Updated, 8:55 p.m.
As lawmakers in Lansing have vowed, once again, to reform the state’s high auto insurance rates, Gov. Gretchen Whitmer has ordered an audit into the Michigan Catastrophic Claims Association (MCCA).
The Livonia-based nonprofit was created by the Legislature in 1978. It collects annual fees from all insured Michigan drivers, in order to cover Personal Injury Protection (PIP) benefits of over $550,000 under the state’s no-fault law. MCCA announced on Wednesday that it would be increasing its yearly mandated fee to $220, a $28 increase from last year, leading to Whitmer’s call for an audit.
“From Detroit to the Upper Peninsula, drivers are feeling the pinch of paying the highest auto insurance rates in the nation and it’s time to do something about it,” Whitmer said in a statement. “Michiganders deserve to know why they are being forced to shell out hundreds of dollars in additional fees for car insurance, which is why I’m ordering an audit to provide drivers with the transparency they deserve.”
The audit will be performed by the Department of Insurance and Financial Services (DIFS). It will be the first time the state has looked at MCCA’s finances since 2015.
MCCA Executive Director Kevin Clinton did not immediately respond to a request for comment on Wednesday afternoon.
Several lawmakers over the years have called for an MCCA audit. This session, state Rep. Michael Webber (R-Rochester Hills) sponsored House Bill 4080 mandating a third-party audit every five years. HB 4111, sponsored by Rep. Ryan Berman (R-Commerce Twp.), requires an annual MCCA audit.
State Sen. Pete Lucido (R-Shelby Twp.) sponsored Senate Bill 4, which requires the association to disclose its actuarial methods. Sen. Paul Wojno (D-Warren) introduced SB 11, which requires a rebate of “excess fees” for consumers from the MCCA.
In a statement announcing the fee increase, the MCCA said it paid out $1.2 billion in 2018 to cover catastrophic injuries. 76 percent of that was for attendant care, prescriptions and hospitalization, according to its statement.
The MCCA says the increased costs are needed to offset a deficit of about $3.9 billion, brought about by an uptick in benefits, claims, and other factors. The organization says it has assets of $20 billion and liabilities of $23.9 billion.*
The MCCA has now raised the fee for Michigan drivers for three consecutive years.
“Today we told the MCCA that we were concerned and strongly urged them to provide more information so the public can understand the basis for this fee increase,” DIFS Director Anita Fox said in a statement. “To provide greater transparency, we welcome Governor Whitmer’s direction to conduct a financial examination into the association’s operations.”
Reforming Michigan’s auto insurance law has been a hot topic in the state for years, albeit one that has eluded a lasting solution. Stakeholders at all levels bring high-powered lobbyists to the table in order to protect their interests.
John Cornack, president of the Coalition Protecting Auto No-Fault (CPAN), believes that looking into MCCA’s finances and holding auto insurance companies to account could potentially lower the state’s notoriously high insurance rates.
“The Michigan Catastrophic Claims Association, which is run by Michigan auto insurance companies, has more than $20 billion sitting in its coffers,” Cornack said in a statement.
“Every year it asks for more money, yet it refuses to show us the rate-making data it uses to determine its financial health and set its annual assessment,” he continued. “This is yet another example of the auto insurance industry not being held accountable due to a lack of strong consumer protections in Michigan. We need to bring full transparency to the MCCA as part of any no-fault reform package.”
Correction: The MCCA has a deficit of $3.9 billion. The story has been updated to reflect this.