Senate fast tracks auto insurance overhaul that doesn’t mandate rate cuts

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A Republican plan that purports to drive down auto insurance costs won swift approval in the Michigan Senate Tuesday afternoon.

The GOP-controlled Senate Insurance and Banking Committee on Tuesday morning approved a legislative overhaul that would offer tiered coverage options to Michigan drivers, including one that does not include any Personal Injury Protection (PIP).

Michigan Senate | Susan J. Demas

In the full Senate, Republicans voted 24-14 over most Democrats’ objections. They argued the plan is not a meaningful way to lower insurance rates for drivers because it does not require rate reductions and doesn’t stop companies from using non-driving factors such as credit scores, ZIP codes, gender, marital status and education level to set prices.

Two Detroit Democrats, Sens. Adam Hollier and Sylvia Santana, supported the plan. Hollier argued on the Senate floor that while it wasn’t perfect, it’s a good start.

The measure now goes to the state House, which has convened a Select Committee on Reducing Car Insurance Rates that is still taking testimony on issues. Some lawmakers and lobbyists have suggested marrying auto insurance reform to Gov. Gretchen Whitmer’s gas tax increase to fix roads, but there’s been no reported progress.

Senate Republicans say excessive medical costs and redundant coverage are a major reason why Michigan has the nation’s highest auto insurance costs.

Adam Hollier

“We’re really criminalizing being poor in the state of Michigan,” said state Sen. Aric Nesbitt (R-Lawton).

He sponsored the main bill in the package, Senate Bill 1, which cleared a Senate panel in a 7-3 vote along party lines earlier on Tuesday.

Nesbitt said people who opt for the lowest-price, lowest coverage insurance, often called “PLPD,” are still required to pay for medical coverage baked into their auto rates because of Michigan’s unique no-fault law. That’s true even for people who already have medical coverage.

“We have the most expensive auto insurance in the nation by far, because we have a one-of-a-kind, unlimited lifetime coverage that’s mandated,” Nesbitt continued. “And you have no choice.”

Nesbitt’s bill would allow people to completely opt out of medical coverage in their auto insurance — something he claims will drive down PLPD rates by as much as 80 percent, although Democratic lawmakers have noted that the legislation does not require any rate rollbacks.

A nonpartisan Senate Fiscal Agency analysis of the legislation says it would allow people to choose from two levels of injury protection: $50,000, with an additional $200,000 in case of “medically necessary treatment” at an acute care center or hospital emergency room and a separate $250,000 option.

Sen. Aric Nesbitt talks about auto insurance reform passing, May 7, 2019 | Michael Gerstein

Nesbitt claims the $250,000 option would result in a 15 to 20 percent savings. The $50,000 option would lead to a 21 to 25 percent savings. And opting out of PIP entirely would lead to a 40 percent reduction for the consumer — or even an 80 percent drop for those with PLPD coverage, he continued.

But none of those figures are outlined in either the legislation or a nonpartisan fiscal analysis of it. When asked, Nesbitt said he calculated his own auto insurance savings and did not elaborate on where he obtained the other figures.

Nesbitt said drivers will, for sure, see a $180 savings once Michigan Catastrophic Claims Association fees are cut to about $40.

The current unlimited PIP coverage would remain an option. But the plan would allow consumers to opt out entirely from catastrophic health coverage and create a host of other changes, including a new auto insurance fraud investigation unit.

Democratic pushback

Detroit traffic
Detroit traffic | Creative Commons

Democrats and lobbyists fighting to keep the no-fault system in place are already criticizing the plan. They want non-driving factors like credit scores taken out of the rate-setting process, arguing that drives up costs in Michigan.

The latest GOP no-fault plan does not include any measures to stop insurance companies from using non-driving factors in price-setting.

State Sen. Mallory McMorrow (D-Royal Oak), who voted against Nesbitt’s bill in committee, said the legislation needs to include guaranteed rate reductions and ban companies from using non-driving factors such as ZIP codes, credit scores and education level to set rates.

“I don’t think anybody in the state benefits if we reduce the coverage and your costs stay the same,” McMorrow told reporters after the hearing. “Especially with such a drastic reduction.”

She said there should be “guardrails in place to help control and make it a more competitive market, with consumer protection in mind.”

Gov. Gretchen Whitmer, April 17, 2019 | Susan J. Demas

Whitmer, a fellow Democrat, has meanwhile asked the state’s Department of Insurance and Financial Services (DIFS) to look into how insurance providers use non-driving factors to set rates under the existing system.

The governor also has ordered an audit of the Michigan Catastrophic Claims Association (MCCA).

Senate Insurance and Banking Committee Chair Lana Theis (R-Brighton) sponsored legislation that did include mandatory rollbacks in a prior legislative session. But she told reporters Tuesday that allowing more market competition without a defined reduction may result in even greater price rollbacks.

“I didn’t write this bill. The bill that I wrote mandated rollbacks. But if we mandate rollbacks, specific rollbacks, it’s going to limit how much it goes back,” Theis said. “They’re only gonna have to do 10, 20, 40 [percent] — that’s what my bill said. What if they could do 50, 70, 80? … How awesome would it be?

“Michigan residents are very, very angry for having to pay the highest auto insurance in the country,” she continued. “At this point, they’re ready to do away with all of it. That’s what I heard at the doors [of her constituents].”

Sens. Lana Theis and Aric Nesbitt talk to reporters, May 7, 2019 | Michael Gerstein

A powerful lobby in favor of the current no-fault system also slammed the latest push for an overhaul.

“Michigan residents are desperate for real relief from their auto insurance premiums,” said John Cornack, president of the Coalition Protecting Auto No-Fault. “Instead, a group of senators are all too eager to strip away their protections and raise their taxes, while letting auto insurance companies continue to charge exorbitant rates with little to no oversight of their discriminatory practices.

“SB1 is a great deal if you’re an auto insurance company CEO. It’s a bad deal if you are anyone else,” he continued.

While Democrats and Republicans argue about the impact the legislation would have if approved by the state House and governor, state Sen. Erika Geiss (D-Taylor) outlined a sentiment shared by many on her side of the aisle: The plan will benefit insurance companies.

“I think it’ll give insurance companies carte blanche to still raise the rates,” Geiss said. “That is not at all meaningful, because they [the insurance companies] can still do whatever it is that they’re going to do or want to do to residents, and we’re stuck with it.

“What about the insurers? We’ve done nothing to address their culpability in the rates that people are having to pay,” she continued.

Senate Minority Leader Jim Ananich at the 2016 Democratic debate in Flint |Susan J. Demas

Senate Minority* Leader Jim Ananich (D-Flint) also told reporters after the Senate vote: “The only thing they guaranteed today is that insurers increase their profits. We did nothing for consumers. We did nothing for red-lining.”

The legislation faces an uncertain fate in the state House and if it passes there, with a Democratic governor. At least one Democratic state representative, Brian Elder of Bay City, has already weighed in on social media, calling the plan “fake reform.”


  1. SB 1 is a piece of legislative crap.

    Weak law and limited over site are the problems. As many other states do our legislature should set fee schedules for medical, professional service, pharmaceutical, medical devices and attendant care; change “file in use” to “prior review”; set rates based upon driving record only; make insurers subject to anti-trust and FOIA. Those lawful actions will reduce the cost to insurance companies and may interest additional insurers in the Michigan market. Only question is, will the legislature insure the cost reductions flow to policy holders?

    The answer appears to be , the legislature cares more about campaign contributions instead of the concerns of their constituents.

    This is insane.


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