Michigan’s no-fault auto insurance system is broken.  As a result, consumers pay among the highest rates in the nation, and rates have been rising faster in Michigan than in any other state, according to the Insurance Information Institute.

The primary driver of the high cost of insurance in Michigan is the state’s no-fault system, which is different than every other state.  Michigan’s system offers unlimited benefits with no cost controls, which has led to escalating insurance rates.  As the Rand Institute noted, “In 2007, average total auto insurance premiums in Michigan were 17 percent higher than those in the rest of the country ($928 versus $795).”

Insurance costs in Michigan are increasing much faster than costs in general under the failing no-fault insurance system.  In general, the consumer price index increased by 39 percent between 1998 and 2011; but during that same time, the average no-fault claim increased by 309 percent.

House Bill 4936 would provide important reforms that would help reduce the costs of insurance by providing consumers a choice in how much coverage they want to purchase—$250,000, $500,000, $1, million, or $5 million.  At the same time, the legislation provides a fee schedule for medical care to prevent doctors from charging higher prices under auto insurance policies than they do for other programs.  For example, under the no-fault auto insurance system, a CT neck scan costs $1867, while the same procedure only cost $461 under workmen’s comp, and just $221 under Medicare.

Reforming Michigan’s no-fault automobile insurance system would also decrease the number of uninsured motorists by reducing the costs of insurance coverage.  Currently, Michigan ranks seventh highest for the number of uninsured drivers, driven in part by the excessive costs of the current no-fault insurance system.

House Bill 4936 does not eliminate Michigan’s no-fault system.  Instead, it reforms the program by giving consumers more choice and more control over the amount of coverage they seek to purchase while creating a more sensible fee schedule to bring medical costs under the no fault system more in line with other fee schedules used by doctors.

Please call your state representatives and ask them to vote yes on HB 4936.  Insurance costs are escalating and insurance consumers are bearing the costs of a system that is no longer functioning.  HB 4936 provides greater consumer choice by implementing important, common sense reforms that will protect the long-run viability of Michigan’s automobile insurance system.