CPAN Takes Auto Insurance Transparency Case to the Michigan Supreme Court
Also releases study indicating MCCA may be overcharging as much as 15 percent
The Coalition Protecting Auto No-Fault (CPAN) and the Brain Injury Association of Michigan (BIAMI) announced today that the organizations have appealed their transparency lawsuit against the Michigan Catastrophic Claims Association (MCCA) to the Michigan Supreme Court.
The organizations argue that the MCCA is a public body and a critical component of Michigan’s auto no-fault insurance system that was created by the state legislature and should therefore be subject to public scrutiny.
“The MCCA is critical to the function to Michigan’s auto insurance system, which is recognized as the best in the country,” said CPAN President John Cornack. “Thousands of our state’s most seriously injured people rely on it every year to help cover the cost of their injuries. We should have the right to examine whether it is charging appropriate rates to cover those costs.”
Michigan drivers currently pay a $186 per vehicle surcharge on their auto insurance policies to fund the MCCA, which was created by the state legislature in 1978. The MCCA controls more than $15 billion in assets that are used to reimburse insurers for auto injury claims over $530,000, and it’s board of directors is controlled by insurance company executives.
CPAN and BIAMI have been denied several requests seeking access to the MCCA’s actuarial data and economic assumptions the MCCA uses to set its rates. Yet a newly published report from former Missouri Commissioner Jay Angoff further highlights the need for greater transparency.
Angoff’s report, “An Analysis of the Profitability and Pricing in the Michigan Auto Insurance Market,”
examined publicly available information filed by the MCCA as well as annual reports from the National Association of Insurance Commissioners. Among the key findings in the report is the fact that the MCCA’s own data indicates its annual surcharges on drivers’ insurance policies are about 15 percent higher than necessary over the long term, and more than 27 percent higher since 2004.
Angoff also finds in his report that, in addition to the MCCA overestimating its payouts, insurers report claims covered by the MCCA differently from one another.
“The MCCA reimburses insurance companies for injury claims exceeding $530,000,” said Angoff. “But due to a lack of uniform reporting guidelines, some insurers appear to include as their own losses, losses that the MCCA is responsible for.”
The other key findings in Angoff’s report include
The Michigan Catastrophic Claims Association does not disclose the assumptions, estimates and projections on which its annual per-vehicle assessment is based.
Michigan drivers receive the most comprehensive no-fault injury coverage in the nation but pay only slightly more than other states that cap injury coverage.
Drivers in Michigan sue less often than drivers in any other state in the nation.
The report also makes the following recommendations:
The state of Michigan should specify a standard methodology for insurers to use in calculating and reporting their estimated future no-fault claims payments.
The MCCA should be required to make public the assumptions and economic projections on which its annual surcharge is based
The Michigan Insurance Commissioner should be empowered to disapprove the MCCA surcharge if he/she finds it to be excessive
The legislature should determine whether Michigan drivers are paying excessive rates for collision coverage due to the availability of multiple types of coverage for the same damage.