Across the country as the economy took a turn for the worse in late 2007 many saw an opportunity to reduce the size of government, cut taxes for the wealthy and cut benefits for the most needy. And while these austerity measures were good at putting money in the hands of the rich and big corporations they hurt the middle class and the poor.
Continuing this trend, Michigan legislators are pandering to the auto insurance industry by considering a cap to the lifetime personal injury protection (PIP) benefits. The idea is that capping these benefits will lead to lower rates for Michigan drivers. Given that Michigan drivers pay one if not the highest auto insurance rates in the nation reducing the costs would be a welcome change. However the resulting $125 per driver savings the governor is touting will have zero effect on our standing as the nation’s leader in auto insurance rate.
Additionally while Michigan residents do pay 5% more for their PIP benefits than the national average we also pay 13% more for comprehensive coverage and 30% more for collision.
This indicates that the motives for attacking the best PIP coverage in the nation has less to do with saving driver's money than appeasing the auto insurance industry who last year pulled in around $285 of profit per Michigan driver or over twice the savings of capping PIP.
But perhaps most disappointing is the governors statement that Michigan's PIP, which keeps many from having to declare bankruptcy simply to get the care they deserve, is too generous. This sets up a false choice of either expensive insurance or generous benefits. The reality is that there are a lot of things the government could do to affect auto insurance rates that wouldn't sacrifice benefits.
For example changing intersections to roundabouts has been shown to reduce injury accidents by 80% and all accidents by 40%. Obviously the less accidents drivers are involved in the less cost to insurance companies and the lower rates we should pay. The same is true of speed limits where the increased speed limits many states have adopted have lead to as much as a 9.1% increase in accidents.
And while "choice" has been the excuse to alter many of Michigan's long standing laws regardless of cost - such as in the case of the motorcycle helmet law repeal, where the decision to give riders a "choice" has resulted in a 34% increase in per accident costs - no such consideration has been given regarding PIP. Perhaps some consumers would choose to pay the additional $125 per year to have lifetime benefits while others would choose to reduce their rate and accept a lower level of coverage.
Additionally analysis shows that thanks to no fault insurance Michigan drivers are more likely to visit the hospital after an accident. These "extra" visits end up costing insurance companies regardless of how necessary the visit. Perhaps people should be given a choice to have a co-pay for these trips to the hospital. This should lower the rates of those who choose such an option.
Michigan legislators could also do other things like increase the number of police on the streets to cut down on auto theft, promote methods of reducing insurance fraud, and implement a system similar to the one in North Carolina that sets a state rate which is very difficult for insurance companies to increase. This system helps them to consistently offer some of the cheapest auto insurance rates in the nation.
Of course all of this assumes our insurance rates are even a real problem. According to the Insurance Institute of Michigan, most states start with a base rate and go up from there with various surcharges. In Michigan the base rates tend to be the top rates charged instead of the lowest, with discounts typically being offered. This means comparing base rates would not be a true apples to apples comparison.
In the end, of all the options available to the Michigan legislature, capping PIP may be the worst possible solution for consumers given the potential costs for such a small savings. Rather than again asking the poor and middle class to accept the bulk of the "shared sacrifice", perhaps it is time for legislators to start doing the job they are paid by Michigan tax payers to do and start looking for real solutions that benefit everyone instead of another corporate giveaway.
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