For The First Time In American History, The Federal Government Is Regulating State Licensed Insurers As To All Lines Of Insurance

Last Friday, Prudential Financial Inc. dropped its fight against being designated as a "systemically important financial institution" by the Treasury Department's Financial Stability Oversight Council.

When the oversight council in June named Prudential and AIG as " SIFIs, " it marked the first time in American history that federal government would directly regulate the solvency of state-licensed insurers as to all lines of insurance.

AIG willingly accepted its SIFI designation, but Prudential resisted, filing an unsuccessful administrative appeal before finally surrendering last week. The oversight council has also voted to subject MetLife to intensive scrutiny for possible designation.

This unprecedented assertion of power by the U.S. Treasury raises significant questions about federalism and insurance regulation, all of which can be distilled to one overarching concern: Who can best safeguard the solvency of entities insuring million of Americans? The 2010 Dodd-Frank financial reform law provides for designating certain "systemically important" insurers for enhanced supervision by the Federal Reserve Board. It is unclear what will be required of SIFI-designated insurers.

Why? Because the Fed hasn't finalized its proposed rules issued last year for exercising enhanced supervision over nonbank SIFI designees. On Sept. 18, Fed Chairman Ben Bernanke said the rules will be "tailored" for SIFI insurers, but he gave no specifics.

 

Ronald Dwyer  an independent insurance agent licensed in Michigan for Home - Auto – Motorcycle - Watercraft - Business Insurance. He is also is a Real Estate Agent working with buyers and sellers.  He can be reached at rondwyer@roninsureme.com or 248-390-6345. His real estate website is http://www.dwyerproperties.com his insurance website is http://www.roninsureme.com or Twitter @ronalddwyerins Facebook: http://www.facebook.com/dwyerinsurance / Linkedin:http://www.linkedin.com/in/ronalddwyer

Michigan Catastrophic Claims Association Rate Increase Spurs Demands To Reform No-Fault Auto Insurance

Michigan motorists are now paying an extra $11 per year to cover the rising costs of the state's unlimited lifetime medical care for auto-related injuries.

The Michigan Catastrophic Claims Association  increased the premium paid for catastrophic coverage by 6 percent to $186 per insured vehicle from July 1, 2013 to June 30, 2014. The current assessment is $175, which represents a $30 increase from the previous year.

Michigan is the only state to offer unlimited lifetime medical care for auto-related injuries under its no-fault auto insurance system. The MCCA is a private, nonprofit association created by the legislature in 1978 that reimburses auto insurers for personal injury protection benefits after they exceed $500,000 per claim.  This past July, that threshold will rise to $530,000 per claim.

The MCCA has been under scrutiny as lawmakers consider changing the state's no-fault auto insurance system to limit personal injury protection coverage and/or implement a medical fee schedule. One Bill would cap coverage at $50,000 and dissolve the MCCA once its liabilities are paid.

House Insurance Committee Chairman Pete Lund, R-Shelby Township, said the MCCA can't remain solvent without constant rate increases, and said the legislature needs to pass reforms.

Those who want to maintain unlimited coverage have questioned whether the MCCA has been properly managing its money. The Coalition Protecting Auto No-Fault (CPAN) and the Brain Injury Association of Michigan filed a lawsuit to get rate calculation information from MCCA, contending that information is necessary for an informed debate on potential changes.

A circuit court judge ruled in favor of CPAN, but the ruling is under appeal.

"Here we are again, hit with a secretive rate increase that consumers can do nothing about," CPAN president John Cornack said in a statement. "This fund is controlled entirely by insurance companies, its meetings are closed to the public and its rate setting information is completely closed off from public scrutiny – and that’s exactly why CPAN brought a FOIA lawsuit against the MCCA."

The MCCA contends much of its information is already available online. Rates are based on recommendations from independent actuarial consultants who evaluate expectations for medical cost inflation, economic conditions, investment returns and the number of claims, according to the association.

MCCA Executive Director Gloria Freeland said the association expects the number of claims to continue increasing along with anticipated medical costs.

Out of the $186 assessment, $156.44 will cover anticipated new claims, $29.19 will go toward an estimated $2 billion deficit, and 37 cents will pay for administrative expenses. If they paid it off now, the estimated $2 billion deficit would cost each motorist about $300 per insured car, according to the MCCA.

The MCCA paid out $947 million on catastrophic injury claims in 2012. More than 29,470 claims have been filed since 1979, and more than $9.9 billion had been paid out as of June 30, 2012.

Most claims involve brain or spinal cord injuries that cause permanent disabilities. About 60 percent of payments are used for residential and attendant care.

The rise in premiums is bound to play a role in discussions on no-fault reform.

“Michigan has already been spotlighted for having the second highest auto insurance costs in the country. Another 6 percent increase demonstrates the need to adopt cost-saving reforms to alleviate the rising medical costs that are driving Michigan motorists out of the market,” Insurance Institute of Michigan Executive Director Pete Kuhnmuench said in a statement.

Ronald Dwyer  an independent insurance agent licensed in Michigan for Home - Auto – Motorcycle - Watercraft - Business Insurance. He is also is a Real Estate Agent working with buyers and sellers.  He can be reached at rondwyer@roninsureme.com or 248-390-6345. His real estate website is http://www.dwyerproperties.com his insurance website is http://www.roninsureme.com or Twitter @ronalddwyerin sFacebook: http://www.facebook.com/dwyerinsurance / Linkedin:http://www.linkedin.com/in/ronalddwyer