INSURANCE 101: Claims Made Policy Vs. Occurrence Policy

A Claims Made Liability Insurance Policy

A claims made insurance policy covers insurance claims filed during a given period of time. Generally speaking, a claim must be filed while a claims made policy is still in effect in order for it to be covered by the insurance carrier. This type of policy form is generally less expensive than an occurrence policy as there isn’t any automatic coverage in place once the policy has ended. Business owners who typically purchase claims made with GL or professional liability insurance coverage include contractors, attorneys and medical professionals. The most common types of policies written on a claims made basis include professional liability, directors and officers E&O, as well as employment practices liability insurance (EPLI).

Understanding the difference between a claims made form policy and an occurrence form policy for business liability insurance.

An important consideration with claims made policies is tail coverage. Tail coverage (also known as an Extended Reporting Endorsement) is an additional policy most business owners will need to buy when they decide to retire or exit their business. Otherwise, a claim filed for work done in the past will not be covered under the claims made form. Unfortunately, there isn’t any guarantee an insurance company will write a tail coverage policy and the premium may be expensive depending on prior policy claims.

The Occurrence Policy for Liability Insurance
An occurrence policy provides coverage for losses or claims that are related to a policy term. A claim can be filed years later for a liability caused during a prior period of time as long as there was active coverage in place when the cause of the claim was created. While an occurrence policy form may be more expensive for some types of business, there isn’t any future cost associated with buying tail coverage.

An occurrence policy is the more common from of coverage and a better choice for most business owners. It is more reasonable to have the coverage in place indefinitely for work performed than it is to gamble on finding tail coverage, or avoiding a future claim. In many instances, the additional cost of an occurrence policy form is minimal compared to purchasing a claims made policy.

Why are There Two Types of Policies?
Claims made insurance coverage is more similar to early insurance programs when groups of businesses would form private insurance pools as a means to cover potential losses. As insurance products and companies evolved into an industry, the idea of protecting risks based on a claims made basis followed. The primary reason claims made coverage is still around is because there is a demand and because insurance companies may only be willing to write certain types of risk on a claims made basis.

INSURANCE 101: Insurance Company Regulation

 Insurance Company Regulation

The insurance industry is a highly regulated industry, regulated by each state independently, as well as through federal legislation.  This means that although each state follows federal regulation, the individual states maintain the power and authority to regulate insurance laws within each state.  Insurance carriers, agencies, and all insurance agents are required by law to be licensed in each state in which they conduct business.

Each state maintains its own division or department of insurance, consisting of regulating officers and an insurance commissioner or superintendent. Upon review of a business or individual insurance license application, the state’s insurance commissioner or superintendent has the authority to approve or deny the application to solicit insurance within the state.

A Certificate of Authority is provided to an insurance company as proof of licensure within the state.  Once certified by the state, the insurer is considered to be Admitted and is authorized to conduct insurance business within the state.

A Non-admitted, or non-licensed, insurer is prohibited from conducting business within a state until it becomes licensed by that state.  Whether it be an individual agent or an insurance company, unauthorized solicitation of insurance without the approval of the state’s insurance commissioner or superintendent is prohibited.

Authorized insurance companies oftentimes conduct business in multiple states, and as such, they are authorized based on the state in which the insurance company’s home office is incorporated. Domicile of Incorporation refers to the state (or country) in which the insurance company is incorporated.

The following categories determine the status of an insurance company based on its location of incorporation in relation to the location in which it is conducting business.

Domestic Insurer
A domestic insurer is an insurance company that conducts insurance business in the same state in which it is incorporated, such as an insurance company that is incorporated in Florida and conducts insurance business within Florida.

Foreign Insurer
A foreign insurer is an insurance company that conducts insurance business in any state that it is not incorporated, such as an insurance company that is incorporated in Florida and conducts insurance business in California or New York.  Although the insurer is considered to be domestic in its home state, it is considered to be foreign in any other state it conducts insurance business.

Alien Insurer
Any insurance company incorporated outside of the United States is considered to be an ‘alien’ insurer while conducting business within the U.S. and must follow all federal and respective state laws.

Remember, Puerto Rico, Guam, and the U.S. Virgin Islands are U.S. territorial possessions and are within U.S. federal law; therefore, insurance companies incorporated in these territories are categorized as domestic or foreign insurers, depending on the location in which they conduct business.

Financial Structure and Requirements of Insurers
As mentioned, insurance companies are regulated on the state level and are required to maintain adequate capital and company surplus to satisfy insurance claims and pay annual operating expenses.  Financial investments made by an insurance company must not endanger the insurer’s solvency or financial wellbeing; therefore, they typically invest in low-risk bonds such as corporate and municipal bonds to ensure that the insurer receives positive returns.

To protect against insurer insolvency, each state’s department of insurance mandates company compliance in reporting financial conditions and results of operations on a quarterly basis.  In addition, an annual audited report must be filed with the department and must be completed by an independent certified public accountant chosen by the insurer.

The following financial reports must be provided by the insurer to the department for review:

• An audited annual report from an independent certified public accountant
• A statement of the company’s financial condition
• Balance sheets and statements of cash flow
• A summary of insurer operations
• A statement of the changes in the company’s capital and surplus

The company’s notes related to its financial statements which reconcile any differences between the audited annual report and its quarterly reports


Insurance Company Financial Ratings
An insurer’s ‘financial rating’ represents its financial strength and is based on its claims experience, investment performance, and dividend returns, as well as an insurer’s management team among other factors.  Similar to how Consumer’s Reports rates its member companies, financial rating companies such as Standard & Poor’s, Moody’s, and AM Best provide consumers with its financial rating of each insurance company.  While each rating company follows its own rating scale, a letter grade ranging from A++ or Aa1 to D is given to each insurer.  The higher the rating grade that is given to an insurance company, the better the insurer is financially fit.

Self-Insurance & Inter-Insurance

Self-Insurance
Many businesses choose to self-insure to cover smaller employee claims that can be paid by the company instead of filing a claim through the insurer.  A business will ‘self-insure,’ or pay for smaller claims from an established fund maintained by the business mainly to avoid costly insurance premiums for relatively small claims.

Reciprocals
‘Reciprocal’ Insurance, also known as Inter-Insurance, is a type of risk retention between members, known as subscribers, consisting of individual business owners, corporations, or municipalities. Subscribers ‘reciprocate’ in sharing risks and participate in indemnifying members who encounter loss.

As a type of insurance, each member can absorb larger loss by sharing it and through its participation in the reciprocal, it pays a lesser amount of loss since it is shared by the other subscribers in the reciprocal.

A reciprocal is another form of insurance for a business, corporation or municipality that helps spread the risk and costs of loss.  This type of self-insurance is administered by an attorney, called an Attorney in Fact (AIF), and is often used by municipalities to ‘cross-indemnify’ each other against potential loss in addition to purchasing formal insurance.

Stock vs. Mutual Insurers

Stock Insurance Company (Non-Participating or ‘Non-Par’)
The majority of private commercial insurance companies in America are considered to be either stock or mutual insurance companies. While both types of organizations provide insurance to consumers, they differ in how they operate.

A Stock insurance company is a private insurance company that is established to provide insurance to policyowners and to make a profit for its stockholders.

This type of insurer is considered to be a Non-Participating, or Non-Par company because the insured policyowners do not own the company, nor do they receive any dividends that the company returns.  Stock insurers do not issue participating policies; therefore, two groups exist: shareholders and policyowners – although a shareholder could also be a policyowner.

Mutual Insurance Company (Participating or ‘Par’)
A Mutual insurance company is a private insurance company that is established to provide insurance to policyowners who are also the company’s stockholders (owners).

This type of insurer is considered to be a Participating, or Par company because it issues ‘participating policies’ in which policyowners share in the company’s ownership and receive dividends from the earned surplus of the company’s profits.

Individuals who purchase insurance from a mutual insurer are both a customer (insured) and an owner (shareholder).  The insurer’s Earned Surplus is paid out to its shareholders in the form of Dividends, which are an annual reimbursement of excess premiums that remain after the company has set aside its needed reserves and has deducted the necessary amount to cover annual claims and other company expenses.

Demutualizaiton
A mutual insurance company has the ability to change its corporate structure to a stock company status, often to help increase capital needs that is more easily accomplished as a stock insurance company. This process is called ‘demutualization.’

Mutualization
Just as a mutual insurance company can ‘demutualize’, a stock insurance company can also change its corporate structure to become a mutual insurance company, a process called ‘mutualization.’

Reinsurance
The concept of ‘reinsurance’ is the sharing of risk between an insurance company and a re-insurance company, known as a Reinsurer, to provide additional insurance coverage for risks that are too large for the single insurer to adequately cover.

When an insurance company cannot assume an entire risk of an applicant’s request at the time of application, it will transfer part of the risk by purchasing additional insurance coverage from a reinsurance company.  A Reinsurance Agreement provides the details of the agreed reinsurance policy, and a reinsurance premium is paid by the Cedent Insurer, to the reinsurer in exchange for the additional coverage.

The agreement between the cedent insurer and the reinsurer does not affect the agreement between the cedent insurer and the insured individual or business and is often times not even known by the insured individual or business.  The insured is covered by the insurer, and if necessary, the insurer shares part of its risk with a reinsurer.

As an example, if a business applies for a large insurance policy equaling $20 million and an insurance company is only able to cover a single loss up to $10 million, the insurer will purchase additional insurance from a reinsurer for the remaining $10 million to adequately cover the $20 million request.

Private vs. Government Insurance
The Federal Government provides various programs including health insurance to military veterans, as well as programs that provide catastrophic protection often excluded from private insurance, such as flood insurance, insurance on mortgage loans and unemployment insurance above state limits, to name a few common examples.

The State Government also provides various programs such as state-administered unemployment insurance, workers’ compensation insurance, and state-administered medical expense insurance plans for eligible individuals.

Known as Social Insurance, Social Security, Medicare, and Medicaid are provided to U.S. citizens through federal and state legislation. In comparison to private insurance, government-administered insurance is funded by tax money and is regulated by state and federal laws. These programs are available to all qualified U.S. citizens and are determined based on the qualifying status of the applicant’s age or income status.

Fraternal Associations & Benefit Societies
Fraternal associations are non-profit organizations that are recognized for their social and charitable activities. Associations often consist of social or religious groups such as the Knights of Columbus, local community lodges, or religious organizations. These associations, often called ‘societies,’ offer insurance to its members in addition to other membership benefits.

A social ‘club’ consisting of friends or neighbors that is not established under the law as an organization is not considered to be an association and cannot form a group policy simply for the purpose of providing insurance to friends or neighbors.

Lloyd’s of London
Lloyd’s of London is not actually an insurer, but rather an exchange marketplace consisting of individuals, companies and underwriters who provide ‘high-risk’ insurance products. Lloyd’s is considered the oldest insurance marketplace, essentially serving as a reinsurer, providing services in over 200 countries around the world.

The Lloyd’s marketplace is best known for its diverse and wide range of coverage including property, marine, aviation, and ‘specialty’ coverage policies on the human condition, such as insurance on a ping pong champion’s hands or on a musician’s voice (Bob Dylan and Bruce Springsteen for example), in addition to other unique items.

The real cost of a DUI on your record

Aside from the physical and emotional cost of a DUI or DWI, driving under the influence could wind up costing you up to $20,000 in legal fees and fines, and the additional cost to your insurance could skyrocket, depending on your driving history.

Auto insurance premiums are calculated based on what your insurer calculates your individual risk to be, and a DUI is among the costliest factors that could determine your risk.

According to CoverHound, in the first year after getting a DUI, your car insurance premium could go up as high as 94.13%. After the second and third year, granted no additional moving violations, premiums could lower slightly, but it will still cost you. On the third year after a DUI, the average premium rings in at a 63.74% increase.

State-by-state differences
To get a better estimate of how a DUI would affect auto premium increases, analyze local data as rate increases vary state-by-state. For instance, in Maine, the average rate increase after a DUI is 37%, way below the national average of 80%, and significantly lower than North Carolina’s average increase of 371%.

Among the states with the highest premium rate increases are Michigan (249%), California (186%), Hawaii (208%), Arizona (145%), New Jersey (132%), Delaware (81%), Georgia (78%) and Rhode Island (68%).

The states with the lowest rate increases are Maryland (28%), Indiana and Maine (37%), Vermont (41%), Alaska and Wisconsin (46%), and New York (47%).

The average national dollar increase to auto premiums after a DUI is $1,163, and the average rate cost rings in at $2,610 each year.

Driving under the influence is undoubtedly one of the most dangerous decisions a person could make, threatening the wellbeing of not only the driver, but every other driver and passenger on the road. It is a violation so serious, some insurance companies might not even raise your rates — they’ll just cancel your policy altogether.

This becomes the worst-case scenario for your wallet. If you are forced to shop for a new policy, you will not only have a DUI on your record driving up your rates, but also a policy cancellation that will cost you even more as your risk multiplies.

A DUI will stay on your criminal record for the rest of your life, but eventually, it will be cleared from your DMV record, which is the good news for your wallet. Insurance companies only see what’s on your DMV record, so after a DUI has cleared, your rates will eventually go down. How long this takes, however, varies by state.

In most states, a DUI or DWI will stay on your DMV record for at least 5-10 years, but some states are significantly stronger on this. In New Mexico, for example, a DUI stays on your record for 55 years — so potentially the rest of your life. The best way to calculate the cost of your DUI is to talk to your agent or broker, and when your rate undoubtedly increases, shop around as you may be able to find a cheaper option.

The Hard Truths About Michigan's New Revised No-Fault Law.

THE HARD CORE TRUTH 

AND 

FACTS ABOUT MICHIGAN'S NEW 

AUTO INSURANCE LAW

Press conference fighting against the new auto reform bill that will
not save Michigan Consumers much but take away much needed coverage

The Legislators in Lansing are trying to put their own spin on an absolutely horrific bill that they passed.  This bill may go down in history as one of the worst bills ever passed by the Michigan Legislature.  Your premium rates are likely to go up not down!  You will likely now need to purchase additional insurance out of your own pocket to protect your financial interests such as your home, auto and other savings.

Right now, drivers are required to purchase unlimited personal injury protection (PIP) coverage, which guarantees insurance companies will cover all of the medical costs associated with car accident injuries. That also means auto insurance companies pay regardless of who’s responsible for the accident.

Under the new plan, drivers can choose between five tiers of PIP coverage beginning July 1 2020:

• Unlimited PIP coverage (the same coverage as now)
• Insurance companies will cover up to $500,000
• Insurance companies will cover up to $250,000
• Insurance companies will cover up to $50,000 — the lowest-price option available to people on Medicaid, who cannot opt out entirely.

Opt-out of PIP coverage entirely, if you have separate health insurance that covers collision injuries.

If a driver doesn’t have unlimited PIP coverage under the new system and gets in a car accident that’s not their fault, and medical costs exceed the amount of coverage they have purchased, they can sue the at-fault driver for charges beyond their coverage.

Under the new plan, insurance companies are required to lower PIP (personal injury protection) coverage rates depending on the level of coverage purchased:

• Those who keep unlimited PIP coverage would receive a 10 percent roll back of PIP coverage costs on average.
• Those who choose the $500,000 get a 20 percent rollback on average.
• Those who choose the $250,000 plan, get a 35 percent rollback on average.
• Those who choose the $50,000 plan, get a 45 percent rollback on average.

Those rate rollbacks must say in place until July 1, 2028. After 8 years, insurance companies no longer will have to hit exact rate rollback targets,. but they’ll still be bound by new rules that require them to get rates approved by the state Department of Insurance and Financial Services before offering them to consumers.

These savings only apply to the PIP and many have been mislead into thinking that they could save 50% or more on their total insurance premiums.  This is not the case.  The savings is only on the PIP!

Currently under the PIP the insurance companies are currently only required to cover medical expenses up to $580,000 after that amount is exhausted, then you go to the MCCA (Michigan Catastrophic Claims Association) fund. 

Other portions of the Auto Insurance policy such as liability and physical damage coverages (collision and other than collision/comprehensive) will not be impacted by this law.   In fact it is quite possible these rates will go up!

The MCCA is the fund that provided unlimited medical benefits but in addition to those medical benefits you also received reimbursement for expenses that help you with care including rehabilitation and at home including household chores that you were unable to do.  The most important factor in the MCCA was the long term care it provided!  Health Insurance coverages are limited (and varies by insurer) and if your care requires long term care, those expenses come out of your pocket.

On my travels meeting with people and legislators to get a real plan, I met many who would not be here today if they didn't have our current auto coverage.  One young man spent 1 year and 4 months in a coma from an auto accident, that he did not cause!  With the new plan he surely would have been deceased today! Mostly likely, as will most drivers (historically most people do not properly pick the higher limits when offered), he would have chosen a lower medical plan to save money on his auto premium not realizing what he was giving up.

The young man who spent 1 year and 4 months in a coma and
was saved by Michigan's Current No-Fault Law

The MCCA premium is set to jump to $220 this month per vehicle, which equates to about $18.33 a month for unlimited coverage!  Yes the MCCA needs to be audited annually with the information being made public and the MCCA board should force an annual public audit annually.  The board should consist of at least 2 non-Insurance but public members that should help with the oversight. 

The primary reasons why we have such high premium rates with PIP and the MCCA are:

• Currently no true fee scheduling for medical services rendered (new law still allows insurance companies to be overcharged by as much as 240% above market price for medical services)
• Tort Law passed in 1995 that allowed a Tort System to parallel the No-Fault system
• No true or open auditing of the MCCA financial records

To help with oversight on these expenses and fraud, a strong state fraud unit would help deter those that want to use the insurance companies and people's premiums as their ATM.

With no true fee scheduling one could currently pay $500 for an MRI but if paid by the Auto Insurance carrier it could be $4,000 or more!  Health insurers, Medicare and Medicaid have limits to what they will pay, why don't auto insurance companies have the same limits?  Under the new law set to take effect on July 1, 2020, auto insurers could still be charged more than 240% above market price for medical services rendered.

In 1995, the Michigan Legislature weakened the no-fault law by redefining how hurt a person injured in a car accident must be to be able to recover money damages for his or her pain and suffering. This has allowed for numerous claims to hit the insurance companies.  Many of the trial attorneys that file these claims have toned their cases to make the insurance companies settle out of court.  It is much more expensive to try a case in court, especially if you lose, than to try to settle out of court.  Speaking with my insurance companies, they have advised that 99% of the cases don't even make it to court.  This tort claims, considered nuisance claims have been the #1 reason for the PIP premium increases. Fixing this loophole will help reduce premiums.

The Michigan Catastrophic Claims Association fund is another reason why our rates are going up.  In reality though it is a small portion.  With the rates increasing to $220 annually per vehicle, it amounts to only $18.33 a month as I stated above.  If you put in place a stronger fraud unit, proper auditing / public reporting and using other means of income to fund the association - including its own interest earned, and using fee scheduling that matches the market value of healthcare,  this will help reduce the premium fee and allow us to keep out unlimited health care.  

Instead of passing real reform that was suggested in this article, our legislators decided to put a bill forward that really looks like it caters to the lobbyists.  

Since medical coverage limits are now going to be limited for many, once they are injured and can not pay for their medical bills, the burden will fall on the driver that caused the accident. This is why, in my opinion, the Trial Lawyers have remained quite on these reforms.  Injured drivers will be suing those that caused the accident to collect medical payments after their limits are exhausted! Current auto limits of liability will not cover most people.  The new state limits of liability that will be required are going to be $50,000 per person and $100,000 for all injured persons per accident.  Most people in Michigan today carry limits of $100,000 per person and $300,000 for all injured persons per accident.  This still will not be enough coverage should you injure someone that needs long term care.  

As an independent agent, who doesn't work for the insurance companies but only sells their products, I  will be recommending to all my clients that they will need to increase their liability limits on their auto policies to the maximum (most cases $1,000,000) and to purchase extra liability in at least another $1,000,000 to maybe $2,000,000 to protect themselves from this new exposure created by our legislators in Lansing.  Whom in my opinion seem to be more worried about their next job with lobbying firms once their term limits are up.  

In addition to destroying our medical coversgrs, insurance companies can now designate new territories because they can no longer use zip codes.  They could possibly micro target neighborhoods or further down to city blocks using the same formula as the US Cencus does.

All of these factors make this new revision in our auto insurance one of the most, if not the most, horrific bills to come from our legislators in Lansing.

Does my personal auto insurance policy cover Uber?

The last time I hailed an Uber, the driver asked me what I do for a living (I work for an online insurance agency). Over the course of the conversation, I learned two things:

Insurance’s reputation for being boring is alive and well.

The driver had no idea his personal car insurance didn’t cover his rideshare driving.

And he’s not alone. A survey of nearly 1,000 rideshare drivers found that more than 90 percent don’t have a rideshare-friendly policy. That means a lot of drivers are probably under the assumption that their personal auto policy is enough.

It’s not.

Here’s the scoop: when you charge for rides, you’re technically a freelancer in both the eyes of the law (for now) and the eyes of your insurance company. Insurance companies offer different policies for business-related driving, which means your personal auto policy likely doesn’t cover your rideshare activities—or anything you make money on.

In other words, if you get in an accident while you’re accepting ride requests, those damages may come out of your pocket.

Let’s break it down and look at three things you need to know about rideshare driving and insurance so you don’t end up with unexpected expenses.

1. Your insurance company can drop you if it finds out you drive for pay.

Again, by the insurance company’s standards, rideshare driving makes you a commercial driver. That means you are also a bigger risk—after all, if you drive to make money, you’re probably on the road more than you would be otherwise. And your personal auto insurance wasn’t designed to cover that increased risk exposure.

At the end of the day, an insurance policy is just a contract. Your insurance company issues the policy based on the information you provide. Throw a curveball by becoming a rideshare driver after the fact, and you’ve broken that contract. When you applied, your company never agreed to cover you for ridesharing. That means it’s free to walk away.

2. You might be charged higher premiums for your personal car insurance later on.

After your auto insurance company cancels your policy, finding affordable car insurance becomes much harder. There are two major reasons why.

First, to avoid getting dropped again, you’ll need to be upfront about your rideshare activities. As we mentioned earlier, business driving is considered “riskier” and in the insurance world, that usually means more expensive.

Second, being dropped is a red flag for other insurance companies because it suggests you are a high-risk driver. Some companies may back away completely. Others may take you on, but at a higher cost.

3. The rideshare company’s insurance won’t fill all the gaps.

Wait, you might say. Uber or Lyft’s insurance covers my driving!

If you’re at fault for an accident during what’s called “period 1” (the time when you’re online but don’t have a ride request), your insurance may not be enough. That is because the coverage is lacking for a couple of reasons.

Doesn’t cover vehicle damage. Those repair costs come out of your pocket.

Might not cover all the lawsuit costs. The rideshare company’s liability coverage is limited during this time frame, so you might be stuck paying for whatever amount exceeds the policy limits.

That said, unlike personal auto insurance, the rideshare company’s insurance can cover vehicle repair and liability costs for accidents that happen during “period 2” and “period 3”.

Period 2: when you’re online and have a ride request.

Period 3: when you’re online and have a rider in the car.

However, the deductibles are still pretty steep—and remember, you still don’t have much protection during that crucial period 1. So let’s look at some other options.

Car insurance options for Uber and Lyft drivers
There are two ways you can get coverage for the driving you do while online and waiting for a rider:
Get a commercial auto insurance policy. It can cover vehicle damage and liability costs for accidents that happen during any of your rideshare duties.

Get a rideshare-friendly personal auto insurance policy. You’ll want to look for one that offers period 1 coverage to supplement your rideshare company’s insurance. Many insurance companies (including GEICO, Erie, Farmers, State Farm, and others) now have limited rideshare options. Your best bet is probably to Google “rideshare insurance” plus your state.

You might be tempted to roll the dice and forgo either option, but consider this: Commercial vehicle claims cost $45,000 on average. If you don’t have that kind of pocket change lying around, it’s smart to make sure your rideshare driving is covered.

What’s the easiest way to figure out what works for your needs and budget? Talk to an insurance agent who has experience insuring rideshare drivers. They can help you find the policy that meets your state’s coverage requirements and that protects you every time you hit the road.

The Michigan Catastrophic Claims Association Fee Jumps to $220 Per Car July 1st 2019

The association announced the fee on auto insurers will rise from $192 to $220 on July 1, a $28 increase that will ultimately be passed along to consumers in the form of higher rates.

Gov. Gretchen Whitmer on Wednesday ordered an accelerated state audit of the Michigan Catastrophic Claims Association after the private non-profit's board voted for a 15 percent increase in the annual auto insurance assessment.

State law requires auto insurance companies to pay the assessment to cover costs of lifetime medical benefits guaranteed under Michigan’s no-fault auto insurance law. 

The MCCA operates as a reinsurance program, reimbursing auto insurance companies for expensive medical claims for motorists who are catastrophically injured in auto accidents. The claim threshold is also set to rise from $550,000 to $580,000 this summer.

The pending increase in the fee — which has risen 76 percent since reaching $124.89 in 2009 — comes as Michigan lawmakers develop plans to reform the state’s no-fault auto insurance and rein in rates that already rank among the most expensive in the nation.

Drivers across the state are "feeling the pinch of paying the highest auto insurance rates in the nation and it’s time to do something about it," Whitmer said in a statement. “Michiganders deserve to know why they are being forced to shell out hundreds of dollars in additional fees for car insurance, which is why I’m ordering an audit to provide drivers with the transparency they deserve."


MCCA officials testified before a Senate committee earlier this month, disputing anti-transparency accusations while arguing that “waste and fraud” in the medical system is driving up insurance costs.

The association, created by the Michigan Legislature in 1978 but controlled by insurance companies, is sitting on $20.6 billion in assets but claims $23.5 billion in long-term liabilities. It is not subject to public records requests that could shed further light on its fee calculation process but publishes internal financial and independent auditor reports each year.

The annual fee is designed to cover current-year catastrophic claims but also gradually pay down a $2.9 billion deficit over 15 years, MCCA Executive Director Kevin Clinton told lawmakers.

In announcing the pending $28 fee increase on Wednesday, the MCCA said its costs are rising, in part, because more individuals are receiving benefits and medical care costs continue to rise. 

The association said it paid out $1.2 billion in 2018 for claims resulting from catastrophic injuries. The majority of claims involve brain and spinal cord injuries, multiple fractures, and back and neck injuries. Most of the payments were for attendant care, prescriptions and hospitalizations. 


The Michigan Department of Insurance and Financial Services, which Whitmer ordered to conduct a separate and accelerated audit, has the authority to examine MCCA documents and review its operations, a process that last occurred in 2015, according to the administration.  

“Today we told the MCCA that we were concerned and strongly urged them to provide more information so the public can understand the basis for this fee increase,” Insurance Director Anita Fox said in a statement welcoming the governor's request for a financial audit. 


Other long-discussed reform ideas include a fee schedule for medical providers that would cap the amount they are allowed to charge insurers for patients injured in auto accidents. Ronald Dwyer of Roninsureme.com, has been one such voice for better fee scheduling.  "I have been stating for years that we need to put medical fee scheduling in place similar to that of Medicare/Medicaid.", Said Ronald Dwyer.  "Right now their is no true cap only the term 'Reasonable Costs' ."

Dwyer also stated the following "Michigan is not the only state in the union with no-fault, we are though the only state with unlimited benefits.  We don't not want to get rid of our unlimited benefits or our no-fault coverage - which is to prevent you from having to go to court  to sue the other driver to get medical reimbursements.  Two main factors have driven the cost of insurance; 1) No True Fee Scheduling for medical coverages/benefits 2) Our legislature in the mid 1990's opened up Pandora's box by easing restrictions on lawsuits pertaining to auto accidents through legislation. This has caused a rise on insurance claims that are most of the time frivolous which in turn have raised insurance premiums to record levels. If we fix these two issues we can keep our unlimited benefits and keep our insurance premiums more affordable."

Michigan’s Republican-led Senate and House are developing proposals that are expected to provide motorists with the “choice” to purchase auto insurance policies with reduced medical coverage. Dwyer believes this is a very bad idea, "What will happen is your will have to pools of coverage and everyone will want to make the wrong choice by taking the reduced coverage. This will leave the other pool with few participants which will then make the unlimited coverage to expensive and it will collapse. It will be a back door way of reducing coverage for all with no guarantee about lowing premiums for a long period of time. " 

Supporters of Michigan’s no-fault auto insurance system contend that eliminating the state’s guarantee of lifetime medical benefits would end an important safety net for some injured motorists and ultimately force more residents into bankruptcy and on to government health coverage.

Legislators have tried for years to reform the state's auto insurance laws, but efforts have repeatedly stalled amid intense lobbying from hospitals, the insurance industry and trial lawyers. 

Spring means hail, and costly hail damage

Flooding, tornadoes, hurricanes and wildfires often steal the spotlight but beware of underestimating the fury of a hailstorm.

Reports of Golf Ball Sized Hail in Houghton Lake MI - 

video from Kevin Blazo Houghton Lake Resident 

August 2nd 2015

Hail causes about $1 billion in damage to crops and property each year, according to the National Oceanic Atmospheric Administration (NOAA). And although hailstorms are rarely associated with fatalities, they are responsible for serious injuries and severe property and automobile damage.

Here is some advice on how to prepare for potential hail storms:

Before a Hailstorm

• Check your policy to see what’s covered and the deductible you’ve chosen.
• Your insurance policy typically covers the cost to repair roofs and cars and other common hail damage.
• You may have a higher deductible for wind and hail damage than you do for other types of claims.
• Talk to your local independent agent to find out more.
• Repair or replace worn, curled or missing shingles.
• If your roof is aging, consider replacing it before hail season begins.

During a hailstorm

• Stay indoors.
• Stay away from skylights and glass doors to avoid broken glass.
• If it is safe, close drapes, blinds or shades to prevent debris from blowing inside.
• If possible, park vehicles in a garage or other covered area.

“Hail comes without much warning,” said 27 year insurance veteran Ronald Dwyer of Roninsureme.com, “and can cause significant damage to property.”