III official calls on Michigan lawmakers to address auto insurance costs

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Michigan's high auto insurance costs are driven by unlimited claims provision, expert says

The Michigan Legislature is debating means of lowering auto insurance costs for state residents, but Insurance Information Institute president Dr. Robert Hartwig says the high costs are driven by just one factor.

That factor is the provision for unlimited claims in no-fault accidents, he says. Michigan is the only state to allow unlimited no-fault claims, and for good reason: "with unlimited benefits come unlimited costs," Hartwig said.

Because there are no limits on claims for post-accident healthcare expenses, Michigan insurers are subject to "the full force and fury" of rapidly increasing healthcare costs, Hartwig suggested. The average no-fault auto insurance claim rose from $9,103 in 1998 to $31,883 in 2007, and there is no state office checking for fraudulent claim activity.

Both drivers and insurers are hurt by Michigan's unlimited claim policy, data shows. Michigan drivers pay the 11th-highest rates in the nation, but insurers' profits are far below the industry average.

Lack of competition is not a factor in Michigan's high auto insurance premiums, Hartwig said; rather, "cost drivers" are to blame.

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Posted: December 7, 2009

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