Why are Michigan Catastrophic Claims Costs Going Up Again?

by Michigan Auto Law

We deserve to know why MCCA catastrophic coverage costs are again going up; political opportunism suspected behind latest hikes

MCCA is increasing its annual assessment for catastrophic coverage: Drivers want to know "Why?"

The cost of catastrophic coverage from the Michigan Catastrophic Claims Association (MCCA) for car accident injury victims is going up, again.

And without any sunlight or transparency behind the catastrophic coverage cost increases, the question is “why?”

This is inexcusable.

Recently, the MCCA, which pays for Michigan No Fault benefits for catastrophically injured auto accident victims, announced that it was again raising the amount of its annual MCCA assessment.

Starting July 1, 2018, and running through June 30, 2019, Michigan drivers will have to pay $192 – on top of the rest of their car insurance bill – to cover the MCCA’s annual assessment.

Not only will the new assessment be a hefty 13% increase over the 2017-2018 MCCA assessment, but the $22 jump it represents is double the amount of increases in recent years! Many people, myself included, believe this fee hike is no coincidence. There have been many efforts to cut No Fault benefits by the insurance industry, and without any sunlight or transparency on how these reserves are calculated, and with the insurance industry likely cooking the books at the MCCA while efforts are being made to “reform” auto No Fault in the Legislature, this raises all the red flags of abuse and opportunism.

Although the assessment is actually directly imposed on auto insurers, they do as they are required to do by the No Fault law and, thus, the car insurance companies pass along the MCCA costs to drivers in the form of higher auto insurance premiums.

Given the direct impact this will have on drivers – and the likely worsening effect it will have on the already growing crisis of uninsured drivers in Detroit, Flint and elsewhere in Michigan – drivers need to know more.

They deserve to know what’s going on and why.

For instance:

  • Why is this the fourth year in a row that the MCCA assessment has increased?
  • Why has the MCCA deficit increased so significantly over the last four years?
  • Why has the MCCA’s annual per vehicle payout on catastrophic coverage benefits increased $11 between 2014 and 2017?
  • Even though the MCCA’s reserves continue to increase, will they be adequate to cover the catastrophic injury claims that the MCCA is liable for both now and in the future?

But they – we – don’t get answers. Instead, the MCCA gives us vague generalities and stonewalling and we’re supposed to sit quietly and take it.

In its March 29, 2018, press release, MCCA explains the assessment increase as follows:

“The increase is due to higher than expected claim costs, partially offset by better than expected investment performance.”

This must change. Oversight of the MCCA must be carried out by entities other than the auto insurers, themselves. And, transparency must be brought to the annual, increasingly frustrating process of increasing drivers insurance costs by increasing their MCCA assessment burden.

What’s happening to MCCA assessments for catastrophic coverage?

Here’s the recent trend for MCCA assessments:

  • $192  (7/1/2018 through 6/30/2019) (increase of $22 or 13%)
  • $170  (7/1/2017 through 6/30/2018)
  • $160 (7/1/2016 through 6/30/2017)
  • $150 (7/1/2015 through 6/30/2016)

What’s the status of the MCCA’s deficit, as a result of providing catastrophic coverage?

Below are the deficit trends (i.e., the difference between assets and liabilities) for the MCCA:

  • For 2017: “$2.3 billion estimated deficit related to existing claims.” 3/29/2018 press release
  • For 2016: “a $1.9 billion estimated deficit …” 3/13/2017 press release
  • For 2015: “a $1.3 billion estimated deficit …” 3/22/2016 press release
  • For 2014: “an estimated $292 million deficit …” 3/25/2015 press release

How much is the MCCA paying out annually for catastrophic coverage benefits?

What is the MCCA’s annual payout on No Fault benefits coverage for catastrophically injured car accident victims:

  • “In 2017, the MCCA paid out $1.2 billion ($160 per insured vehicle) for claim costs resulting from catastrophic injuries.” 3/29/2018 press release
  • In 2016, “[t]he MCCA paid out $1.1 billion (more than $154 per insured car) in 2016 for claim costs resulting from catastrophic injuries.” 3/13/2017 press release
  • “The MCCA paid out $1.1 billion (more than $155 per insured car) in 2015 for claim costs resulting from catastrophic injuries.” 3/22/2016 press release
  • “The MCCA paid out $1 billion — more than $149 per insured car — in 2014 for claim costs resulting from catastrophic injuries.” 3/25/2015 press release

What are the MCCA’s reserves to pay present and future claims for catastrophic coverage?

Below are the MCCA’s reserves (through June 30 of the year listed):

  • 2017 21,425,644,000
  • 2016 19,465,364,000
  • 2015 17,755,489,000
  • 2014 16,855,230,000

“Reserves” is the amount of money the MCCA sets aside or saves to use to pay for present and/or future open catastrophic claims.

(Source for Reserves data: Annual Statements (i.e., financial statements) of the MCCA for Fiscal Years Ending on June 30, 2017, June 30, 2016, June 30, 2015 and June 30, 2015, “LIABILITIES, SURPLUS AND OTHER FUNDS,” “1. Losses …,” “Current Year” [Note: This information has historically been reported as “Discounted Loss Reserves” on the “MCCA Financial and Statistical Highlights” page (“Appendix 5”) of the MCCA’s Annual Report to the DIFS Director, but, for reasons not disclosed, it was not included in the December 2017 report for FY ending June 30, 2017])

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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