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 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 some of the highest auto insurance rates in the nation, a reduction in costs would be welcome. 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 rates.
Additionally, while Michigan residents do pay 5 percent more for their PIP benefits than the national average, we also pay 13 percent more for comprehensive coverage and 30 percent more for collision.
This indicates that 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, which 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 governor’s 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 percent and all accidents by 40 percent. The same is true of speed limits where increased state speed limits have lead to as much as a 9.1 percent increase in accidents.
And while “choice” has been the excuse to alter many of Michigan’s long-standing laws regardless of cost (such as the motorcycle helmet law repeal, where the decision to give riders a “choice” has resulted in a 34 percent 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.
Michigan legislators could also 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.