Rebuttal: Michigan’s Auto Insurers Make Only a Small Profit

Rebuttal: Michigan’s Auto Insurers Make Only a Small Profit

December 10, 2009
Originally published in The Detroit News

About the Nov. 30 article "Industry balks at bills aimed at auto insurance reform":

Before we listen to politicians who claim greedy insurance companies over-charge Michigan residents, perhaps we should look at how much it costs to write insurance in the state.

While it's true Michigan residents pay on average $150 more than the typical U.S. driver for insurance, it's also true that during the last 10 years Michigan insurers made profits of just 2.1 percent compared with the national average return on profit of 8.4 percent.

The real reason for Michigan's exorbitant insurance premiums is not unrestrained greed from insurers, but the unrestrained costs of writing insurance in the state.

Michigan is the only state in the nation that allows for unlimited payout of no-fault claims.

This means the costs are unlimited as well, which might explain why the average claim in Michigan rose 250 percent the past 10 years.

Clamping down on the rates factors companies use to write insurance will simply raise the cost of insurance and thus raise the premiums in the state.

If legislators truly want to reduce the rates, they should focus on reducing the costs instead of focusing on looking good in order to get re-elected.