Contact: Lee Doren, 202-331-2259
Washington, D.C., October 19, 2010 – Michigan’s next governor has his work cut out for him. It is no secret that over the last decade Michigan’s economy has been in a veritable free-fall. Housing values slumped while businesses closed, residents fled and nearly a million jobs were lost. Unemployment in the state consistently ranks as one of the nation’s highest and on top of all of that Michigan was recently ranked as having the nation’s second highest auto insurance premiums.
A study released this week by the Competitive Enterprise Institute and the Mackinac Center for Public Policy outlines concrete and practical steps to begin reforming auto insurance regulation and perhaps put Michigan’s economy on the road to recovery.
Gary D. Wolfram, professor of economics and public policy at Hillsdale College and D. Joseph Olson, Michigan’s former Commissioner of Insurance authored the study, which indicates that no-fault insurance and mandates requiring individuals to purchase unlimited personal injury protection are two reasons for the increased costs of providing insurance coverage in Michigan. Though no-fault insurance was originally thought by many states to be a way to reduce costs associated with court battles and as a way to speed up the process of payment for accident victims, the no-fault system in practice resulted in greater inefficiencies and costs. Though many states have since altered or repealed no-fault regulations, Michigan has retained the system and as a result costs have increased and consumer options have decreased. Steps for reform suggested in the study include:
1) Replace Michigan’s unlimited personal injury protection purchase requirement with more flexible options;
2) Allow Insurance companies to use the risk-management and underwriting tools they deem most fit to determine the probability and costs of accidents; and
3) Wind down the Michigan Catastrophic Claims Association as reinsurance becomes more affordable for insurers.
Michelle Minton, Director of the Insurance Studies project at the Competitive Enterprise Institute, argues that these policy changes are absolutely necessary for Michigan’s economic recovery. “Insurance is vital to the economy, but politicians in Michigan have not made it easy for insurers in the state,” said Minton. “The current Governor has made attempts throughout her tenure to restrain the industry and the hostile attitude of her administration towards insurers has created inefficiencies, increased costs, and reduced the ability of consumers to choose the kind of insurance that best fits their needs.”
“If Michigan’s next governor hopes to turn that state’s economy around he is going to have to reform the way insurance is regulated.”
To read the entire proposal, click here.
For media inquiries, please contact Lee Doren, Communications Coordinator at the Competitive Enterprise Institute, 202-331-2259