It’s sometimes hard to picture your insurance company as a caped hero sweeping in to rescue you in times of crisis. Yet, that is what insurers do – without the cape, of course. Whether it’s a tornado, car accident or litigious consumer, insurance provides relief from some of life’s worst moments.
More than that, insurance – the guarantee that help will be available – makes possible some of life’s best moments. Without that guarantee, who would invest in big purchases like cars and homes, start a business, or hire employees? Insurance makes investment and economic activity possible. This is why Michigan’s next governor must end regulatory hostility toward insurers in order to revitalize Michigan’s economy.
During Gov. Jennifer Granholm’s two terms, houses lost half of their value, nearly 1 million residents left the state, thousands of businesses closed and nearly 1 million jobs were lost, giving Michigan the nation’s highest unemployment rate for many months.
Her administration’s hostility toward industry, particularly toward auto insurers, has resulted in a market that is expensive for consumers and restrictive for companies. Though the supposed goal of Granholm’s policies was to lower costs for consumers, they have resulted in significantly higher auto insurance premiums.
Detroit, for example, now has the nation’s highest average auto insurance premiums at $5,020. And despite dropping accident rates, claim costs per accident rose by 250 percent, resulting in the $140 assessment every driver must pay.
In spite of this, insurers remain a vital part of Michigan’s economy; for now. While other businesses closed or laid off workers, insurers continued to hire. More than 1,500 insurance companies employ about 100,000 people, contributing more than $4.2 billion in wages and $223.2 million in premium taxes paid to the state. But how long can this last?
The current governor and her consumer advocate have chosen to ignore the significance of these numbers. Their proposals to limit the factors insurance companies can use in rate setting and to set rate caps fail to address the real factors driving up insurance costs in the state. Worse, their proposals would result in greater inefficiencies. If the next administration carries on this hostility, it would likely result in insurance companies leaving the state, taking jobs, revenue, and opportunities with them.
While the situation may seem bleak, there are immediate steps the next governor can take to improve the state’s insurance climate, which would go a long way toward economic recovery.
First, scrap attempts to cap rates or limit the way insurance companies set rates.
Second, increase consumers’ ability to choose the amount of coverage they want to purchase. Eliminating the requirement to purchase personal injury protection will allow drivers who have other types of insurance to reduce their premiums and eliminate overlapping coverage.
To stimulate Michigan’s economy, the new governor must amend the current attitude toward insurers and recognize that a competitive insurance market will not only provide jobs and revenue, but also create the necessary safety net for other businesses to enter the Michigan market and support economic renewal.