Bills cutting car insurance rates would increase rate of insurance fraud, AG says

Posted at 12:36 PM, May 10, 2019
and last updated 2019-05-10 12:36:21-04

(WXYZ) — Michigan Attorney General Dana Nessel warned residents that the bills that cut insurance rates would deliver limited temporary rate reductions and undermine efforts to pursue auto insurance fraud.

“If passed, this legislation will destroy existing efforts by my department and the Department of Insurance and Financial Services to investigate and prosecute no-fault fraud,” Nessel said in a release. “The excessive amount of fraud in our state – estimated to be more than $820 billion ($108 for every insured vehicle) annually – is one of the single biggest contributors to Michigan’s extraordinarily high auto insurance rates.”

Nessel's Auto Insurance Fraud Unit investigates and prosecutes complaints where criminal activity has been confirmed. In less than a year, the unit has received 3,200 complaints.

“We currently have more than 25 active cases under investigation and we have already charged one case with an estimated $100,000 in fraudulent activity,” said Nessel. “We are driven to aggressively investigate and prosecute acts of auto insurance fraud in tandem with the Department of Insurance and Financial Services and the Michigan State Police.”

Nessel said the bills passed by the House and Senate would eliminate the coordinated AFU and all current and new cases would be transferred to Michigan State Police. Nessel says MSP doesn't have a single prosecutor nor does it have prosecutorial authority, meaning the new AFU couldn't prosecute a single instance of auto insurance fraud. She said MSP has competing priorities to protect public safety and county prosecutors do not handle auto insurance fraud cases.

“Without any funding appropriations – in addition to the Senate’s 10 percent reduction in our general fund appropriation – auto insurance fraud will go unprosecuted, leaving this area of criminal activity a free-for-all for any and all bad actors who chose to take advantage of the system,” Nessel said. “Our ‘highest in the nation’ rate of insurance fraud will increase, which will inflate the premiums even more.”

“As Michigan’s chief law enforcement official, I am stunned and outraged that the Legislature would deliver this all-encompassing gift to criminals who abuse our state’s auto insurance system, passing those costs along to consumers. I support Governor Whitmer’s expected veto of these imprudent bills. Criminals should not be granted carte blanche to break the law, and these bills hand them that opportunity.”

The House bill would allow drivers to choose their Personal Injury Protection rates, and would cut them by either 10 percent, 30 percent, 60 percent, 80 percent or a full opt-out of 100 percent.

However, Governor Gretchen Whitmer said saving money through lower levels of PIP coverage doesn't go far enough. Whitmer said both the House and Senate bills wouldn't guarantee rate cuts or address discriminatory rate-setting practices.