Governor Whitmer calls for $5 billion in auto insurance refunds for Michigan drivers

Gov's announcement reverses insurance director's position from September
Posted at 11:25 AM, Nov 01, 2021
and last updated 2021-11-01 18:17:54-04

(WXYZ) — Governor Gretchen Whitmer announced on Monday that she will continue to fight for lower insurance costs for Michigan families.

The announcement comes roughly a month after a 7 Action News report that showed Michigan drivers were overcharged $ 1 billion in 2020 alone, according to a recent study.

She is calling on the Michigan Catastrophic Claims Association to deliver refund checks to every Michigander with auto insurance.

The refund is part of a bipartisan auto insurance reform law, Senate Bill 1, signed by the governor in 2019.

RELATED: Michigan drivers overcharged $1 billion in auto premiums during pandemic, study finds

“The over $5 billion surplus accumulated by the MCCA belongs to Michiganders and should be put in people’s pockets immediately with a refund check,” said Governor Gretchen Whitmer. “As we stay-laser focused on growing our economy and ushering in a new era of prosperity we need to use every resource we have to help people thrive. A refund check to working families will help us continue to put Michiganders first and drive down costs.”

Earlier this year, the Consumer Federation of America issued a study saying that Michigan's refunds early in the pandemic were insufficient, and that drivers were owed another $1 billion in 2020.

But in September, Anita Fox, the director of the state's Department of Insurance and Financial Services, or DIFS, said the state's data did not support issuing further refunds to Michigan drivers.

Whitmer's announcement today marks a stark disagreement with DIFS' assessment.

"It’s not enough to say, 'Well, we stood up once for consumers,'" said Doug Heller, who was part of the study, back in September. "Their job is to always be standing up for consumers because we are always required to buy this insurance product."

Senate Bill 1 was signed into law in May of 2019.

Under the law, Michigan drivers are guaranteed lower rates for eight years.

It also gives drivers a choice to pick their own Personal Injury Protection (PIP) options  with coinciding  PIP  rate reductions, offering unlimited coverage (at least 10% PIP reduction), $500K coverage (at least 20% PIP reduction), $250K coverage (at least 35% PIP reduction), $50K coverage for Medicaid eligible recipients (at least 45% PIP reduction), or a complete opt-out for seniors or anyone with sufficient private insurance (100% PIP reduction).  

The law also bans companies from using zip code, credit score, gender, marital status, occupation, educational attainment, and homeownership as factors in setting rates.

Fee schedules for hospitals and providers would also prevent overcharging for auto-related injuries.

Monday afternoon, Insurance Alliance of Michigan Executive Director Erin McDonough released the following statement:

“Reforms passed with bipartisan support and signed by Gov. Gretchen Whitmer include a way to ensure drivers would get money back from the MCCA if there is a surplus. Under law, this money goes back to Michigan insured drivers, which the Insurance Alliance of Michigan and its members strongly support. Moving up the timeframe for a refund, as the governor now proposes, makes it even more important to stay the course with the full reforms. Long-term care is the number one cost driver within the MCCA and is currently subject to the reasonable medical fee schedule. Changes to any part of reform will have a domino effect that will change the MCCA’s long-term liabilities, increase premiums and drive up costs at a time when Michiganders can least afford it.”