Researcher: Michigan-based Citizens Insurance raised auto premiums after state reform

Posted at 6:09 PM, Mar 23, 2022
and last updated 2022-03-23 18:09:09-04

HOWELL, Mich. (WXYZ) — In 2019, lawmakers in Michigan’s Republican-controlled state Legislature and Democratic Gov. Gretchen Whitmer passed an auto insurance reform bill they said would save drivers money.

But did it? A report just released says while drivers may be paying less into the Michigan Catastrophic Claims Association fund, they may be paying their insurer more for premiums.

Director of Insurance at the Consumer Federation of America Douglas Heller says he examined Citizens Insurance filings with the state.

“Citizens is charging its customers, the premium that it keeps, that premium has gone up $90 for the average coverage,” Heller said.

Heller is also a consultant for the Coalition Protecting Auto No-Fault, or CPAN, which lobbied against the 2019 law. He says his research found the law forced personal injury protection coverage costs down, but other coverage costs increased at Citizens.

“You are not holding insurance companies accountable with this law. What you are doing is shifting costs around,” Heller said.

The law passed in 2019 also promised to end pricing based on zip codes. Citizens filings to the state show in response, it uses Census Tract Block Group locations. The result is the same. Consumers will see a big difference in price based on where they live. Heller says he found a Troy resident

“That is beyond unacceptable. It shows we have not solved the problem. Instead what has happened is you create a second class citizenry of people who get less coverage for dramatically higher premiums,” Heller said.

Heller pointed out that profits also increased at the insurance company.

Relatively high rates are not just a Citizens issue. The Zebra found Michigan is the second most expensive in the nation for insurance rates. 7 Action News asked the Insurance Alliance of Michigan about this last week as we covered cuts to long-term care coverage for crash survivors under the 2019 law. The law cut coverage for catastrophic injury care by 45% across the board.

“We’re seeing new entrants into the market. You are going to continue to see changes to the rates because things have had time to work,” said Erin McDonough, executive director of the Insurance Alliance of Michigan.

7 Action News reached out to Citizens Insurance for response. It released a statement that said:

“This is the first we’re hearing about the purported report and we have not seen a copy of the study, nor has any of the underlying data been shared with us. Moreover, we don’t know anything about the assumptions, methodology or third-party sources that may have been used instead of actual rate data.

Based on the limited information you have shared, the statistics provided appear to be materially misleading.

Our rates have been reviewed and approved by the Department of Insurance and Financial Services. These rates fully comply with the mandated PIP rate reductions as part of no-fault reform.

That said, Citizens continues to compete effectively in a highly competitive and regulated marketplace, offering comprehensive insurance solutions for individuals and families in Michigan.

And like the rest of the industry, we are working diligently in conformance with the Department’s guidance to process millions of dollars of refunds to Michigan auto insurance consumers on behalf of the MCCA. It is unclear whether the purported report takes those refunds into account.”

- Citizens Insurance

There has been a decrease in the fee paid to the Michigan Catastrophic Claims Association, which manages a fund set up to provide care for those with catastrophic injuries. The current fee is now optional and $86 per vehicle. The annual fee was $220 per vehicle in 2019 before the law was passed. The fund was also found to be overfunded due to the law change and care cuts, resulting in a $400 rebate per insured vehicle that is currently being processed and/or sent to drivers.