Letter: Insurance companies not making a fortune off you

Detroit Free Press

Since 2001, the average profit for insurers that provide private passenger auto insurance in Michigan was a negative 1.2%. In fact, of all 50 states, Michigan was last in auto insurance profitability (it didn’t have any), according to the National Association of Insurance Commissioners. That is a far cry from trial attorney Steven Gursten’s opinion that auto insurance companies were making huge profits from the state’s no-fault law.

By using an incomplete picture of insurance company data and manufactured terms, such as “unused premiums,” Mr. Gursten misleads readers into his “simple math” calculation: that everything after claim payments is profit. That is simply not true.

Michigan law requires all drivers to purchase unlimited, lifetime medical coverage as part of the auto insurance policy. No other state comes close to such a high requirement.

To sustain unlimited, lifetime medical benefits, auto insurance companies must buy reinsurance (or insurance for insurance companies) to help them cover large auto accident losses. One of the large costs associated with the system is the Michigan Catastrophic Claims Association (MCCA), which spreads risk among all auto insurance in Michigan. After paying their own claims, insurance companies paid more than $1 billion to the MCCA to cover the medical cost of seriously injured auto accident victims.

This expense is significant and unique to Michigan. Other expenses not reported by Gursten include commissions to agents; employee salaries; employee benefits; buildings; federal, state and local taxes; adjusters; attorneys; medical review of claims, and other costs of doing business.

The bottom line is that the information portrayed as fact couldn’t be further from the truth. Most Michigan auto insurance carriers actually paid out more than a dollar in claims and expenses for every dollar they collected in premiums. Mr. Gursten’s motives are clear. He doesn’t want Michigan’s expensive no-fault system changed. While he may support the system, people struggling to pay their bills are not happy with the cost of auto insurance in this state.

A coalition of insurance carriers, business groups and agents are supporting changes that would constrain escalating medical costs and still provide a medical benefit that is 20 times higher than any other state.

Pete Kuhnmuench

Executive Director, Insurance Institute of Michigan