LANSING — Gov. Gretchen Whitmer called Monday for insurance refunds of up to $675 per vehicle to be quickly issued to drivers.
In a letter to the Michigan Catastrophic Claims Association (MCCA), the Democratic governor cited a surplus of $5 billion that she attributed to premium overcharges and a 2019 law that cut insurers’ medical costs for people injured in crashes. The surplus was up from $2.4 billion a year before, according to a report issued in the summer. She also said many residents have faced financial hardships during the COVID-19 pandemic.
The association is a state-created nonprofit entity that reimburses car insurers for health care claims surpassing $600,000. Michigan used to require motorists to pay a unique, annual per-vehicle fee for unlimited health coverage until passage of the law.
The fee once surpassed $200 before dropping over two years to $86 currently. The coverage is optional as of last year, though about 80% of drivers have kept it.
Every insured motorist would be eligible for the refund.
“Billions in surplus funds should not be held by insurers to invest for their own profit or be conditioned on renewal of a policy. The surplus belongs to Michigan policyholders and should promptly be returned directly to them in full, in the form of refund checks,” Whitmer wrote.
MCCA Executive Director Kevin Clinton said the board, comprised almost entirely of insurance companies, will consider the request but having no surplus would be “too dangerous.”
“The governor’s proposal is both higher in terms of dollars coming out and sooner than the law says it should be. … I don’t think that we will probably go as high as she does, even if the board decided something, because that would leave us with no surplus at all,” he said.
Under the 2019 law, the state insurance director must hire an independent actuary starting next year and every third year after to audit the MCCA. If the review — due by September — shows the MCCA’s assets exceed 120% of its liabilities, the difference must be refunded.
“If we did the formula in the statute and applied it to today’s numbers, it would mean about $100 per car,” Clinton said.
The insurance industry said it supports giving money back to drivers, but potentially speeding the time frame makes it even more important to stay the course with the law, which includes a reduction in what insurers can be billed to reimburse medical charges.
The Coalition Protecting Auto No-Fault, a group of health providers and plaintiffs’ attorneys that opposed the 2019 law and is pushing for changes, criticized Whitmer’s step. It said her administration should do more to investigate whether insurers overcharged motorists when claims were down in the pandemic.
“The governor’s announcement seems designed to distract our attention away from the real issue — the fact that survivors of catastrophic auto accidents are suffering under the new law, and that auto insurance companies are continuing to gouge consumers,” said President Devin Hutchings.