How about some honest information?
Nearly every day we get the question: Why did my car insurance go up? Part of that answer is always: The auto policy provides unlimited medical benefits. As the cost of care increases, the cost of the insurance increases and the cost of health care is increasing at an alarming rate. When claim costs increase, insurance rates increase (Insurance 101).
No doubt about it, unlimited medical coverage is a wonderful benefit…no doubt about it, unlimited anything costs a lot of money. The proposed reform would limit medical benefits to $1,000,000.
So let’s talk about insurance…
With a $1,000,000 medical benefit Michigan motorists would still have the most generous coverage for auto medical insurance in the country, 20x more than the next highest state (New York) with $50,000 in mandated coverage.
Did you know medical providers charge auto insurance companies 300% to 400% more than they accept from private health insurers for the same treatment? The proposed reforms would also fix this, forcing medical providers to accept the same rates that are paid by the private insurers. With these reforms it is estimated that 99.5% of auto medical claims would fall under the $1,000,000 mark. For the other .5% the injured party would have the same options they have in the other 49 states.
If these reforms are enacted your annual auto insurance rates will be reduced by $125 per car, but I know what you’re thinking. That’s great but what about next year; won’t the insurance companies just raise my rates next year? We promised honest information so yeah, probably; rates always seem to go up because everything seems to go up; parts for cars, high tech paints, labor rates, etc. Remember Insurance 101? However, controlling medical expenses will go a long way in helping to keep your overall costs down. In addition, Michigan has a very competitive auto insurance climate with over 100 companies selling auto insurance. Without the nearly impossible task of trying to figure out how to price an unlimited benefit Michigan will look attractive to even more companies. The Law of Supply and Demand: Demand for insurance will remain constant. More companies = more supply = lower rates (Economics 101).
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PS. For the readers who think these opinions are biased, if these changes are passed the average Michigan household will save $250 per year (collectively that's $750,000,000 the first year alone). Most insurance agents (like us) are compensated via commission. When the cost of our product decreases our compensation decreases. So back to being honest, we're not looking forward to a cut in pay but we're not sure the auto policy should be providing health care in the first place. Perhaps, with the new Affordable Care Act, $1,000,000 in coverage on the auto policy, the ability to recover damages from an at-fault driver, private health care, etc. etc. this may simply be the right thing to do.