Reforming no-fault car insurance in Michigan


There are two basic systems for organizing the provision of car insurance. One relies on the centuries old law of tort. The driver who’s at fault pays for putting right the damage caused. The other approach is no-fault insurance. Effectively this is self-insurance where anyone who decides to drive insures against any losses they may suffer as a result. In other more law-abiding countries, the no-fault system works out cheaper because instead of spending time and money arguing about who’s to blame, insurers only need decide how much to pay out. Unfortunately, America is the law of fraudsters and also the land where medical costs can quickly spiral out of control. Both factors combined make no-fault systems potentially more expensive to operate.

In Michigan, two top Republicans are fighting each other over whether to reform that state’s no-fault car insurance. Governor Rick Snyder points to the uncomfortable fact that Michigan has the eighth most expensive annual premium rates in America. The reason why people are being asked to pay ever higher rates is the cost of medical treatment. Michigan is the only state in the union requiring people to carry unlimited coverage against the cost of medical treatment. Governor Snyder is arguing the system should be reformed by imposing a cap of $1 million dollars on the amount anyone can claim from their insurer to deal with catastrophic personal injuries.

Lining up against him is Oakland County Executive L Brooks Patterson. His view of the reform is that the lucky drivers who avoid accidents may save a few dollars a year but the few who are seriously injured will potentially be driven into bankruptcy when the bills for treatment reach home.


If we go back a few years to the time when Governor Engler was in charge, he campaigned by ridiculing his Democrat opponent Jim Blanchard for offering five cents a week reduction in property tax. In fact, he actually handed out nickels when he gave stump speeches. So now Governor Snyder is promising his proposed reforms will produce savings for all drivers. The trouble is the return of the nickel phenomenon. It seems the savings will be mere nickels but, if medical costs keep rising at the same rate, more and more Michigan drivers could run foul of the cap and be forced into bankruptcy.

Politics is an endlessly fascinating game. With the reminder to GOP supporters coming in an open letter, you can almost see the nickel ads being prepared for the next elections.

With electors being energized by well-publicized rallies by people who have received catastrophic injuries, this is turning into a very interesting fight between factions within the ruling Republican party. For now, the Democrats do not have to do anything other than watch the argument. In a way, no matter which side wins the debate, the Democrats have been gifted an election issue.

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