Michigan Auto Insurance Bills Boost Bureaucracy, Hurt Consumers

A package of 10 auto insurance reform bills proffered by Michigan lawmakers would create a massive new regulatory bureaucracy, raise insurance rates, and hurt consumers, say analysts at The Heartland Institute.

“These are approaches that have been tried in the past and failed every time,” said Eli Lehrer, director of The Heartland Institute’s Center on Risk, Regulation, and Markets. “New red tape, new regulations, and new bureaucracy will make things worse. While there are a small handful of good ideas in these bills, on balance they’re an awful idea.”
 
The lead sponsor of the auto insurance package is Rep. Sarah Roberts (D-St. Clair Shores). Lehrer said many of the statements she and other lawmakers who support the bills are making about Michigan’s auto insurance are misleading.

Costly Benefits
“It simply isn’t true that Michigan consumers pay the most for auto insurance in the United States. Michigan’s automobile insurance system provides more benefits than any other and, as a result, costs more than any other. It’s that simple,” he says.
 
Matthew Glans, legislative specialist on insurance and finance at the Heartland Institute, argues the proposed changes might transfer risk to cautious drivers, not away from them.
 
“State control of insurance rates does not guarantee lower rates for consumers,” he said. “It has been proven time and again that the best method for ensuring lower prices is encouraging strong competition in the market.”
 
Accurate Rate Setting
Glans points out a fundamental aspect of insurance is to measure risk accurately and set rates accordingly. Doing so ensures policyholders pay premiums that reflect the risks they pose without subsidizing or being subsidized by other policyholders who might pose lesser or greater risks.

“Accurate rates ensure that one consumer does not end up subsidizing another’s risky behavior. Keeping rates artificially low under political pretenses increases this risk,” Glans said.

—Steve Stanek