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Report finds overcharging by medical providers, costly lawsuits making car insurance unaffordable

A blistering report released today by the Insurance Research Council (IRC) finds Michigan’s broken, outdated auto no-fault system is ripe for fraud and abuse and that out of control medical charges and a spike in costly lawsuits is driving up the cost of auto insurance for drivers across the state. The Auto Insurance Affordability: Cost Drivers in Michigan report was released as a follow-up to a report the IRC issued in February that found Personal Injury Protection claims increased by 60 percent in Michigan from 2008 to 2017.

“We applaud the Insurance Research Council for conducting this important research into the problems plaguing Michigan’s broken, outdated auto no-fault system,” said Tricia Kinley, executive director of the Insurance Alliance of Michigan. “This report backs up what several other studies have found: medical providers and trial attorneys are the two main contributors to the high cost of auto insurance in Michigan.”

Michigan is the only state in the nation that forces drivers to purchase unlimited, lifetime medical benefits with their auto insurance. Couple this costly mandate with a lack of commonsense cost controls and you have doctors ordering costly CT scans twice as often as the national average, according to the report.

The report also found a 78 percent spike in auto-related lawsuits from 2002 to 2017, much of it from a flood of no-fault cases.

“In 2002, lawsuits over no-fault insurance were fairly uncommon, accounting for just five percent of all civil cases,” the report states. “The number of no-fault cases more than tripled over the next 15 years, so that they accounted for 26 percent of all civil cases in 2017.”

The report also found that in 2017 just three percent of all PIP claims exceeded $250,000 in medical costs, meaning a “no-fault system with limits of $250,000 would have sufficiently covered 97 percent of claimants.”

“This report supports what the Insurance Alliance of Michigan has been saying for years: Cracking down on fraud and abuse, stopping medical providers from dramatically overcharging for procedures and giving consumers a choice in their level of medical coverage will help lower the cost of auto insurance for drivers across the state,” Kinley said.

Michigan drivers consistently pay some of the highest auto insurance premiums in the country, with some reports calling it the most expensive state in the nation. According to data compiled by The Zebra, Michigan drivers pay, on average, $2,610 a year for car insurance – nearly twice the national average and more than double what drivers in Ohio, Indiana and Wisconsin pay for coverage.

A recent study conducted by the University of Michigan also found auto insurance is unaffordable for drivers in 97 percent of zip codes across Michigan.

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