Rep. Banks Unveils Auto Insurance Reform Bills to Lower Rates

Plan reduces rates while keeping current no-fault system in place
Monday, December 14, 2015

LANSING – State Representative and Detroit Caucus Chairman Brian Banks (D-Detroit) today announced that he has introduced two bills to reform auto insurance by lowering rates for urban and rural drivers while still keeping the current no-fault system in place. The two bill package would give Michigan residents in areas with the highest auto insurance rates affordable policies while maintaining their benefits and protections for accident victims, a new fraud authority, and a tax credit for participating insurance companies. House Bills 5134 and 5135 were introduced recently with bipartisan support.

“Urban and rural residents deserve quality, first-class insurance policies that are equal to insurance policies available to residents of our surrounding suburban communities,” said Banks. “Urban and rural residents deserve the same quality, first-class insurance policies offered to their suburban neighbors, and should not have to forgo these benefits simply because of where they live.”

Banks’ plan would roll-back auto insurance rates by 12 percent of the average annual premium for the area in which the consumer resides. Individuals would be eligible if they reside in an area with a population of 500,000 or more; they live in rural or urban municipalities bordering the areas that meet the population criteria; if 35 percent of the motor vehicles of drivers in a city, township or village are not insured; or they live in a designated zip code or live in a community bordering a designated zip code. The plan includes a good driver requirement. In order to be eligible for this type of policy a driver must have had no moving violations or points on their license in the previous three years. In addition, the plan would offer participating insurance companies a $500 tax credit for each household signed up under the program. Insurers could also enact a co-pay for Personal Injury Protection (PIP) benefits, similar to existing co-pays for medical insurance.

Banks said that his plan is a better option than D-Insurance because it maintains the best of our no-fault insurance system – it guarantees medical care for victims with catastrophic injuries so they can live the best possible life. This medical care is one of the paramount features of no-fault and it must be preserved for every Michigander.

“Michigan citizens are required to buy auto insurance, and yet we all know that there are thousands of uninsured drivers on the road because, based on where they live and not on their driving record, their policy is simply unaffordable,” said Banks. “My bill would encourage insurance companies to participate in this plan and lower rates by also giving the company a tax credit for each household that signs up. This is the best kind of tax credit because it actually puts money back into the hands of consumers, in the form of lower rates, so that they have more to spend in their local shops and stores. This is a win for everyone.”

In addition to lower rates and a tax credit, this plan also addresses fraud and hospital reimbursements. The fraud authority would provide financial support to state or local prosecutors for programs designed to reduce the incidence of automobile insurance fraud. It would also include an independent entity to investigate the claims practices of insurers. The plan would limit the reimbursement rates to hospitals to no more than 80 percent of their charges, for a savings of as much as $20 million, but that would not apply to independent practitioners or post-acute service providers outside of licensed hospital facilities.

“This plan guarantees that the care that victims with catastrophic injuries need in order to live a quality life is not diminished,” said Banks. “This medical care is one of the best features of no-fault and it must be preserved for every Michigander. I have talked with people representing insurance and health care, and they are excited about my plan. With their continued involvement, I believe House Bills 5134 and 5135 can be the solution to high insurance costs that the Legislature has been searching for. I look forward to continuing the discussions and to working with my legislative colleagues to see this plan passed and signed into law.