From the Insurance Institute of Michigan
Fireworks aren’t the only thing going up this week. An insurance assessment to reimburse insurance companies for catastrophic injuries resulting from auto crashes increased 6 percent on July 1.
The Michigan Catastrophic Claims Association (MCCA) assessment, which covers unlimited lifetime medical costs for those injured in auto accidents, rose $11, from the $175 to $186 starting July 1, 2013.
“Just like health insurance, the cost to provide unlimited, lifetime care and medical treatment for those injured in auto crashes is rising at a staggering rate. In 2012, the cost neared the $1 billion mark,” said Pete Kuhnmuench, Executive Director, Insurance Institute of Michigan.
Michigan’s no-fault auto insurance system is unique in that it provides unlimited medical benefits for motorists injured in auto accidents. Michigan is the only state in the country with such a high medical benefit mandate. The MCCA was created in 1978 to reimburse auto insurance companies for injury claims that exceed a certain threshold, which will be $530,000 on July 1. The MCCA then assesses all auto insurance companies to cover the costs of those catastrophic claims. The assessment is reflected in the premiums paid by Michigan policyholders.
The MCCA is required by state law to assess carriers the amount it is expected to pay for those injured in auto accidents during the upcoming year. The MCCA evaluates expectations for medical cost inflation, economic conditions, investment returns and number of claims. It is adjusted for fund surpluses or deficiencies from earlier assessments. Currently, the MCCA faces an estimated $2 billion deficit, which represents $300 per insured car. Of the $186 assessment, $29.19 is designated to recoup part of the deficit.
In 2012, the MCCA paid out $947 million, primarily for closed-head injuries, paraplegia, quadriplegia and burns. Since 1978, when the fund began, more than 29,474 claims have been reported, which will cost an estimated $83 billion over the life of the injured motorists.
Each year, an increasing number of individuals are receiving benefits from catastrophic auto accidents. Payments to full-time family or agency attendant and residential care providers comprise 60 percent of the claim payments.
The liability of the MCCA falls upon auto insurance companies in Michigan, according to Kuhnmuench. Five of those insurance companies that write over 40 percent of the state’s auto insurance serve on its Board of Directors. Those member companies are appointed by the Director of the Department of Insurance and Financial Services. The Director serves as an ex-officio member. Information on the MCCA, including claim payment statistics, audit reports, financial statements and answers to frequently asked questions is available at www.michigancatastrophic.com.
IIM is a government affairs and public information association representing property/casualty insurance companies and related organizations operating in Michigan. IIM member companies provide insurance to 74 percent of the automobile and 65 percent of the homeowners markets in Michigan. For more information about insurance, visit the website, www.iiminfo.org.