Rise in catastrophic auto insurance costs unsettling to some
Every auto insurance holder in Michigan will pay $18.20 more this year to cover severe injuries from accidents deemed “catastrophic.”
The Michigan Catastrophic Claims Association, an organization that includes all auto insurance companies in Michigan, adds a solid fee to each vehicle owner’s insurance costs. This year, the fee is being raised to $143.09 from $124.89 in 2009.
“The last couple of years, investment returns have been less than anticipated,” said Jim Lunsted, controller of the MCCA. “Also, there has been an increase because of the inflation rate.”
He said this new price will take effect July 1, 2010 through June 30, 2011.
Macomb sophomore Nicole Seiberling said she is unsure whether she supports the idea of paying extra to reimburse someone else’s insurance company for injuries another person incurred.
“I think it’s just the risk insurance companies take when they insure someone,” she said. “There is always a chance that they will have to pay for a catastrophic accident, and they should be responsible for it.”
Illinois graduate student Kevin Murphy drives an ‘88 Chevy Caprice Classic, which is his solution to insurance costs. He has Public Liability and Property Damage (PLPD) insurance that only covers liabilities.
“Maybe everybody should just drive junkers and get PLPD,” he said, “that’s what I do.”
Expected deficit: $2 billion
Lunsted said the price was determined by their organization’s databases, which take into account every insurance company’s accident reports from the previous year, along with inflation rates.
“All companies report the rise in their number of claims for cars to us and we assess the costs for each company,” he said. “We have a database it’s all entered into and we have consultants that analyze these statistics.”
According to an MCCA news release, $811 million was paid out in claims in 2009, which equals about $115 per insured driver. He said the MCCA is expecting its deficit to rise to $2 billion this year.
The release stated of the $143.09 charge per driver this year, $116.84 will go to cover new claims, $26.00 to pay off the deficit and $0.25 to administrative costs.
Lunsted said it is predicted there will be 1,200 accidents next year that will require help from the MCCA.
The MCCA was created in 1978, five years after state legislature passed the Michigan No-Fault Act, which requires insurance companies to cover all damages and medical expenses to their own insurers in an accident, whether it was their fault or not.
The act requires that these companies cover life-long medical expenses that may occur as a result of an accident, with no cap on the amount they will spend.
- Senior Reporter Maryellen Tighe contributed to this report.
