Michigan Bill Proposes 10% Mandatory Auto Insurance Premium Cut, Faces Industry Pushback

A Michigan legislator has introduced Senate Bill 328, proposing a mandatory 10% reduction in auto insurance premiums for all new and renewed policies without any decrease in coverage benefits. Alongside, Senate Bill 329 aims to prohibit reinstatement fees and rate increases following lapses in coverage. The American Property Casualty Insurance Association (APCIA) cautions that SB 328 could destabilize Michigan's auto insurance market, which has seen improvements due to reforms implemented in 2019.

According to APCIA, data from the National Association of Insurance Commissioners (NAIC) indicate that insurers are still experiencing a loss ratio exceeding 100%, with claims and expenses surpassing premium income. The association argues that forcing universal premium reductions could reverse recent gains in market stability and affordability, potentially mirroring market disruptions seen in states like California.

Senator Jeff Irwin, the primary sponsor, advocates the legislation as a measure to address what he terms "unjustifiably high car insurance rates" impacting consumers. The bill has garnered support from eight additional Democrats and one Republican but is currently awaiting committee review in Michigan's Senate Committee On Finance, Insurance, And Consumer Protection.

Industry analysis references an AM Best study showing a 12% decline in average personal auto insurance premiums in Michigan from 2019 to 2022, contrasted with a 5% national increase during the same period. APCIA emphasizes that the 2019 no-fault reform legislation has led to greater insurer participation and increased consumer options, outcomes they warn could be jeopardized by the proposed mandatory premium cuts.

If passed, the legislation would introduce regulatory mandates on pricing that the insurance industry contends could undermine the balance of premiums and claims costs. This debate highlights the ongoing tension between regulatory intervention aimed at affordability and the insurance market's financial viability. Michigan remains a key state in observing how legislative action can influence auto insurance dynamics amid evolving market conditions.