According to a recent study performed by the Insurance Research Council (IRC), the no-fault system for Michigan auto insurance has experienced an increase of 192 percent in the average claimed losses for lost wages, medical expense, and other injury-related costs linked to vehicle accidents within the state, in a period from 2002 to 2001.
The IRC study of auto injury insurance claims in no fault systems also demonstrated that within that same period of time, there was an average increase of 13 percent every year within that state. It identified an average annual medical care inflation rate of about 4 percent during that stretch of years.
Michigan’s regulations are unique among the states, in that its drivers are required to buy coverage that offers a unlimited lifetime medical coverage for injuries relating to a vehicle crash. This recent study determined that much of the costs to the system are being generated from a small number of highly costly claims.
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Among the claim payments, only 1 percent have involved insured expenses that were more than $250,000. However, those same claims made up 22 percent of the total amount of the losses among all of the payments that were made. The results of this research have aligned with the findings of previous studies that have all suggested that catastrophic claims, including those that were considered either open or closed at the time of the study – make up between 1 and 2 percent of the total claims, but represent over 45 percent of the total expenses for claims relating to injuries.
The IRC published the results of their research in a report entitled “No-Fault Auto Injury Claims in Michigan: A Study of Closed Claims and Open Catastrophic Claims.” It also indicated that the portion of total claims expenses that were linked to medical expenses had undergone a significant increase. For closed claims, it was 83 percent, whereas for open catastrophic claims, it was 90 percent last year.
According to the IRC senior vice president, Elizabeth Sprinkel, “This report provides further evidence of the role that a relatively small number of very large claims play in the increased costs to the entire [Michigan auto insurance no-fault system].”