Writings - Freelance Articles
A Wolf in Sheep's Clothing? Auto Insurance “Reform”
Metro Times - September 22, 1994
All across Michigan, the television spots and newspaper ads would have you believe, common citizens are coming together over auto insurance reform.
Their vehicle—Michigan Citizens for Insurance Reform, ‘‘a broad-based and growing coalition of Michigan residents working together to bring meaningful reforms to our automobile insurance system.’’ MCIR’s main goal—the Nov. 2 passage of the auto insurance reform package known as Proposal C.
The advertisements tout Michigan Citizens for Insurance Reform as a coalition of ‘‘more than 50 major Michigan organizations and nearly 50,000 individual citizens.’’ They picture ordinary folk mouthing such campaign-ready slogans as ‘‘Right now, the bad drivers get the same rates as the good drivers do,’’ and ‘‘Today, some guy, ‘drunk as a skunk,’ runs into you and he sues you!’’
At stake is some $700 million in potential savings, according to the ads.
A long list of Proposal C’s supporters in the newspaper ads and in a glossy pamphlet distributed by the committee contains the names of numerous state law enforcement associations, business organizations and agricultural groups.
Notably absent from the list of supporters is any mention of insurance companies themselves, those most directly affected by the proposal. Yet one MCIR list that insurance companies appear on repeatedly is its campaign finance statement, where the insurers had contributed nearly all of the committee’s $400,000 war chest by May 30. That war chest is expected to grow into the millions by Nov. 2.
State Farm has been a good neighbor to the committee to the tune of $132,774, while AAA anted up $121,652. Allstate Insurance has given the committee a good hand too - $67,872.
But the insurance companies can well afford the effort, according to a report by the National Association of Insurance Commissioners that estimated their 1992 profits at 21.3 percent. The figure, more than twice the national profit rate of 8.8 percent, has since been challenged as too high by insurers and others.
‘‘We’ve never hidden the fact that the insurance companies are certainly part of our coalition. They're represented with the Michigan Insurance Federation,’’ said MCIR Media Director Mike Kent. ‘‘But they’re just a part of the organization.’’
‘‘We feel it’s important for the public to realize that Proposal C is not just an insurance industry vehicle,’’ Kent added. ‘‘We’ve been real careful to show that it does have a broad impact and it is not just something that the insurance companies are behind. Yes, they are behind it, yes they support it, but it is not just an insurance vehicle.’’
In fact, the battle over auto insurance reform includes vested interests on both sides. Proposal C was originally Public Act 143, a reform measure passed by the state legislature and scheduled to take effect April 1. It was blocked by a petition drive organized by the Committee for Fairness and Accountability in Insurance Reform (FAIR), a group funded largely by the state’s trial lawyers.
‘‘The difference between us and the insurance companies is they walk down the hall and get the corporate treasurer to write a check to their ballot question committee,’’ said FAIR spokesman Rich Stoddard. ‘‘We don’t have that luxury. We have to go out and hold fundraisers and beg, borrow and steal from individual lawyers, lawyer by lawyer. And if you’ve ever tried to get money out of a lawyer, you know how tough it can be.’’
What has brought the trial lawyers together, along with organizations like the AFL-CIO, NAACP and AARP, Stoddard said, are the many flaws in Proposal C.
He noted that the 16-percent rate reduction being touted in MCIR advertisements is for drivers accepting the minimum $1 million in medical coverage. Those wanting up to the maximum of $5 million in coverage could end up paying as much as they are now for unlimited coverage.
Even the six-month rollback is not guaranteed, he noted, with companies able to request a waiver if the rollback would reduce their profits below the statewide average.
‘‘The bottom line is that people will still exhaust their medical benefits. Then they will either sue the person who hit them, which means responsible drivers carrying more liability insurance, or they exhaust their assets,’’ Stoddard said.
Though the pro-Proposal C forces are selling it as a way to reduce out-of-control legal cases, Stoddard noted that the portion of a person’s premium going to lawsuits is the smallest part of the policy, and that Michigan ranks second to last nationwide in the number of such lawsuits.
‘‘It’s a red herring because lawyers aren’t popular. They rank down there with insurance companies and politicians and used car salesmen,’’ he said.
MCIR is actually just one side of a two-pronged attack by the insurance companies on the state’s existing no-fault auto insurance system. It's the public relations side, taking out newspaper advertisements and funding glitzy television ads lampooning lawyers.
The other thrust comes from the Committee for Auto Insurance Reform, a coalition including the Michigan Insurance Federation, the Michigan Chamber of Commerce and the Professional Independent Insurance Agents of Michigan which spent more than $100,000 between Jan. 1 and June 1 on a losing legal fight against the placement of the new auto insurance laws on the November ballot.
Kent insists that the two organizations are separate.
‘‘We had nothing to do with that,’’ he said. ‘‘That was a group formed specifically to handle any legal matters, and they’re the ones who challenged whether or not this should even be on the ballot.’’
Kent may not believe so, but a close look at the campaign finance records for each committee suggests that their major contributors believed the two are working hand-in-hand. Five of the top ten contributors to MCIR also contributed to CAIR, and the committees received four of the five pairs of contributions on the same day, with the fifth pair arriving two days apart.
What's more, in each of the five cases, the companies divvied up their payments to the two committees with the payment to MCIR representing 82 percent of the company's total payments to both.
‘‘They clearly were operating as one committee but with two hands,’’ Stoddard said.
Stoddard ran into MCIR’s handiwork when he noticed an ad in local newspapers seeking petitioners at the same time FAIR had its petition drive underway.
‘‘They actually were advertising for people trying to hire people away circulating our petitions,’’ Stoddard said. ‘‘I called two of them up, one in Detroit and one in Battle Creek, and they said ‘Do you have any experience on insurance issues?’ and I said ‘Yeah, some.’ They said ‘Are you circulating petitions right now for FAIR,’ and I said ‘No, not at the moment.’ . . . and they said ‘Oh, well we only want people who are circulating them right now. We’ll pay more than they are.’’’
Stoddard also questions MCIR’s claim of over 50,000 members, noting that the ‘‘membership’’ was drawn from signatures on MCIR’s petitions saying they wanted lower insurance rates.
‘‘We normally define membership in a group as somebody who pays dues, makes contributions of some minimal amount to an organization,’’ Stoddard said. ‘‘They are defining membership as the 40,000 or 50,000 people who signed the petitions on street corners, when they were trying to confuse it with us.’’
Kent acknowledges that this year’s campaign is being waged differently than the 1992 effort by AAA—a campaign that cost the insurance company nearly $6 million and a raft of negative publicity—to pass the similar Proposal D.
‘‘Doesn’t that make sense? Look what happened two years ago,’’ he said.
That vote failed by a nearly 2-to-1 margin.