Senate bill has insurance industrys motor running

July 15, 2011
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When lawmakers return to Lansing after Labor Day, the state’s insurance industry will be keeping a close eye on how House members handle a Senate bill that repeals the motorcycle helmet law.

The Senate passed it in late June just before legislators went on summer recess, despite data released by the Office of Highway Safety Planning. OHSP reported that a repeal of the helmet law would result in 30 more fatalities and 127 more serious injuries each year on Michigan’s roadways at an economic cost of $127 million annually.

“The consequences of a person’s decision not to wear a helmet is borne by all of society through higher insurance costs, lost productivity and increased health care costs,” said Pete Kuhmuench, executive director of the Insurance Institute of Michigan.

The reason the Senate passed the bill is chamber members felt it would increase summer tourism across the state by drawing more motorcyclists to Michigan. Neighboring states Wisconsin, Illinois, Indiana and Ohio let bikers decide whether to wear a helmet.

“It is estimated that Michigan turns away thousands of bikers each year because we don’t let them decide for themselves whether to wear a helmet. These riders go instead to surrounding states. Thousands of bikers turned away means millions in tourism dollars lost,” said State Sen. Phillip Pavlov, R-St. Clair Township, primary sponsor of the bill.

The IIM is a statewide association that represents 73 percent of the companies that write automobile policies and 66 percent of the firms that offer homeowners insurance in Michigan. The IIM, which is based in Lansing, opposes the repeal legislation on several grounds.

The association said motorcycle crashes account for a disproportionate share of money that is paid out of the Michigan Catastrophic Claims Association, funds that come from a surcharge on every auto policy sold in the state. While bikers represent 2 percent of all the assessments paid into MCCA, they receive 5 percent of its outgoing dollars and make 7 percent of all claims.

Since its inception in 1978, MCCA has reimbursed IIM member insurers more than $421 million for 885 motorcycle injuries that have exceeded the claims threshold. The association argues that repeal of the helmet law will result in more bikers making larger claims, causing more MCCA payouts.

“The consequences of Senate Bill 291 will mean more deaths and injuries. This is the outcome that has been experienced by other states that have repealed their helmet law,” said Kuhmuench. “There are increased liability and cost and burdens that are placed on the system,” said Dyck Van Koevering, IIM general counsel.

Pavlov disagrees and doesn’t expect more deaths and injuries to come from the legislation. He said roughly half of the state’s motorcycle crashes involves bikers who haven’t been properly trained or don’t have a state endorsement. “Requiring this training should decrease the number of crashes involving motorcycles,” he said.

The senator believes the issue is one of choice. “If someone is 21 and has received the proper training, the choice to wear a motorcycle helmet or not should be left to them. Responsible adults can make their own decisions,” said Pavlov.

Another issue for IIM is the state’s no-fault insurance law, which allows for lifetime benefits to be paid for all “reasonable and necessary” medical costs. Under no fault, essentially, each motorist’s insurance firm pays for medical costs resulting from an accident. Every driver of a vehicle is required to buy personal injury protection coverage as part of a policy, except for motorcyclists. But bikers can file claims against insured motorists for injuries they suffer from having a collision with an automobile.

“Motorcyclists don’t have to buy unlimited medical like you and I do for our cars. Say I’m on a motorcycle and I get in an accident that evidences the involvement of a motor vehicle. I get everything through the motor vehicle policy, not through my own motorcycle policy,” said Van Koevering.

“So to the extent that we can assume greater incidents of death and injury, those greater incidents of death and injury will bring more costs and liability to the system, which will be, in large measure, borne by auto-rate payers, not motorcycle-rate payers, because of this quirk in the no-fault code,” he added.

The bill the Senate passed requires motorcyclists to buy an additional $100,000 in insurance coverage if they plan to ride without wearing a helmet. Van Koevering, though, said that’s not $100,000 worth of PIP coverage like all auto owners purchase. Instead, it’s medical reimbursement coverage.

“That’s a different product, number one. Number two, that $100,000 only comes into play if they’re in a single vehicle accident — they lose it on gravel, they swerve to avoid a deer, they hit a tree and that kind of thing. But if they’re involved in an accident with a motor vehicle, they collect everything through the motor vehicle (policy),” said Van Koevering.

“So what’s the cost? It’s hard to project now because there are so many variables that go into determining a premium that it’s difficult. But I think it’s safe to assume there is going to be more injuries, more costs, more burden on the system, but where that burden is going to show is, in most part, going to be on auto-insurance ratepayers and not on motorcycle ratepayers,” he added.

Van Koevering’s assessment of who will pay first can be found in the state’s Insurance Code of 1956. Section 500.3114, subsection 5, clearly states that the insurer of a motor vehicle is first in line to pay personal protection insurance benefits when a driver of a car or truck is involved in an accident with a motorcycle.

“The governor has not indicated his position on that bill,” said Becky Bechler of Public Affairs Associates, the county’s lobbying firm. Bechler said the House will reconvene for one day, July 27, and could take up the helmet law then.

Van Koevering didn’t think that national insurers, such as State Farm, would stop offering policies in Michigan, which would reduce consumer options, if the House passes the bill and the governor signs it into law this fall.

“I wouldn’t imagine so. I guess I’ve never heard that concern that there would be a lack of coverage availability,” he said. “It certainly impacts the risk, but I can’t imagine that it would get to a point where companies wouldn’t continue to offer coverage.”

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