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Trevor Tarpinian, CEPA®                                                                                    417 Words
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trevor@tfi4insurance.com

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House Bill 5457 increasing MI auto insurance cost?

The single greatest reason customers shop around for new insurance is because of price increases. Yet some of those increases are driven by factors outside of all insurance companies, from which no one can hide. One of those factors is legislation. On June 2, 2016, House Bill 5457 passed in Michigan, repealing a tax credit insurers could obtain based on the following qualifying costs paid to the:

  • Michigan worker's compensation placement facility (pursuant to chapter 23 of the insurance code of 1956, 1956 PA 218 [MCL 500.2301 to 500.2352]) 
  • Michigan basic property insurance association (pursuant to chapter 29 of the insurance code of 1956, 1956 PA 218 [MCL 500.2901 to 500.2954])  
  • Michigan automobile insurance placement facility (pursuant to chapter 33 of the insurance code of 1956, 1956 PA 218 [MCL 500.3301 to 500.3390]) 
  • property and casualty guaranty association (pursuant to chapter 79 of the insurance code of 1956, 1956 PA 218 [MCL 500.7901 to 500.7949]) 
  • Michigan life and health insurance guaranty association (pursuant to chapter 77 of the insurance code of 1956, 1956 PA 218 [MCL 500.7701 to 500.7780])

This tax credit repeal essentially effects most insurers in Michigan, not just auto insurance companies. However, let's just focus on auto insurance. What are the potential ramifications concerning pricing for consumers and their personal auto insurance policy? It is likely we'll see auto insurance pricing in Michigan take a bump upward in cost this next 12 months as a result. The repealed tax credit will result in higher costs for insurers, which one expects that they will pass down to consumers in the form of the statutory assessment that every policyowner pays for on a MI personal auto insurance policy.

 When I say pricing will "likely," go up state-wide, it is based on observations of immediate company activity we're seeing. We've already seen notice from one insurer that the statutory assessment they assess each policy will increase by 130% as of Aug 1, 2016. One industry association projects that the loss of the credit would increase premiums about $40 per car.  Legislative leaders saw this as a source of approximately $80 million of tax revenue. That's a lot of potential costs passed down to Michigan auto owners.

The repeal was introduced March 15, 2016 by representatives Jon Bumstead, Al Pscholka, and Earl Poleski.

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