The Michigan Catastrophic Claims Association (MCCA) was created in 1978 to reimburse insurance companies for amounts paid for Personal Injury Protection (PIP) benefits over an amount deemed catastrophic under the automobile no-fault law. Due to the cost of providing unlimited benefits, insurance companies were encountering difficulties obtaining reinsurance for Michigan’s no-fault auto policies, leading to the creation of the MCCA.
Where Did the Funds Come From?
To keep insurers on a level playing field, every insurance company that sells automobile insurance in the state of Michigan is required to be a member of MCCA. Historically, the MCCA was funded by an annual premium assessment based upon the number of automobiles and motorcycles insured in Michigan. The MCCA is required by law to assess an amount sufficient to cover lifetime claims of individuals catastrophically injured in that year and to revise the assessment rate as necessary.
Michigan No-Fault Reform Law Contributes to a Surplus
In 2019, the Michigan legislature passed, and Governor Gretchen Whitmer signed into law, the no-fault auto insurance reform bill, which was designed to help mitigate the cost of Michigan’s no-fault auto coverage. The law created medical fee schedules and established fraud-fighting measures that resulted in greater cost savings than anticipated.
Further, Michigan policyholders are now able to buy limited coverage limits of $250,000 or $500,000, rather than traditional unlimited benefits Michigan historically required all insureds to purchase. To the great benefit of Michigan consumers, the auto no-fault reform savings resulted in a decrease in the MCCA assessment for those insureds continuing to purchase the reformed coverage on an unlimited basis from $220 per vehicle in 2020, to $86 per vehicle in 2021.
MCCA Surplus Results in Refunds
The overall cost savings of the no-fault reform law contributed to a $5 billion surplus for the MCCA. On November 3, 2021, the MCCA Board of Directors voted unanimously to return approximately $3 billion of the surplus to Michigan insureds. The board determined that it would be appropriate to return this amount and still maintain the ability to fund all projected liabilities. This will be accomplished by returning surplus funds to its member insurance companies, which are then required to refund the excess premium to policyholders. As determined by the Board of Directors, the policyholder refund has been set at $400 per vehicle or motorcycle and $80 per historical vehicle.
After receiving the money, member companies will then have 60 days to distribute checks or ACH deposits to eligible policyholders. The MCCA and the Michigan Department of Insurance and Financial Services have strongly encouraged member companies to return the full refund as expeditiously as possible.
Are You Eligible for the Refund?
All Michigan policyholders with an auto coverage policy in-force as of 11:59 PM (EST) on October 31, 2021, will be eligible for the refund. This only applies to autos and motorcycles – trailers are not eligible. In addition, all autos and motorcycles must have maintained the minimum liability insurance requirements as required by the Michigan financial responsibility law. Policyholders will be eligible for the MCCA refund regardless of the PIP limits that were selected. Qualified insureds do not need to request or apply for their refunds, as they will be forwarded from their insurance carriers within 60 days of receiving the funds from the MCCA.
The Michigan Department of Insurance and Financial Services has created a ‘Michigan Catastrophic Claims Association Refund FAQ’ section on their website, which can be found here.
The Product Development & Compliance Department at Old Republic Risk Management monitors legal and regulatory developments that take place in our business environment. They adopt relevant changes to ensure that our insurance products are in compliance with applicable laws & regulations, and that they meet the needs of our policyholders. The Product Development & Compliance Department is based out of our corporate office in Brookfield, WI.