An independent actuarial consultant told the Senate Commerce Committe yesterday that the costs of no-fault auto insurance in Michigan appear to be 10 percent less than if the ordinary lawsuit-type of insurance system were in effect.
Philip O. Presley, summarizing a study of the Michigan no-fault system which he conducted for the committee to determine if no-fault saces money, said, "What I was saying is that no-fault personal injury costs are 10 percent less than under a fault system."
Presley added that because of legal challenges to no-fault, Michigan companies have been putting aside extra reserve to meet lawsuits if no-fault is thrown out by the courts.
"If you take out overreserving, the cost differential would go as high as 20 percent," Presley said. Presley's conclusions were assailed by Sens. Don Riegle (D-Mich.) and Ernest F. Hollings (D-S.C.) on grounds that the information available was insufficient to warrant a definite judgment on the Michigan system.
Hollings pointed to a statement in Presley's report that said the Michigan and other state no-fault systems "have not been in place long enough to produce mature and consistent results." If that is so, he said, wouldn't it be better to wait and postpone action on the national no-fault bill sponsored by Sen. Warren G. Magnuson (D-Wash.)?
"When in doubt, do nothing," said Hollings.
He asked Presley whether he would concede that he din't have enough information to make any conclusions!
Presley, unruffled, responded, "As an actuary I always want all the data I can get . . . but I feel quite confident in the general conclusions of the report."
The first, Riegle said, was whether large numbers of "bad risks," who would have paid high premiums were driving illegally without insurance. If so, Presley's cost estimates might be artificially low because these people weren't in the system. Tiegle also wanted cost estimates for different risk categories.
The second, Ford said, was whether coordination of family medical insurance policies, and auto medical insurance didn't keep no-fault madical costs artificially low. Under Michigan law, a driver can get lower auto medical premiums by specifying that his own family health-insurance policy would bear first-risk even for auto accident medical costs. Ford said this would shift costs to family health insurance.
Presley said auto medical insurance costs were sometimes 40 percent lower under the coordination scheme but didn't have further details sought by Ford.
Under a no-fault system, a driver injured in an auto accident doesn't sue the other driver to recover basic medical costs and compensation for loss of income during recovery. His own insurance pays, regardless of who was at fault. He or his family can sue only if he suffers economic losses exceeding what his no-fault policy pays, or is killed, disfigured or premanently injured.