April 23, 2014

Michigan Catastrophic Claims Association

The Michigan Catastrophic Claims Association (MCCA), an unincorporated non-profit association, was created by the state Legislature in 1978. The MCCA reimburses auto no-fault insurance companies for each Personal Injury Protection (medical) claim paid in excess of a certain threshold, currently at $530,000. That means that the policyholder's insurance company pays the first $530,000 of medical expenses and the MCCA reimburses the insurance company for any costs paid out over that amount.

Michigan's unique auto insurance no-fault law provides unlimited lifetime coverage for medical expenses which result from auto accidents. So, consumers who are injured in an auto accident will receive reasonable and necessary medical benefits for their entire lifetime. No other state in the country has such high medical benefits. The cost to run such a system is expensive. Without the MCCA, the stability of one insurance company could be threatened by a series of catastrophic claims.

The 1978 law requires all insurance companies that write automobile insurance in the state of Michigan to be members of the MCCA. The law specifies that the MCCA must distribute excess losses among all auto insurance companies doing business in the state of Michigan. The MCCA is subject to regulatory supervision by the Michigan Office of Financial and Insurance Regulation.

How does the MCCA determine its assessment?
The law requires the MCCA to assess an amount that is sufficient to cover the lifetime claims of all persons expected to be catastrophically injured in that year. The MCCA also adjusts its annual assessments to compensate for surpluses or deficits in earlier assessments.

Companies pay an assessment to cover MCCA's costs and that assessment is passed on to policyholders. The assessment is determined annually by a five-member board appointed by the Director of the Department of Insurance and Financial Services.

What is the current assessment for the MCCA?
The 2013-14 assessment is $186 per insured car. 

What How many claims have been reported to the MCCA?
Since 1978, there have been approximately 29,000 catastrophic claims reported to the MCCA which will cost an estimated $9 billion.

Why do motorcyclists pay MCCA assessment when they don't receive same coverage as automobile drivers?
 
If a motorcyclist is injured in an accident with a motor vehicle, he/she  is entitled to no-fault benefits, including MCCA protection for unlimited medical expenses. If a motorcyclist is injured in an accident not involving a motor vehicle, the motorcyclist would have only the medical payments coverage they purchased, up to a certain limit.

Motorcyclists do pay the same MCCA fee as part of their insurance.  Why?  Although motorcyclists represent 2 percent of the assessments paid to the MCCA, they account for 5 percent of the money paid by the MCCA.  Motorcyclists also represent 7.7 percent of all claims reported.

For more information, you can visit the
Michigan Catastrophic Claims Association website.
Copyright 2010 by Insurance Institute of Michigan