Member Alert: Insurance Tax Increase Proposal Would Worsen Already-High Auto Insurance Rates

February 22, 2016

As part of the Governor’s 2016-2017 Executive Budget recommendation, the Administration called for the repeal of an insurance tax credit that serves to spread the costs associated with providing healthcare benefits to those injured by an automobile when no other insurance is available. Unfortunately, this proposal gained further attention last week when a number of Michigan House Republicans stated they want to use the money garnered by repealing the tax credit to pay off the debt of the Detroit Public School system. 

The Michigan Chamber has very strong concerns with this “car insurance” tax hike that is targeted squarely at Michigan’s insurance industry, an industry that provides good, stable jobs in our state and an industry that already pays a disproportionately high amount of our state business taxes. Ironically, just last year House Republicans bent over backwards to provide hundreds of millions of dollars in tax breaks to a Las Vegas data center company to locate to Michigan, despite the fact that few, if any, jobs would be created – but now want to impose a car insurance tax on stable Michigan job providers and law-abiding motorists. 

Here’s the background on this issue: In 2012, the Michigan Legislature passed, and the Governor signed, a law moving Michigan’s “assigned claims” (those claims from individuals who were hurt by an automobile as say a pedestrian, or bicyclist, where no insurance exists at all) from the purview of the Secretary of State over to the Michigan Automobile Insurance Placement Facility (MAIPF) in order to get better control and oversight over escalating claims. For years prior to this, Michigan insurance companies were provided a credit to help offset other costs of the MAIPF – which otherwise would have to be picked up by all law-abiding drivers. Now this credit is being threatened as way to fund state budget requests or the Detroit Public Schools. 

The Michigan Chamber does not agree that this proposal is necessary; Michigan’s revenue has produced a budget surplus and this tax increase proposal will only serve to drive up the premiums we all pay for auto insurance, exacerbating an already challenging situation. What Michigan needs is quite the opposite; too many drivers in Michigan are simply driving with no auto insurance because they can’t, or refuse, to pay for it. The Legislature, to date, has refused to act on measures to address the underlying costs of high auto insurance premiums, and this problem will only make a challenging situation worse. 

The Michigan Chamber will keep members posted as more information becomes available. For more information on this issue, please contact Tricia Kinley at