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If Insurance Goes Up, Business Will Vote with its Feet, Says Columnist

Michigan's fortunes have deteriorated along with the U.S. auto industry. Its unemployment rate, while now below 15 percent, was recently the nation's highest in September at 15.3 percent, with the most people out of work since early 1983. Detroit's 22 percent unemployment rate is so bad that one columnist compared the Motor City's troubles to devastation caused by Hurricane Katrina.

Michigan legislators feel their pain, and recently came up with a spreadsheet of "reforms" that would help residents and, of necessity, penalize insurers. Among them are plans to get rid of "credit scoring" which allows insurers to decide how much you pay for insurance based on your credit score, and slapping insurance executives in the slammer if their companies don't pay claims.

Sounds like a plan? Sure, but as Free Press columnist Tom Walsh points out, insurers aren't powerless either, and there's bound to be a backlash. Floridians felt that backlash when State Farm, the Sunshine State's largest insurer, said it would leave the state after a tooth-and-nail battle with Gov. Charlie Crist. Florida and State Farm eventually both gave ground and the insurer will stay, but with a reduced presence.

Michigan's likely to be a bit more complicated. No insurer is threatening to leave, but more stringent laws will probably mean that insurers will pile on extra charges, both to residential and to commercial customers and, as Walsh points out, Michigan's rates are already the 11th highest in the nation, averaging $928, which is nearly 17 percent above the national average. Meanwhile nearby states like Ohio are hungry for jobs and would like to take away what Michigan has left.

Walsh claims "the elephant in the room" is that Michigan is the only state that requires unlimited lifetime medical benefits to people injured in car accidents. In a perfect world, that would be a good thing, but as Allstate CEO Tom Wilson says, it "doesn't put economic discipline in the system." In other words, people involved in fender benders could end up going to chiropractors for the rest of their lives. Worse is the insurance fraud problem, which has gotten worse with the recession. Rings of doctors and lawyers use immigrants to set up fake crashes and then run the "victims" through an elaborate mill of MRIs, consultations and non-existent treatments.

Ultimately car insurance is a tax we have to pay in order to drive. As more services are provided, taxes go up. If they go up too much, people - and businesses - will leave. And, as Walsh points out, it's a short hop to Ohio.

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