LANSING- This upcoming October, approximately 2 million Michigan
drivers will pay an additional $40 per vehicle for their auto insurance.

Auto Insurers believe the rate increase on the elimination of an
$80 million tax credit from the state’s 2016-2017 budget is the cause. State
lawmakers explained that the tax credit was accidentally created in 2012 the
time they changed the organization that controlled the auto insurer’s
imbursement fund, taking money out of the general fund.

“That money created a hole in the budget. We would have had to
make cuts in a number of places,” State Rep. Al Pscholka said.

The rate increase only has a major impact on customers of
Michigan-based auto insurers, like Auto-Owners, AAA or Frankenmuth insurance.

Before 2012, auto insurance companies in Michigan paid money to a
fund controlled by the Secretary of State’s office. The fund repays companies
when they have to cover damage caused by uninsured drivers to their clients.

The Legislature wanted to make the system more effective, so it
let the Michigan Auto Insurance Placement Facility manage the fund. This
unintentionally caused auto insurers in Michigan to receive tax credit.

“Industry-wide, companies are very disappointed with the loss of
this credit,” Pete Kuhnmuench, executive director of the insurance institute of
Michigan, said. “The burden is being forced upon the smaller pie of the
(insured).”

Psholka and Kuhnmuench both
agreed that adjustment needs to be made to make rates more reasonable. However,
it takes times

In the meantime, Psholka
advised people to compare insurance company rates to find what’s best for them.