What You Need to Know About Michigan Auto Insurance Reform
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What You Need to Know About Michigan Auto Insurance Reform

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On May 30, 2019, Michigan Governor Gretchen Whitmer signed an auto insurance reform bill into state law. This bill goes into effect on July 1, 2020, and means significant changes for every driver in Michigan.

News will continue to develop about this new legislation. For now, here’s what you need to know:

Drivers Will Be Able to Select Their Level of No-Fault Personal Injury Protection (PIP) Coverage

If you are injured in an auto accident – regardless of who is at fault – your own no-fault PIP coverage is what provides medical insurance benefits. Currently, every Michigan vehicle owner is required to purchase PIP coverage, which provides unlimited lifetime coverage for medical treatment and rehabilitation expenses, lost wages for three years and up to $20 daily for personal assistance.

Under the new law, you will be able to choose between $50,000 (if enrolled in Medicaid); $250,000; $500,000; or unlimited PIP coverage.

Drivers with Medicare or another qualified health insurance plan may choose to opt-out of PIP coverage altogether.

Drivers Will Likely See Auto Insurance Premiums Go Down Due to PIP Changes

This new legislation is primarily about reducing insurance costs. For auto policies effective after July 1, 2020, but before July 1, 2028, the new law provides the following premium savings off your PIP premium:

  • 100% savings for drivers who opt-out of PIP coverage altogether
  • 45% savings for drivers who choose $50,000 in PIP coverage
  • 35% savings for drivers who choose $250,000 in PIP coverage
  • 20% savings for drivers who choose $500,000 in PIP coverage
  • 10% savings for drivers who choose unlimited PIP coverage

Additional Changes to Be Aware Of

Medical Provider Fee Schedule

This legislation will establish a “no-fault fee schedule.” A fee schedule normalizes the rates charged by doctors, hospitals, clinics, rehabilitation facilities, etc. – in this case for medical care associated with auto accidents. 

Michigan Catastrophic Claims Association (MCCA) Fees

Drivers who elect less than unlimited PIP coverage will pay lower MCCA fees under the new law.

The MCCA is a nonprofit association established in 1978 by the Michigan Legislature, which reimburses insurance companies for any auto-related medical claim costs over a threshold of $580,000. The MCCA fee is an annual per-insured-vehicle assessment used to fund the MCCA.

Non-Driving Factors in Determining Rates

Under the new law, insurance companies will no longer be allowed to consider certain “non-driving factors” when setting insurance rates, which may lead to lower rates for some drivers.

Some of these factors include home ownership, educational level, and occupation.

Suing for Excess Medical Benefits; Increased Minimum Liability Limits

The new legislation allows drivers to sue for excess medical costs and economic expenses beyond the no-fault PIP coverage they have chosen.

Because of this change, drivers will also have new requirements when it comes to bodily injury liability insurance, which protects you in case you cause an accident and injure or kill someone.

Currently, drivers are required to have mandatory minimum limits of $20,000 for bodily injury or death per person, or $40,000 per accident. Under the new law:

  • These mandatory minimum limits will increase to $50,000 per person and $100,000 per accident
  • New “default” liability limits of $250,000 per person and $500,000 per accident
  • Drivers may select more or less than the default limits, but never less than the mandatory minimum limits of $50,000 per person and $100,000 per accident

Mini-Tort

Under the new law, drivers may sue another driver who is responsible for an accident for up to $3,000 in damage to their vehicle. Previously the maximum recovery limit was $1,000.

Making the Complex Simple

The new Michigan auto insurance reform legislation goes into effect on July 1, 2020, and will impact all drivers. This post has gone over the key changes in the bill, but there are other aspects to it. We will continue to keep you informed as more information becomes available.

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