Michigan auto insurance reform

Michigan auto insurance reform

May 7, the Senate passed Senate Bill 1, to start the Michigan auto reform process.  On May 9, the House passed House Bill 4397, with its version of no-fault reform.  After a couple of weeks of bipartisan negotiations between Senate and House leaders and Governor Whitmer, a deal was reached.  On May 25th the Michigan House and Senate pass the compromise to change Michigan’s no-fault auto insurance system and Gov. Gretchen Whitmer said she would sign the legislation.  Michigan no-fault began in 1973 to cut down on all the auto lawsuits. The Michigan auto reform Bill will go into effect on July 1, 2020.

Significant Provisions of the Michigan auto reform bill

  • Introduces provisions for personal injury protection option: 
  • Creates a fraud bureau that’s part of the DIFS
  • Medical services will have a fee schedule based on 190% – 250% of what Medicare pays.
  • Creates Transparency of the Michigan Catastrophic Claims Association.
  • Places limits on the use of sex, marital status, ZIP codes, credit scores, home ownership, education level, and occupation as factors in setting rates.
  • Creates mandatory rate relief with consumers.

Where will rate reduction come from in new auto insurance reform bill?

New PIP choices provided by the Michigan auto reform bill

  • Unlimited PIP coverage (the same coverage as now)
  • Insurance companies will cover up to $500,000
  • Companies will cover up to $250,000
  • PIP coverage of up to $50,000 — the lowest-price option available to people on Medicaid, who cannot opt out entirely.
  • Opt-out of PIP coverage entirely, if you have separate health insurance that covers collision injuries or Medicare for seniors.

Guaranteed Rate Reductions for eight years provided by the :

  • Keep unlimited PIP coverage would receive a 10 percent rollback of PIP coverage costs.
  • Choose the $500,000 get a 20 percent rollback on average.
  • The $250,000 plan, get a 35 percent rollback on average.
  • Those who choose the $50,000 plan, get a 45 percent rollback on average.

Rate Reduction from the elimination of “non-driving factors.”

The plan will bar insurance companies from setting auto insurance rates based on several “non-driving” factors: gender, marital status, home ownership, educational level, occupation, credit score, or zip code.

Even though zip codes can no longer be used the bill allows insurance companies to determined rates by “territory,” which could be areas as small as a census tract (the size of a neighborhood).

Insurance companies won’t be able to use a driver’s credit scores as a factor anymore but could use information from credit reports or “insurance scores” based in part on your credit information.

Michigan Catastrophic Claims Reduction

The auto reform bill also provides some relief from the MCCA $220 fee that insureds pay to the Michigan Catastrophic Claims Association could be reduced depending on the pip choice that you pick. However, if you opt of PIP because you have current medical insurance, you would still have to pay a $43 annual fee to help pay down the MCCA’s debt.

Finally, for more information on Michigan, auto insurance coverages visit our Understanding Michigan Auto Insurance.