In 1973, Michigan instituted no-fault auto insurance.
Previously, Michigan had a tort – or at-fault – auto insurance system under which the driver who caused an accident paid for damages. Because this was often determined in court, auto accident-related lawsuits flooded the Michigan court system, and insurance premiums skyrocketed. Michigan’s no-fault auto insurance was implemented to combat those rising costs, limiting lawsuits to cases of severe injury, disfigurement or death. Over time the opposite occurred, and insurance premiums increased even higher due to lawsuits and the rising medical treatment costs for injuries from auto accidents.
By 2018, Michigan auto insurance had become cost-prohibitive for many. Michigan is ranked as the fourth-most expensive auto insurance in the U.S.* Not surprisingly, it is also ranked fourth in the U.S. for the number of uninsured drivers, with an estimated 20% of its drivers having no insurance.**
May 2019, the Michigan Legislature votes to reform the no-fault system.
We have long supported reform that would make auto insurance in Michigan more affordable. On May 30, 2019, many changes, including mandated regulations to current Personal Injury Protection (PIP) premiums, fee schedules for medical services and the creation of an anti-fraud unit were approved by the legislature and signed into law by the Governor.
Auto insurance reform goes into effect July 2, 2020.
Beginning in 2020, Michigan drivers will be able to select their preferred level of PIP Allowable Expenses (“PIP AE”), the coverage that pays for medical coverage if you are injured in an auto accident. Based on your eligibility and individual needs, you'll be able to select from the coverage options available or you may be able to waive PIP AE coverage altogether.
Here is a summary of PIP options under Michigan's new auto insurance law:
OPTIONS AVAILABLE TO EVERYONE
OPTIONS AVAILABLE TO ELIGIBLE INDIVIDUALS WITH QUALIFIED HEALTH
- Unlimited1: This is the level you have right now. (10% average savings)
- $500,000 limit (20% average savings)
- $250,000 limit (35% average savings)
COVERAGE (QHC), MEDICAID OR MEDICARE
- $250,000 limit with PIP AE exclusion-QHC5 (Excludes PIP AE) (100% average savings)
- $50,000 limit – Medicaid only3 (45% average PIP Premium savings)
- Allowable Expense Opt-out – Medicare4 Only (up to 100% average savings)
Remember, these options are only for PIP AE, which is just one of the coverages in your auto policy. You can also make changes to your other coverages, such as Bodily Injury and Collision.
Because Michigan’s new auto insurance program will no longer be purely no-fault, it is more important than ever to have adequate Bodily Injury (BI) coverage. This coverage addresses liabilities paid by the driver at fault when an accident causes serious injuries / death. Premiums are expected to rise for this coverage as minimums are increasing, and many policyholders will increase their coverage:
- The BI minimum limits are increasing from $20,000/$40,000 to $50,000/$100,000
- A new default BI coverage is established at $250,000/$500,000
How Meemic can help
Meemic is busy developing an online Auto Insurance Reform Center that will provide a more comprehensive look at the new law and what this means for Michigan drivers, along with other Member tools to help with coverage selections affected by the new law in advance of your renewal starting with policies renewing on or after July 2, 2020. Sign up here to be among the first to access this content.
Cost control of medical services begins.
In July 2021, the fee schedule for medical services will become active, regulating what health care providers charge for auto insurance-related injuries. Recent data shows that health care providers typically bill insurers more than Medicare for the same test – a reason why insurance premiums keep rising. The fee schedule is intended to help control these claim costs.
Please note that this information is being provided for general informational purposes. Please see the new no-fault reform law for complete details.
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