With Auto Insurance Changes Next Week, Options Abound, But Caution is Urged

While calling it “the biggest change in auto insurance in our state in generations,” State Senator Kim LaSata is strongly encouraging everyone to know the impact of their decisions before simply opting to save “serious money.”

With landmark no-fault auto insurance reforms taking effect next week, Senator LaSata says, “This is the biggest change to auto insurance in our state in generations, and one that could save drivers serious money.” She cautions, however, “With so many improvements made, it is important that motorists familiarize themselves with the changes before renewing their auto insurance policies.”

The reforms, signed into law last spring, were designed to save drivers money by offering more options to better meet individual needs, while improving coverage and consumer protections. Those changes become law effective next week on Wednesday, July 1, 2020.

Michigan law requires auto insurance policyholders to carry personal injury protection (PIP), which covers medical costs if a driver is in an auto accident. On July 1st, for the first time, motorists will be able to choose from a selection of new coverage levels to better meet their needs and budget.

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Each PIP level represents the maximum amount a policy will pay per person per auto accident. Senior citizens who are on Medicare and other motorists whose health insurance plans include coverage for auto accident injuries may now choose to opt out of PIP medical coverage on their auto insurance policy.

Insurers, meanwhile, are urging caution when selecting your new insurance plan. An organization called The Coalition for Protecting Auto-No Fault – CPAN — conducted several public education sessions last fall. The organization’s President John Cornack told one such session in Kalamazoo that drivers need to realize what the impact of the choice they’re making when they get the option to opt for less personal injury protection can have. He says, “If a driver opts for anything other than unlimited coverage and gets into a catastrophic crash, there won’t be the Michigan Catastrophic Claims Association, MCCA, to pay benefits like the system has been set up in the past.” He warned, “They’re going to go on Medicaid, they’re going to be bankrupt. Medical bankruptcy is one of the worst things in America and we just put Michigan smack dab in the middle of that.”

Under the new law, drivers may select the following PIP coverage levels:

  • Unlimited
  • $500,000
  • $250,000 (exclusion is available for individuals with qualifying health coverage)
  • $50,000 (for those on Medicaid)
  • Opt-out (for seniors with Medicare)

All auto insurance companies doing business in the state must also reduce the cost of each PIP level for at least eight years. The unlimited plan must be lowered by an average of at least 10-percent per vehicle; the $500,000 plan by at least 20-percent; the $250,000 plan by at least 35-percent; and the $50,000 plan by at least 45-percent. Those choosing to opt out will not pay a PIP medical premium.

The Michigan Department of Insurance and Financial Services (DIFS) recently announced that the average statewide PIP medical savings under the state’s new auto insurance law will exceed the law’s requirements. Compared to the statewide average rates on May 1, 2019, this year’s average statewide reduction for the unlimited plan is 15.5-percent per vehicle; 30.6-percent for the $500,000 plan; 41.8-percent for the $250,000 plan; and 53.5-percent for the $50,000 plan.

The new law includes additional consumer protections, including:

  • A fee schedule to control costs medical providers charge auto insurance companies.
  • A new fraud investigation unit to crack down on auto-insurance-related crimes.
  • Tougher fines and penalties for bad actors in the insurance industry.
  • Elimination of non-driving factors, like ZIP code, homeownership status and marital status.
  • Pre-approval of all auto insurance rates.

Senator LaSata suggests, “Choosing the right plan that best meets people’s needs and budget can help maximize savings,” but she also adds, “I encourage Southwest Michigan drivers to consult their insurance agent to learn about their options and how much they can save before renewing their policy.”

For more information on Michigan’s new auto insurance law, you can click the link below, email AutoInsurance@Michigan.gov, or call 833-ASK-DIFS. Here’s the direct link: