Insurance PolicyAs you have probably heard by now Governor Gretchen Whitmer signed the Insurance Reform Bill into law effective June 11, 2019.  The law itself is still being digested by insurance companies and lawyers and seems to have generated more questions than answers.

Since the news headlines have led everyone to believe that this will dramatically reduce the cost of insurance we thought we would share what we feel to be true with the information that has been provided so far.

Note: Please keep in mind this is only our interpretation of the information and as this law is put into practice, your insurance carrier will provide more specific details.

Changes July 1, 2019

The changes that impact rates do not go into effect until July 1, 2020. Do not expect to see any rate relief until your renewal following July 1, 2020.  In fact, you will see a rate increase of $28 per vehicle with the annual Michigan Catastrophic Claims Association (MCCA) surcharge that went into effect July 1, 2019.

Changes July 1, 2020

The first thing to be aware of is that any rate reductions will only be in conjunction with your choice to reduce your benefits. Personal Injury Protection (PIP) is currently only offered on an unlimited basis. Effective July 1st, 2020, you will be given the choice to opt out of unlimited benefits. You will have five PIP choices:

  1. Unlimited PIP coverage, the same coverage as now (mandated 10% rate reduction on PIP premium)
  2. Insurance companies will cover up to $500,000 (mandated 20% rate reduction on PIP premium)
  3. Insurance companies will cover up to $250,000 (mandated 35% rate reduction on PIP premium)
  4. Insurance companies will cover up to $50,000 — the lowest-price option available to people on Medicaid, who cannot opt out entirely (mandated 45% rate reduction on PIP premium)
  5. Opt-out of PIP coverage entirely, if you have separate health insurance that covers collision injuries

We currently estimate the current PIP premium for insureds in our area is $150-$250 per vehicle. If you are paying $200 in PIP premium per vehicle and they elect a reduction in benefits to $250,000 with a 35% rate reduction the estimated savings is about $140 a year. This is giving up a bunch of benefits for a relatively minor savings. By opting out of unlimited benefits it appears that a portion of the current $220 Michigan Catastrophic Claims Association (MCCA) surcharge will be reduced to approximately $43, saving another $177 per vehicle. So, savings on the PIP reduction in premium and the reduction in the MCCA surcharge would save you a total of $317 per vehicle per year in this example. Don’t put these dollars in the bank just yet. At the same time, the state is increasing the mandatory bodily injury liability limits from the current $20,000 per person/$40,000 per accident to $250,000 per person/$500,000 per accident. There will be a provision to opt out of this mandatory limit and select $50,000 per person/$100,000 per accident.  Its quite possible that this increase in limits will eat up a good portion of the savings on the PIP and MCCA surcharge.

Our summation is this will cause a great deal of disruption in the industry and will provide very little rate relief for most insureds. The savings can be adequate for those that are willing to give up a great deal of benefits.

Changes June 11, 2019

There are some important law changes that do not impact rates that went into effect June 11, 2019.

The Michigan Assigned Claims Plan (MACP) is the state facility that pays PIP benefits for those injured in auto accidents that do not qualify for benefits under an auto insurance policy.  Effective immediately benefits for those who end up in the MACP are reduced from unlimited benefits to a $250,000 limit. 

Secondly, the order of priority for qualifying for PIP benefits has changed effective June 11, 2019. The change in the order of priority is as follows:

Before: An injured person collected PIP benefits in the following order. 

  1. Insurer of the Named Insured;
  2. Insurer of a Spouse or Resident-Relative;
  3. Insurer of the Owner or Registrant of the accident-involved vehicle; then
  4. Insurer of the Driver of the accident-involved vehicle; otherwise, 
  5. Injured Person applies for benefits through the MACP (unlimited)

Now: An injured person collects PIP benefits in the following order.  

  1. Insurer of the Named Insured; 
  2. Insurer of the Spouse or Resident-Relative; then 
  3. Injured Person applies for benefits through the MACP ($250,000 benefit level)
  • No-fault reform eliminated the owner, registrant and driver of the accident-involved vehicle from the order of priorities.  
  • No-fault reform changed the benefit level.

Also, in effect June 11, 2019 is the ability to sue for any at fault driver to recover their uncovered medical expenses and work loss benefits.  With the $250,000 MACP benefit cap, this will likely increase the amount of law suits involving your bodily injury liability limits. We believe everyone will have an increased bodily injury liability exposure and we are recommending that folks increase their liability to at least the new state minimum requirements that will go into effect July 1, 2020 of $250,000 per person/$500, 000 per accident. Insureds with more assets to protect most certainly should elect a $1 million umbrella liability policy (cost $200-$300 per year).  We recommend you contact us to increase your limits.

The change in order of priority can also impact coverage for those unmarried couples who are insured on the same policy. For both individuals to be covered for personal injury protection, both individuals must be listed as named insureds and not just drivers. If you are unsure about this give us a call.

There are many other provisions of this new law. These appear to be the ones that will impact clients the most. 

Avery Johnson
Contact Dan Diederich
Call: (248) 347-3630

Read more articles by Dan

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