Michigan Auto Insurance Reform: What's The Hold-Up?

On May 30, 2019, Governor Gretchen Whitmer signed into law the Michigan No-Fault Auto Insurance Reform, which came into effect on July 1, 2020. The reform introduced sweeping changes to the state's No-Fault law, affecting all drivers and car accident victims in Michigan. The new law offers more choices and lower insurance costs for Michigan drivers while maintaining the highest coverage options and strengthening consumer protections.

Michigan auto insurance reform: what's changed?

The state of Michigan has introduced a new auto insurance law that offers drivers more choices and lower-cost insurance options. This reform was signed into law by Governor Whitmer on May 30, 2019, and took effect on July 1, 2020. The changes apply to policies issued or renewed after that date. Here's a breakdown of the key changes and how they impact drivers and car accident victims in Michigan.

PIP Choice and Rate Reduction

One of the most significant changes is the introduction of Personal Injury Protection (PIP) choice. Previously, Michigan law required all drivers to carry "unlimited" No-Fault medical coverage. Now, drivers can choose from four PIP medical benefits coverage levels: $50,000 for drivers on Medicaid, $250,000, $500,000, or unlimited coverage. This change allows drivers to select a coverage level that suits their needs and budget.

In addition, insurance companies are required to reduce PIP statewide average medical premiums. The specific premium will depend on individual circumstances and the chosen coverage level.

Fee Schedule and Prohibited Rating Factors

The new law includes a fee schedule, which is a cost control measure between auto insurance companies and healthcare providers, making PIP medical coverage more affordable.

Furthermore, the law prohibits insurance companies from using certain non-driving factors to set auto insurance rates. These factors include sex, marital status, home ownership, credit score, educational level, occupation, and zip codes. This change ensures that rates are based primarily on driving-related factors.

Consumer Protections and Increased Fines

The reform also strengthens consumer protections by establishing a Fraud Investigation Unit to address criminal and fraudulent activities related to insurance and financial markets. It also increases transparency in the Michigan Catastrophic Claims Association (MCCA) by mandating annual reports, website updates, and audits by the Michigan Department of Insurance and Financial Services (DIFS) every three years.

Additionally, auto insurance rates and policies must now be approved by DIFS before being offered to consumers, and the law allows for increased fines for insurance companies, agencies, and licensed agents who violate certain provisions.

Bodily Injury and Property Damage Liability (BI/PD)

The default BI/PD coverage limits have increased. For policies issued after July 2, 2020, the default limits are: up to $250,000 for a person injured or killed in an accident, up to $500,000 for multiple people injured or killed, and up to $10,000 for property damage in another state.

Drivers can still choose to purchase lower coverage limits, with the minimum being $50,000 for a person injured or killed, $100,000 for multiple people injured or killed, and $10,000 for property damage in another state.

Limited Property Damage Liability ("Mini-Tort")

The law has increased the maximum amount for "Mini-Tort" claims, which apply when a driver is found to be 50% or more at fault in an accident. The limit has been raised from $1,000 to $3,000 for damages to cover the other driver's deductible or actual damages to their vehicle.

Attendant Care

The law has also made changes to attendant care, which includes services to assist an injured person with daily tasks. Beginning after July 1, 2021, insurance companies are only required to pay for 56 hours per week of in-home attendant care provided by a relative or someone with a prior relationship with the injured person. Insurers may choose to contract for additional hours or use a professional care provider.

Additionally, insurers are required to offer an optional rider for attendant care coverage in excess of the chosen PIP limit for those who select a $50,000, $250,000, or $500,000 PIP limit.

The Michigan auto insurance reform introduces significant changes that aim to lower costs, provide more coverage options, and strengthen consumer protections. These changes will have a substantial impact on drivers and car accident victims in the state, and it is essential for individuals to understand their new choices and rights under the reformed law.

Michigan car insurance cancellation laws

Michigan's auto insurance law has undergone significant changes that affect every driver and car accident victim in the state. The Michigan car insurance cancellation laws outline the specific ways in which an insurance company can cancel a policy, including rules for when a company can cancel, the type and length of the cancellation notice, and the requirement to provide a refund. These laws also outline how a driver can cancel their policy.

According to Michigan law, a policy is considered cancelled when it is terminated during the policy period and before its expiration date. Both the insurance company and the driver have the right to cancel the policy. If the driver chooses to cancel, the insurance company is obligated to refund the excess of the paid premium. The laws allow the named insured on the policy to cancel at any time, including before the policy starts or after renewal. There is no fee associated with cancelling car insurance in Michigan.

Insurance companies are permitted to cancel a policy at any time, but they must provide the insured with a written notice of cancellation at least 10 days before the effective date. This notice can be mailed or delivered, and it may include a refund of the excess premium. If the insurance company fails to comply with these laws, the cancellation will not be effective, and coverage will continue until the end of the policy term or until proper cancellation occurs.

In the case of nonpayment of premiums, insurance companies can cancel a No-Fault policy, but only if they provide a written notice of cancellation after the nonpayment has occurred. The Michigan Supreme Court reinforced this requirement in the case of Yang v. Everest National Insurance Company, ruling that a cancellation notice is only effective if it is peremptory, explicit, and unconditional.

When it comes to liability policies, Michigan laws require insurance companies to mail a written notice of cancellation by certified mail, return receipt requested, to the insured at least 20 days before the effective date of cancellation. The notice must state the reasons for cancellation and inform the insured of their right to appeal to the Insurance Commissioner within 7 days.

Michigan's car insurance cancellation laws also address situations involving alleged No-Fault fraud. Insurance companies are required to provide notice to their insureds before terminating their policies in such cases. The Insurance Commissioner has ruled that policies allowing for cancellation without notice in these situations are unenforceable.

It is important to note that if your car insurance is cancelled, you should obtain a new No-Fault auto insurance policy as soon as possible to avoid severe criminal penalties and financial consequences for driving without insurance in Michigan.

Mandatory types of car insurance coverage

Michigan's new auto insurance law, which came into effect on June 11, 2019, offers drivers new choices and lower-cost insurance options. The law requires drivers to carry No-Fault insurance, which includes four types of mandatory coverage, often referred to as "personal liability and property damage" or "PLPD" insurance. This PLPD insurance provides the minimum coverage required by law and does not include optional coverages such as collision or comprehensive insurance. Here is a detailed breakdown of the four mandatory types of car insurance coverage in Michigan:

• Personal Injury Protection (PIP): This coverage provides "No-Fault PIP Benefits," which reimburse seriously injured drivers for medical expenses, a percentage of lost wages, attendant care (in-home nursing services), and replacement services (help with household duties).
• Property Protection Insurance (PPI): This insurance covers damage caused to parked cars or other property, such as buildings, fences, trees, or lawns, within the state of Michigan. Every Michigan auto policy includes a mandatory $1 million of PPI coverage.
• Residual Bodily Injury Liability (BI): This coverage protects drivers in the event they cause an accident that results in serious injuries to someone else. The law sets minimum coverage requirements: $250,000 per person and $500,000 per accident. However, drivers can opt for lower limits of $50,000 and $100,000. Attorneys generally recommend carrying higher coverage of at least $500,000 per person and $1 million per accident for better protection.
• Property Damage (PD): This coverage is for damage caused to another person's vehicle outside of Michigan. The law mandates a minimum PD coverage of $10,000, but attorneys suggest carrying at least $100,000. This higher coverage becomes crucial if an accident occurs in a tort state like Ohio, where one would be responsible for all the other driver's car damage.

These mandatory types of car insurance coverage in Michigan aim to provide financial protection and peace of mind for drivers, ensuring they can cover medical expenses, lost wages, and property damage in the event of an accident.

Consumer protections under the new law

Michigan's new auto insurance law, which came into effect on June 11, 2019, offers strengthened consumer protections. The law, signed by Governor Whitmer, is designed to lower costs for Michigan drivers, maintain the highest coverage options in the country, and enhance consumer protections. The changes apply to policies issued or renewed after July 1, 2020. Here are some key consumer protections under the new law:

Elimination of Certain Non-Driving Factors

The new law prohibits auto insurance companies from using several non-driving-related factors to determine a driver's insurance rates. These factors include sex, marital status, home ownership, credit score, educational level, occupation, and zip codes. This change ensures that a driver's insurance rates are based primarily on their driving record and not on other personal characteristics.

Enhanced Fraud Investigation

The law establishes a new Fraud Investigation Unit to address criminal and fraudulent activities related to insurance and financial markets. This unit works closely with the Attorney General and law enforcement to prosecute insurance fraud, which drives up premiums for all drivers.

Amnesty for Lapse in Coverage

Under the new law, insurance companies cannot penalize drivers for a lapse in coverage if they apply for insurance before the amnesty period ends on January 1, 2022. Previously, insurers could charge a reinstatement fee or increase premiums for those who had gone without insurance for a period.

Prior Approval Required for Rates and Policies

Auto insurance rates and policies must now be filed with and approved by the Department of Insurance and Financial Services before being offered to consumers. This ensures that insurance companies cannot implement arbitrary rate increases without regulatory oversight.

Increased Fines and Penalties for Violations

The new law allows for higher fines to be imposed on insurance companies, agencies, and licensed agents for certain violations. This acts as a deterrent and encourages greater compliance with the law.

Consumer Rights and Claim Handling

The Michigan Insurance Code outlines important rights for consumers regarding the payment of benefits from their auto insurance company. Upon receiving an auto insurance claim, insurance companies are required to inform the claimant within 30 days about the information needed to process their claim. Additionally, insurance companies must promptly pay any portion of the claim for which they have received proper supporting documentation. Personal Injury Protection (PIP) claims are considered overdue if not paid within 30 days of receiving satisfactory documentation, and interest is owed on overdue amounts.

The new auto insurance law in Michigan offers enhanced consumer protections, ensuring that drivers benefit from lower costs, improved coverage options, and stronger rights. These protections aim to create a fairer and more transparent auto insurance system in the state.

How to choose your PIP and BI coverage limits

Michigan's new auto insurance law, which came into effect on July 1, 2020, has given drivers new choices and lower-cost insurance options. The changes include a PIP choice, opt-outs, attendant care limits, a fee schedule, and increased bodily injury liability coverage.

Personal Injury Protection (PIP) and Bodily Injury (BI) insurance are two different types of coverage that offer unique benefits in the event of an accident. Understanding the differences between the two is crucial when deciding on your coverage limits.

PIP Coverage

PIP, often referred to as "no-fault" coverage, provides immediate medical and wage loss benefits to policyholders, regardless of who is at fault in an accident. It typically covers medical expenses, rehabilitation costs, funeral costs, and lost wages. The extent of PIP coverage varies by state, with some requiring it as a mandatory component of auto insurance policies.

When choosing your PIP coverage limit, consider the following:

• The cost of medical care in your area: Ensure your PIP coverage limit is sufficient to cover potential medical expenses resulting from an accident.
• Your income: PIP covers lost wages, so consider how long your savings could sustain you if you were unable to work due to injuries.
• Your family situation: If you have dependents or care for others, PIP can help cover the costs of hiring someone to take care of your family during your recovery.

BI Coverage

BI coverage, on the other hand, comes into play when you are found at fault in an accident and someone else is injured. It protects you from financial responsibility for the injured party's medical expenses, lost wages, and pain and suffering. BI coverage also includes legal defence costs if the injured party decides to sue.

When selecting your BI coverage limit, consider:

• Your net worth: Choose a BI limit that is close to or higher than your net worth to adequately protect your assets.
• Your state's minimum requirements: Ensure you meet the minimum amount of liability coverage required by your state.
• The likelihood of being sued: If there is a higher risk of being sued in your state, consider increasing your BI coverage limit to protect yourself from potential legal fees.

By understanding the differences between PIP and BI coverage and carefully considering your personal circumstances, you can make informed decisions about your coverage limits and ensure you have the protection you need on the road.

Frequently asked questions