As of July 2, 2020, Michigan Auto Insurance Insurance has changed. Michigan has never seen an overhaul like this before, and the changes have generated much confusion over what exactly is happening to everyone’s auto insurance. You might have read an article or watched a video advising of enormous savings and new options while other media sources are presenting just the opposite. How do Michigan drivers make sense of it all?
As an independent insurance agency we work with both insurance companies and customers to make sense of the changes Michigan drivers face. We converse with clients daily on these new changes and feel compelled to dispel some myths amid the abundance of information and opinions in the media.
Myth #1 – I’m getting a refund on my Auto Insurance. The No-Fault Insurance changes that started July 2nd do not give you a refund of your premium. Many carriers returned some premiums due to the COVID pandemic in the way of a refund, which is not to be confused with the No-Fault Reform. In July, insurance companies are required to lower the PIP portion of your Auto Insurance when it renews, but this is only a part of your auto policy. Depending on your individual policy characteristics, you may or may not see overall savings.
Myth #2 – Insurance companies are the ones truly making out with these changes. This one is a matter of opinion. If you ask the insurance companies, they might say the attorneys are the ones making out, if you ask the hospitals, they might point at the insurance companies, and politicians have elections to think about.
The truth is that all parties made concessions to pass the No-Fault Reform. Starting in 2021, Medical facilities are limited to a fee schedule that puts controls on the amount charged for auto accidents. On the other hand, insurance companies cannot raise rates on medical coverage for 8 years. Conversly, consumers can save on premiums, but only by lowering their medical coverage limits.
Myth #3 – I can opt-out of Medical Auto Insurance (PIP) coverage with no repercussions. There are two options to “opt-out” of the medical portion (PIP) of your premium, but doing so could come with significant risk. You will have to decide if the savings is worth it for you, and if you qualify.
If you have Medicare or what’s called Qualified Health Coverage (QHC), you may be able to avoid paying for the PIP portion of your insurance, which can be a significant dollar amount. If you opt-out with Medicare, you would be required to go directly to Medicare after an accident, and you may miss out on some of the coverage Auto Insurance policies include. On the other hand, a QHC opt-out requires you have a certain level of health care deductible and also mandates that your health insurance will cover accidents.
You would want to ask yourself, “Would I chance less coverage, or no coverage, when I’m injured in an auto accident? Am I willing to lower my coverage for greater savings, and by how much?” An insurance agent can help you evaluate these question based on your circumstances.
Myth #4 – Everyone’s Auto Insurance rates are decreasing. Not exactly. The law puts restrictions on what insurance companies can charge for medical (PIP) coverage, and it forces a reduction in an assessment you pay, called the MCCA, but the law now allows drivers to sue the other party for their medical costs. This means your insurance company is more likely to be faced with increased lawsuits costs. This change may cause an increase in liability rates for your policy which can offset some of the required reduction in savings.
In the end, there is some actual savings but I’d recommend talking with an agent who can help you navigate the new medical (PIP) options for Unlimited, $500K, $250K, $50K (Medicaid), or full opt-out. I personally chose $500K and saved $200 a year with two vehicles. That’s just me and everyone could be different.
Myth#5 – If I take a lower PIP limit, I’ll run out of coverage. According to one of Michigan’s largest insurance companies, 99% of claims are covered at $500K or below. And the state with the next highest PIP limit is New Jersey with a limit of $250K. So there is a possibility you could run out of coverage if you do not take Unlimited medical (PIP) but even at $500K there is a lot of coverage. Choosing $500K in coverage would apply per person per accident. So If a family of four is injured in an accident they would have a limit of $500K each or $2,000,000. Again, an insurance agent can help you balance your coverage limits with potential savings. If no one has walked you through these changes then you may want to see one out.
Myth #5 – All insurance companies are the same. Depending on the financial strength of the insurance company, the new law may impact each company and their customers differently. Some companies may promote certain limit options that may or may not leave the customer exposed. It is important to talk with a licensed insurance agent who can evaluate multiple companies to find one that is a fit for you.
Myth #6 – I have to wait for my policy to renew to take advantage of the new options. Everyone is eligible for the new options and rates starting July 2nd. Some insurance companies have created a solution for you to capture the new changes without having to change your insurance company, or take out a new auto insurance policy. Other companies are requiring policies to be “re-written” which could mean updating your motor vehicle report, insurance score, etc. Hopefully you are hearing from your insurance agent on the changes. If not, and I know I’m sounding like a broken record but you should seriously contact a licensed agent to see what options you have for your auto insurance.
As you have gathered by now, Michigan No Fault Auto Reform is complicated and has many interest groups sending conflicting messages. You should know that Insurance Agents have their own interest in attracting new customers and good ones do that by helping their clients evaluate insurance coverage needs so you’re not left in the dark and without coverage when tragedy strikes.
Brandon Gadbury, MBA, CPCU, CPRM, CIC, AAI is the Director of Business Development for Michigan Community Insurance Agency, an independent insurance agency representing South Lyon, Wixom, Northville, and West Bloomfield.