How Michigan’s Auto Reform Will Affect Policy Renewals in 2020

Find out what the state’s auto reform will mean for drivers.

While auto insurance rates have increased throughout the country, Michigan drivers have faced the most significant premium hikes.  To combat these exorbitant rates, the state passed a sweeping auto insurance reform that will go into effect on July 1 of this year.  But what do these changes mean for your auto insurance in Troy, Michigan?  Here’s what you need to know.

Michigan’s High Auto Insurance Rates

Currently, Michigan drivers pay an average of $2,693 for auto insurance every year.  This is a whopping 83% higher than the national average rate of $1,470.  These rates increase for drivers living in cities like Detroit, where insurance can cost up to $6,000 annually.

But why are rates so high?  Well, for starters, Michigan has the highest insurance requirements in the country.  This is especially apparent in the state’s Personal Injury Protection (PIP) requirements, which forces drivers to carry unlimited, lifetime medical coverage for car accident injuries.  While this coverage is great for those injured in auto accidents, such high coverage limits also make the system susceptible to acts of fraud and costly legal battles between insurers, medical providers, and policyholders.  These legal issues only force insurance rates up higher.  Finally, because many drivers cannot afford to keep up with steadily increasing premiums, many struggle to maintain continuous auto coverage.  This means that they face compounded auto insurance costs when they do attempt to restart their coverage.

What Michigan’s Auto Insurance Reform Means for Drivers

Changing PIP Insurance Options

Starting July 1, drivers will have the option to choose different levels of PIP coverage.  New laws require insurance providers to reduce the cost of PIP coverage by the following amounts until July 1, 2028:

  1. Unlimited PIP coverage- 10% reduction
  2. $500,000 of PIP coverage- 20% reduction
  3. $250,000 of PIP coverage- 35% reduction
  4. $50,000 of PIP coverage- 45% reduction
  5. No PIP coverage- 100% reduction (Note: This option is only available for drivers who have Medicare or a qualifying health insurance plan that includes coverage for auto accident injuries.)

Higher Liability Requirements

Currently, Michigan drivers must carry a minimum liability coverage of $20,000 of coverage for one person injured or killed in an auto accident and at least $40,000 of coverage for accidents where two or more people are injured or killed.  After July 1st, the minimum liability limits are increasing to $50,000 per person and $100,000 per accident. The default limit after July 1st2020 will be $250,000/$500,000 drivers choosing coverage below the limit of $250,000 of coverage for one person injured or killed in an auto accident and $500,000 of coverage for accidents where two or more people are injured or killed will be required to sign a form requesting this lower limit from the carrier.

New Restrictions for Auto Rates Based on Personal Information

When calculating your insurance rates, providers will take a variety of personal factors into account.  While you might expect things like the type of car you drive, your driving history, and your annual mileage to affect your rates, other factors like your gender, marital status, and so on can also impact your coverage costs.  Starting July 1, Michigan will ban gender, marital status, occupation, education, zip code, credit score, and residential status from auto insurance calculations.

Limits of Medical Billing

Currently, Michigan requires insurance carriers to pay whatever is “reasonably necessary” to treat crash victims.  This leniency leads to inflated medical bills, which then causes auto insurance rates to increase for all drivers.  On July 1, the state will introduce a medical fee schedule to limit how much insurers are required to pay for medical care.  The new limits will start at 200%-250% of what Medicare will pay for a medical procedure.  Additionally, reimbursement rates will drop to 190%-230%, depending on the type of medical facility.

Insurance Oversight

Currently, Michigan allows auto insurers to start charging new rates as soon as they’re submitted to the state.  While regulators can later reject these rates, this is very rare.  To provide stricter oversight, starting on July 1, the state insurance regulator must approve new rates before insurers can start charging customers.

While it remains to be seen how these new auto insurance regulations will affect premiums, it’s important that Michigan’s drivers understand how their coverage requirements will change as they renew their policies this year.  Do you have additional questions about the insurance reform and how it affects your auto insurance in Troy, Michigan?  If so, then contact the experts at CIA Insurance and Risk Management.  Our dedicated team is eager to assist you with all your coverage needs today.

Post written by Sam Crudo, Chief Executive Officer

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