Michigan’s No-Fault Insurance Reform: More Options And Protections, But Not Necessarily Lower Rates
After years of trying, the Michigan legislature passed broad reforms of the state’s no-fault auto insurance system. Michigan drivers pay some of the highest rates in the country for car insurance. It’s no coincidence that Michigan also has the fourth-highest rate of uninsured drivers.
The reforms, which went into effect July 1, 2020, were intended to make insurance more affordable for consumers and encourage more drivers to carry the mandated coverage. The jury is still out on the actual impact of the new laws. Many drivers have indeed seen their premiums lowered but some drivers are paying even more than they did before and with less coverage.
What were the reforms of the no-fault laws?
Michigan’s no-fault system was overhauled extensively. Some of the main highlights:
Unlimited lifetime medical benefits no longer automatic – Under the old no-fault law, drivers injured in auto accidents were eligible for unlimited personal injury protection (PIP) benefits. All insured drivers paid for this coverage, which contributed to the exorbitant cost of insurance. Under the new law, lifetime benefits are still an option but not mandated.
Drivers can choose from different tiers of PIP coverage:
- Unlimited medical benefits
- $500,000 per person per accident
- $250,000 per person per accident
- $250,000 with exclusions for health insurance
- $50,000 per person per accident (if enrolled in Medicaid)
- Opt-out (no PIP if enrolled in Medicare Parts A and B or otherwise qualified)
Higher minimums for liability insurance – Every driver must be insured against causing bodily injury or property damage to others. The old 20/40/10 coverage was among the lowest in the country. Michigan drivers must now carry 50/100/10 – $50,000 per person who is injured or killed and $100,000 total per accident for injury or death, plus $10,000 for damage to property. This is the minimum liability coverage; you can (and perhaps should) purchase more.
Amnesty for the uninsured – The legislation included an 18-month grace period for uninsured drivers to come into compliance. Insurance companies cannot limit coverage, charge reinstatement fees or increase the rates of drivers whose insurance had lapsed. To qualify for amnesty, drivers must purchase no-fault insurance before Jan. 1, 2022. The intention is to reduce the estimated 20% of Michigan drivers (one in five) who do not have any car insurance.
Combatting discrimination – The new law prohibits insurers from considering non-driving factors in determining insurance rates, such as credit scores, education, ZIP code, occupation, marital status, gender or homeownership.
Combatting fraud – The new legislation created a dedicated law enforcement unit to investigate insurance fraud and criminal activity related to insurance markets. Reducing fraudulent accident claims and insurance scams will help reduce insurance premiums for everyone.
Keeping insurers honest – The new law increased fines and penalties against insurance companies and insurance agents for violating insurance laws and consumer protections.
Change in mini-tort protection – If you are more than 50% at fault for an accident, the other driver can sue you for vehicle damage not covered by their own collision insurance. You can purchase optional coverage against this scenario. Under the old law, you could not be sued for more than $1,000 in property damage. The new law raises the mini tort cap to $3,000, making it more prudent to carry this extra protection.
Will my car insurance rates go down?
The overall focus of the legislation was to bring down insurance costs and reduce the number of uninsured drivers. With the options and protections, many drivers have been able to purchase new policies or lower their existing rates while still protecting themselves in the event that they suffer or cause injuries.
However, some drivers have reported that their rates increased markedly under the new system. If you qualify for Medicare or if your health insurance covers automobile accidents, you may not need the redundancy of PIP coverage. If you do continue PIP, choosing a cap such as $50,000 or $250,000 instead of unlimited medical should reduce your rates.
Our attorneys have handled many injury accidents and medical benefits claims since the no-fault reforms were enacted in 2020. We can advise you on PIP and liability coverages so that you know what to ask your insurance agent when it is time to renew, upgrade or add drivers to your policy.