Our agency, like many others have started to receive calls from our clients and even new prospects asking many questions about the new reform bill that was passed at the beginning of June 2019. This law, which started in October 1973, affects everyone in the state of Michigan. The reform bill will start going into effect July 1, 2020 with some provisions not changing until 2021 & 2022. Like many other bills it can take years to figure out the details in a change of this magnitude.
The changes we are currently aware of include mini tort, non-driving factors, Michigan Catastrophic Claims Authority (MCCA) and state required limits. Other changes involve medical coverage/charges in an auto accident, but most importantly to the consumer is the premium decrease of an auto insurance policy.
If you have liability coverage ONLY on your vehicle you may currently go after the "at-fault" party of an accident for $1,000. This mini tort amount will increase to $3,000.
Non-driving factors including things such as marital status, owning a home, education level/occupation and postal code can no longer be used as rating methods. Membership associations will still be able to offer group discounts on insurance policies and territory codes will still be used by insurance carriers. Credit scores cannot be used for rating but credit report information can be used to calculate an insurance score. Also, Insurance companies will no longer be able to limit or refuse coverage based on a consumer not having "prior insurance" and they will no longer surcharge for this.
The MCCA is going to have to provide more detail as to how the annual fee is calculated for each vehicle. Currently, it is listed at $192 fee per vehicle. On July 1, 2019 (in 6 days) this amount is going to increase to $220 per vehicle, not policy, PER VEHICLE. We hope that next year’s assessment will be more reasonable with the new reform policy that is put in place.
Michigan, like many other states, has state required minimum limits for liability coverage. It is currently listed at $20,000 per person with $40,000 per occurrence. This will increase to $50,000 per person with $100,000 per occurrence. This increase is assumed because the new law allows people to sue at-fault parties for additional coverage needs.
Auto insurance in Michigan has had unlimited payout in medical coverage for almost 50 years. This means that there has been no limit to what or how much can be charged by individual entities as the result of an auto accident injury. Consumers purchasing auto insurance can now decide if they want to keep their "unlimited" coverage (most insurance agents should recommend this) or if they want a specific limit to be applied for medical coverage. Limits that can be chosen are $500,000, $250,000, $50,000 and opt-out. You can only choose $50,000 if you are a recipient of Medicaid and you can only opt-out if you are a senior or permanently disabled on Medicare. It is important to keep in mind that the consumer is responsible to check with their health carrier on ALL coverage because some expenses may have a limit and other expenses may not be covered at all. These can include physical therapy, medical equipment and services provided in or out of network. Medical providers will only be able to charge a maximum 200% of the Medicare base. This decreases to 190% by year three.
How much do you save on insurance? This law reduces ONLY the Personal Injury Protection (PIP), medical expense & work loss wages, on each policy. This is not a total policy reduction. I have listed the percentage that your PIP coverage can be reduced:
Opt-Out = 100% reduction
$50,000 = 45% reduction
$250,000 = 20% reduction
$500,000 = 10% reduction
Our recommendation is to make sure you carry enough coverage to help you in the event that you were catastrophically injured. Assume you have to pay for all procedures (including surgery if necessary), prescriptions and medical equipment not only for your vehicle but also your home. These medical expenses could last the rest of your lifetime so make sure you are prepared.