Tuesday morning the Michigan Senate passed a proposal aimed at reforming Michigan No Fault Insurance. The proposal would make a number of changes to how the medical portion of your auto insurance, Personal Injury Protection (PIP), would work.
Currently, all auto policies in Michigan offer unlimited lifetime benefits. This means there is no dollar limit or time limit to these benefits. No other state has similar levels of benefits. In fact, many states limit this significantly more than MI, sometimes only offering $10,000.
The proposal will give an insured person two additional optional levels of coverage for personal injury protection; $250,000 and $50,000. While insurers could still offer unlimited coverage, it would not be required. Having these optional limits should create more competition amongst carriers as they will now have framework for which to set their rates against versus it being completely unlimited.
It would also allow for a qualified person (yet to be defined) to opt out of purchasing Personal Injury Protection altogether. The assumption is that these people would have to prove they have sufficient coverage through private or employer provided insurance in order to opt out completely.
The proposal will require better financial disclosure to the state from the Michigan Catastrophic Claims Association (MCCA) which handles catastrophic auto injury claims that exceed the insurer’s responsibility. Currently we all pay an MCCA fee per vehicle, which is currently set to go up again in July. It would require MCCA to actually issue rebates if the MCCA’s assets exceeded 120% of its liabilities.
In addition, it will also create a new fraud authority aimed at reducing auto insurance fraud in Michigan.
Finally, the proposal will set a fee schedule that would limit how much medical providers can charge your auto insurance company for medical procedures. Currently there is no limit to what they can charge. The new proposal would set the fees similar to what they currently are for workers compensation.
While the intended result of this proposal would be to lower auto rates in MI, I would not expect insurance companies to slash auto rates across the board immediately if this happens. I think the end result of how this impacts auto insurance premiums as a whole in Michigan is something that will play out over time, likely years.
In the short term however, this proposal will at least give you the option to select a lower level of coverage, other than unlimited benefits, which should result in a lower premium.
The bill still has to pass the House and we will be watching this closely to see how it might change and whether it passes.
-By Darin Mohrman and Emily Stroub
I’m a former aspring “ski-bum” turned insurance professional.I was licensed in 2002 and in 2013 I obtained my Certified Insurance Counselor (C.I.C.) designation. I'm married, have an amazing son and two cats.I enjoy exploring new places, music, friends, family, Star Wars, craft beer and all things computer and tech related.