Michigan Drivers Stand to Save Under Auto Insurance Reform, But Will They Really Benefit?

Up until recently, Michigan motorists were paying the highest auto insurance rates in the entire nation. But thanks to a new statewide no-fault reform law, the required fees paid by drivers will be reduced by more than half — and who doesn’t want to save some money?

While there are currently over 300 bills waiting for Senate action, local drivers won’t have to wait too much longer to see results, thanks to a no-fault auto insurance bill that was signed into law back in May by Michigan Governor Gretchen Whitmer. The bill, which will go into effect in July 2020, includes massive changes to the state’s current requirements for personal injury protection (PIP) coverage, among other items. Starting this summer, drivers will no longer be required to purchase unlimited no-fault benefits, nor will drivers with Medicare be required to maintain coverage for no-fault PIP medical benefits. In other words, people with health insurance policies that already cover automobile related injuries (as well as insured senior citizens) can opt out of PIP coverage completely. There will now be different levels of coverage options for drivers to choose from, as well.

While injuries caused by forklifts nationwide represent 10% of all injuries that occur in warehouses and factories, the likelihood of being involved in a car crash and suffering subsequent injuries is certainly a bit higher for most Americans. And certainly, Michigan drivers have the right to be protected if they’re involved in a collision. Since more than 20 million vehicles on the road in 2020 will be at least 25 years old, it makes some sense to invest in injury protection if an older vehicle isn’t equipped with certain safety features. However, the lack of choice presented to Michigan drivers — combined with the rapidly increasing fees associated with the mandatory PIP system — prompted some big changes in the law.

For the drivers who do choose to keep their unlimited PIP coverage, there are some financial incentives. The Michigan Catastrophic Claims Association (MCCA), which is the nonprofit that receives PIP premiums and then reimburses medical costs after a serious injury, recently announced that they would be making cuts to their claim fees by 55% next year. Currently, the claim fee is $220, but that cost will decrease to just $100 when the law goes into effect. Moreover, Michigan motorists who opt out of PIP coverage likely won’t need to pay anything into the catastrophic injuries fund, provided that it doesn’t go into deficit.

Said Gov. Whitmer in a statement: “Today’s reduction by the MCCA demonstrates that our historic bipartisan legislation will provide real savings to Michigan drivers. The new law will enhance consumer protections and continue to lower costs for Michiganders by mandating rate reductions for eight years. Millions of Michigan drivers will finally see relief under a new system that maintains the highest benefits in the country.”

Although it remains to be seen as to whether drivers will actually obtain the protection they need (and how much they’ll end up saving), the changes are seen as positive by many. However, it’s possible that car accident victims may not be given the coverage they need to receive necessary medical care and that car insurance premiums may not be lowered as much as what’s been promised. Until the law actually goes into effect, Michigan residents will have to wait and see — and watch the road carefully.

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