Michigan’s new auto insurance law is set to take effect
Changes in the law will apply to policies issued or renewed after July 1, 2020. Starting tomorrow, drivers can choose to keep their current level of PIP coverage, opt-out entirely, or switch to a lower tier of coverage allowed under the new law.
Check out the information below from the Michigan Department of Insurance and Financial Services about what you need to know.
Download a guide to Michigan’s New Auto Insurance Law here.
When does the law take effect?
The current law requires you to have auto insurance that includes unlimited Personal Injury Protection (PIP) medical coverage to pay for your expenses if you are injured in an auto accident. The new auto insurance law allows you to choose a level of medical coverage when your policy is issued or renewed after July 1, 2020.
If you are already receiving payments from your auto insurance policy due to injuries from an auto accident, you will continue to receive the current unlimited benefit regardless of the choice you make for the future. This is also true if you are injured in an accident between now and July 1, 2020.
Will my auto insurance bill be lower when the law goes into effect?
The new auto insurance law will allow you to choose a level of PIP medical coverage. Insurance companies are required to reduce the premium for this coverage so that there will be an average reduction per vehicle based on the level of coverage chosen.
You will also have the ability to choose different levels of Bodily Injury and Property Damage (BI/PD) coverage. This choice will also affect your premium.
Your total premium and potential savings will depend on the coverages you select. A licensed insurance agent can help you select the right coverage options for your budget.
How will I know what choices I have and what to choose?
The new law requires that auto insurance agents and auto insurance companies give you forms that describe the benefits and risks of the coverage options. DIFS encourages you to shop around for a policy that fits your needs. You may also want to talk with an auto insurance agent to discuss your personal auto insurance needs.
A SUMMARY OF WHAT YOU CAN EXPECT
PIP Benefit Coverage Levels
- Unlimited
- $500,000
- $250,000
- $50,000 for individuals on Medicaid only
- Opt-Out for qualified persons with qualified health coverage. Qualified health coverage means:
- Medicare Parts A & B
- Enhanced Coordination
- Allow for an applicant or named insured who has selected the $250,000 PIP benefit coverage to reduce his/her PIP benefits premium by 100% if the named insured, his/her spouse, and all relatives domiciled in the same household have health coverage that will cover injuries related to an auto accident.
Rate Rollbacks
- 10% for unlimited PIP coverage plans
- 20% for $500,000 PIP coverage plans
- 35% for $250,000 PIP coverage plans
- 45% for $50,000+Medicaid PIP coverage plans
- 100% for Medicare Opt-Out or for Enhanced Coordination as described above
- The above applies only to the PIP line of the auto policy.
Rating Factors
- The substitute will prohibit insurers from using sex, marital status, home ownership, credit score, educational level attained, occupation, or postal code when establishing rates on any type of auto insurance policy.
- While the use of ZIP codes is prohibited, insurers will still be able to use territory as a rating factor. This is an important difference that may limit price spikes occurring between adjacent ZIP codes, but not prohibit the overall use of territory by an insurer when establishing rates.
- There will be exceptions for educational level and occupation, so long as they are used solely for a common enterprise, economic, or social affinity or relation. This is to allow groups like alumni clubs and professional organizations to still obtain discounts for their members.
File and Approve
- Insurers must file rates with the Department of Insurance and Financial Services (DIFS) and cannot use those rates until they are approved by DIFS or 90 days have elapsed, whichever is earlier.
- If DIFS disapproves of an insurer’s rates for noncompliance with the rate, an insurer has 15 days to refile a rate in compliance with the DIFS disapproval order.
Anti-Fraud Unit
- Codify Executive Order 2018-9, which maintains the current fraud authority in DIFS and allows for the maintenance of current Memorandums of Understanding that exist between DIFS, the Attorney General, and the Michigan State Police.
- DIFS is required to provide an annual report on the activities of the Anti-Fraud Unit.
Re-entry Penalty
- Prohibit an insurer from charging a re-entry penalty, limiting coverage available, refusing to provide or continue coverage, or increase premiums for auto insurance for an individual solely because the individual failed to maintain mandatory auto insurance coverage.
- This provision applies for 18 months after the PIP cap levels are available to consumers.
QUESTIONS?
Contact the Michigan Department of Insurance and Financial Services at (877) 999-6442 or visit their website, Michigan.gov/AutoInsurance, for additional information about Michigan’s new no-fault auto insurance law.