car insurance

Michigan Lawmakers Strike Deal On Auto Insurance Reform

May 24, 2019 - 8:15 am

LANSING (WWJ/AP) - Michigan lawmakers have reached a tentative deal on legislation to cut the state's high car insurance premiums.

The Legislature is convening for a rare Friday session when a bill is scheduled for a vote. Democratic Gov. Gretchen Whitmer said the legislation would guarantee rate reductions for every motorist and offer choice among personal injury protection, or PIP, levels. PIP, on average, makes up half of car premiums.

Click here to see a summary of the bill (.pdf format)

"The deal: guarantees rate relief for every Michigan driver; provides a choice in coverage levels; establishes more uniform and structured compensation levels for medical providers; and removes the ability of insurance companies to discriminate based on non-driving factors," Whitmer said in a statement. "I look forward to working with the legislature to pass and sign this important legislation into law."

The measure also would prohibit the use of several non-driving factors in setting rates and scale back reimbursements for health providers that treat accident victims. Unlike several other no-fault states, Michigan does not have a fee schedule for care covered by auto insurers. They pay much more for the same services than is paid by employer plans or government insurance such as Medicare or Medicaid.

A driver choosing to stick with unlimited coverage would see a 10% PIP reduction. Someone who fully opted out would get a 100% cut, if they have health insurance. People on Medicaid would have to get at least $50,000 in benefits and would pay 45% less. People picking $250,000 or $500,000 of coverage would see a 35% or 20% reduction.

The rollback in PIP rates would start in July 2020 and last for eight years.

Under the current no-fault system, Michigan has the highest auto insurance rates in the nation -- about $2,693 per year on average, which is 83% higher than the national average of $1,470. Detroit's premium on average is $5,464, far surpassing any other U.S. city. Michigan is also the only state that requires seniors to buy duplicative coverage, costing them between $600 and $1,000 each year.

"This basically breaks a 40-year logjam on trying to change this," said WWJ Lansing Bureau Chief Tim Skubick. "The Republicans are pleased. The question is how many Democrats will support this thing? The harsh reality is Republicans have the votes both in the House and the Senate to pass this deal with or without Democrats. So before this day is over, we should have what they call no-fault car reform."

Detroit Mayor Mike Duggan and others filed a lawsuit last year asking that the 1973 no-fault law be declared unconstitutional for failing to provide "fair and equitable" insurance rates. Duggan said there will "no doubt be major reductions" for drivers, especially those in Detroit who pay the highest rates in the state.

"The bill allows you if you already have health insurance not to pay for it a second time. All you have to do is look at your bill and PIP, personal injury protection, is 40% of the bill for the average Michigan resident. For those who already have health insurance, that's going to come off. For those who don't, they've lowered the options that you can buy so that (cost) will come down," said Duggan. 

Michigan is the only state to require that drivers buy unlimited PIP benefits with their auto insurance policy. Voters in 1992 and 1994 defeated insurance industry-backed ballot proposals to cap medical benefits.

Speaker of the House Lee Chatfield and Senate Majority Leader Mike Shirkey said the wait now is over after decades of inaction in Michigan.

"Today's vote will be a significant victory for the hard-working people of Michigan that will finally fix our broken car insurance system and deliver real, meaningful rate relief for families, seniors and household budgets all over the state," they said in a statement.

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