Michigan Auto Insurance Reform By The Numbers
Today on my radio show I interviewed Deyan R. Kozhuharov from Allen Harmon and Kozhuharov Insurance Agencies about the actual Michigan auto insurance changes that are coming our way on July 1, 2020, and how the reform will affect the end consumer. Deyan is on a committee with other insurance agencies and companies that meet to discuss the new auto insurance law and the effects on their industry and clients.
Coming our way July 1, 2020, with Michigan Auto Insurance Reform we have the following:
PIP/Medical Benefits Coverage Options and Rate Reduction Schedule
Note that the PIP rates portion of your premium will be locked in for 8 years:
- Unlimited: 10% or greater average reduction per vehicle
- $500,0000: 20% or greater average reduction per vehicle
- $250,000: 35% or greater average reduction per vehicle
- $50,000 for individuals on Medicaid only: 45% or greater average reduction per vehicle
- Opt-Out for qualified persons with qualified Medicare A & B coverage: 100% reduction per vehicle
- Enhanced coordination of benefits levels available
An individual has 30 days from losing medical benefits to inform the auto insurer or they lose all benefits. During the 30 days, the insured gets $2M coverage from MACP. After 30 days, the insured loses PIP benefits.
You should be aware that all of the insured will continue to pay the MCCA (MI Catastrophic Claims Association) unfunded liabilities under all of the limited PIP options.
Limits on Attendant Care – Effective June 11, 2019
- Care provided by a relative, housemate will be limited to 56 hours a week;
- Insurers can pay for more than 56 hours if medically necessary;
Rating Factors:
The reform will prohibit insurers from using sex, marital status, homeownership, credit score, educational level attained, occupation, or postal code when establishing rates on any type of auto insurance policy.
Residual Liability Insurance (RBI), a.k.a. Auto Bodily Injury Coverage:
- Increased current minimum coverage from $20k/$40k to $50k/$100k
- The default level will be $250k/$500k. To receive the $50k/$100k you must sign a waiver acknowledge the consequences of your decision.
Re-entry Penalty:
The new law will 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 part of the law will only apply between 07/1/2020 and 01/01/2022 (18 months of forgiveness).
PIP/Medical Coverage Order of Priority:
An injured person will collect PIP benefits in the following order.
- The insurer of the Named Insured
- The insurer of the Spouse or Resident-Relative; then
- Injured Person applies for benefits through the MACP ($250,000 or $2,000,000 if the injured person selected less than unlimited PIP and is within 30 days of losing qualified health insurance)
- Motorcycle – must be in an accident with an auto; then the PIP of the owner of the vehicle is the primary and only source of PIP.
Non-resident Relative Note: drivers, occupants, and pedestrians are no longer covered by the Named Insured’s policy unless they are the Named Insured on the policy, the Named Insured’s resident spouse or a resident relative of either. Therefore, the following individuals will no longer receive PIP benefits under the named insured’s policy:
- Unrelated Household Member
- Child of Divorced Parents: a child should be added to the policy where the child resides
- Student Away: If the student still has established a residency at the parents’ address, the student is covered.
Mini-Tort:
- Allows for the collection of damages to a motor vehicle from the at-fault driver to the extent the damages are not covered by insurance.
- The current level of $1,000 is increased to $3,000.
Anti-Fraud Unit:
An Anti-Fraud Unit will be created at the State Insurance Department level.
Tort Liability (3135(3)(C)):
This provision of the statute applies a “pure” comparative negligence standard as opposed to a “modified” comparative negligence standard regarding economic damages.
- Driver one will be able to sue driver two for allowable expenses, work loss, and survivor’s loss including in excess of the applicable PIP coverage limit even if driver one is more than 51% at fault in the accident.
Medical Fees Schedules:
- Fee schedules will begin on 07/01/2021 and will be a multiple of the Medicare fee schedule.
- Fee schedules will be between 190% and 250% of Medicare fee schedules depending on the medical provider class. There are 4 provider classes
As Deyan stated on my show it is time for you to set up a meeting with your insurance agent and be upfront and honest with all of their questions and understand what you are getting yourself into.
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