New Car Insurance Options Start Thursday

By Scott McClallen

(The Center Square) – Michigan drivers will be able to opt out of unlimited personal injury protection (PIP) insurance and cut costs on their car insurance rate beginning Thursday, when an insurance reform measure goes into effect.

The state enacted a no-fault insurance law in 1973 that required all state policyholders to buy unlimited PIP coverage. The reform measure was passed by lawmakers and signed into law by Gov. Gretchen Whitmer in May 2019.

Much savings should result from new five-tiered coverage options.

  • Those who keep unlimited PIP coverage would receive a 10 percent rollback of PIP coverage costs on average.
  • Those who choose the $500,000 plan get a 20 percent rollback on average.
  • Those who choose the $250,000 plan get a 35 percent rollback on average.
  • Those who choose the $50,000 plan get a 45 percent rollback on average.

The cost rollbacks will last for eight years.

The Michigan Catastrophic Claims Association (MCCA) starting Thursday also will cut its per-vehicle annual fee from $220 to $100 through June 30, 2021.

Drivers choosing coverage less than unlimited PIP can dodge that fee.

Stephan Sinas, legal counsel for The Coalition Protecting Auto No-Fault, previously told The Center Square that the MCCA fee reduction might give short-term relief to consumer’s pocketbooks but at the cost of less medical care for injured motorists who choose lower coverage options.

“So the public may be happy they’re paying less on their insurance premium, but they should know that comes at the cost of so many people not having catastrophic care through the MCAA, and those people could be family members, friends of all of us,” Sinas said.

Rep. Jason Wentworth, R-Farwell, chair of the House Select Committee on Reducing Car Insurance, said the change should save consumers money.

“Michigan had the highest auto insurance rates in the nation. Across the state, we were hearing from constituents on the need for car insurance reform,” Wentworth said in a statement. “The 100th Legislature came together in a bipartisan way, set its differences aside and delivered a meaningful solution to a system responsible for financial hardship within many Michigan households.”

The nonpartisan House Fiscal Agency estimated the law could increase the state’s Medicare costs by $65.9 million over a 10-year-period from uninsured or under-insured motorists declaring bankruptcy after crashes that exceed that person’s insurance coverage.

Those motorists would then enroll in taxpayer-funded health-care programs.

The total cost depends on how many people opt out of unlimited PIP.

But is the change a good idea?

Eric Lupher, the president of the Citizens Research Council of Michigan, told The Center Square “it depends” on consumers’ risk aversion and past driving history.

The structure under the expiring law provided unlimited health care for a person injured in a car wreck, Lupher said, and there was a little ability to control these costs.

The revised act attempts to control the amount medical providers can charge  auto insurers for motorists’ medical bills.

“I’m hopeful that it will be for the better,” Lupher said of the change as a whole. “Over the medium to long-term, those controlled costs should help reign in the costs of insurance for everyone” through lower rates.

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