Michigan Auto Insurance Reform
We’re committed to helping our customers navigate Michigan auto insurance reform.
Michigan auto insurance reform offers drivers more choices, as well as changes to their auto insurance. While some changes will be phased in over time, most went into effect July 2, 2020. At Frankenmuth Insurance, we want to help our customers understand how their insurance coverage may be impacted.
Changes for Michigan drivers
The reformed Michigan no-fault insurance law lets Michigan drivers choose the Personal Injury Protection (PIP) option that best meets their unique needs and budget. Previously, it was mandatory for drivers to carry unlimited PIP coverage. As of July 2, 2020, drivers can choose from six different PIP options:
- Unlimited PIP coverage
- $500,000 limit
- $250,000 limit
- $250,000 limit with PIP medical exclusion(s); this option is for drivers who have qualified health coverage (non-Medicare) that covers auto accident injuries. (This option is available if your spouse and other relatives who live with you have qualified health coverage that will cover auto accident injuries.)
- $50,000 limit; this option is only for drivers who are enrolled in Medicaid. (This option is available if your spouse and other relatives who live with you have Medicaid or qualified health coverage that will cover auto accident injuries.)
- Opt-out of PIP coverage entirely; however, you, your spouse and all relatives who live with you must have Medicare or qualified health coverage to be eligible.
Additionally, these changes went into effect July 2, 2020:
- Insurance companies must reduce PIP premium rates, and guarantee that they will be reduced for eight years. The rate reduction applies only to PIP premiums, which is one part of your entire auto insurance costs. The average reduction takes into account both the PIP premium and Michigan Catastrophic Claims Association (MCCA) vehicle assessment fee, which cannot be reduced by insurance carriers. The reduced amount will depend on the PIP coverage that a driver selects – the higher the coverage, the lower the reduction. For example:
- Unlimited coverage would receive on average a 10% reduction
- $500,000 in coverage would reduce on average by 20%
- $250,000 in coverage would reduce on average by 35%
- $50,000 in coverage would reduce on average by 45%
- Individuals with Medicare or qualified health insurance could opt out and receive a 100% rate reduction on certain portions of PIP, depending on their individual circumstances. MCCA deficit fee would still apply (MCCA has announced the deficit fee is $0 for 2020).
- Minimum bodily injury liability coverage limits increased from $20,000 per person and $40,000 per accident to $50,000/$100,000. The policy will default to $250,000/$500,000 (or $510,000 for commercial auto policies) if the policyholder does not make a choice. Policyholders must sign a selection form to choose limits lower than $250,000/$500,000 (or $510,000). If a selection is made following the first renewal after July 2, 2020, policyholders may keep that option until they request a different option. All following renewals will be issued with the previously selected option. Policyholders will be sent a bodily injury coverage selection form at each renewal so a different selection may be made; however, policyholders may select a different option at any time.
- Policyholders will be given the option to select their PIP and bodily injury liability coverage at each renewal; selection forms will be sent at each renewal. If a selection is made following the first renewal after July 2, 2020, policyholders may keep that option until they request a different option. All following renewals will be issued with the previously selected option; however, policyholders may choose a different option at any time.
- Non-driving factors can’t be used to set insurance rates for personal auto policies. Factors include postal zone, credit scores, home ownership, education level and occupation.
- Tort damages will be recoverable for excess allowable expenses and work loss. And, the “Mini-Tort” damage cap will increase from $1,000 to $3,000 for accidents occurring after July 1, 2020.
- The order of determining who will pay for a no-fault claim – called the “order of priority” – has changed in some cases involving:
- Relatives who do not reside in the household of the named insured unless they are away at school. These relatives (such as your children) would need to have their own insurance policy, even if they are driving a car you own.
- Non-relatives who reside in the household, even if they are listed drivers. They would need to have their own insurance policy.
The following changes went into effect July 2, 2021:
- The Michigan medical fee schedule is intended to standardize payments to medical care providers (physicians, hospitals, clinics, etc.) for services rendered or supplies provided to people injured in auto accidents. Payments to medical care providers are based on a percentage of the Medicare-based fee schedule. This fee schedule outlines costs that correspond to medical services and supplies and will help standardize how much can be charged by and paid to medical care providers for these services.
- Your PIP provides attendant care benefits. Attendant care is the help you need in performing activities of daily living following an auto accident, and the care can be provided by a professional or family member/friend. Coverage remains unlimited for care provided by a professional but will be reduced to 56 hours per week for in-home care provided by someone who is related to you, lives in your household, or is a friend.
The following changes went into effect January 1, 2022:
- The amnesty period for policyholders to obtain insurance without penalty or increased premiums will expire on December 31, 2021.
- Policyholders may be denied coverage through Frankenmuth Insurance if they have not maintained insurance for more than six months.
Brief history of Michigan’s no-fault law
Michigan’s no-fault auto insurance law has been in place for nearly 50 years. When it was passed in 1973, the no-fault system was designed to:
- Make the claims process more straightforward for auto accident victims, especially if more than one driver contributed to an accident
- Allow injured persons in auto accidents to collect benefits in a timely manner, so they can recover more quickly – ultimately saving time and money
- Compensate accident victims promptly and equitably for medical costs and lost income
- Limit the number of lawsuits that result from auto accidents, and reduce the burden on the state’s court system. (Before the law was passed, there were about 69,000 auto injury lawsuits per year. Today there are about 29,000.)
Under Michigan’s no-fault law, those who are injured in auto accidents receive unlimited lifetime medical benefits and significant wage loss benefits. Severely injured persons receive these benefits immediately, rather than having to wait for a settlement to be reached in court, like the traditional tort system in other states. And, all drivers are required to carry these coverages: personal injury protection, property protection and residual liability.
However, there have been challenges with the no-fault system, such as the rising cost of auto insurance for Michigan drivers. The Insurance Alliance of Michigan (IAM) cites that Michigan’s unlimited, lifetime medical benefits, inflation in the cost of health care and auto repair, and lawsuits are driving up the cost of auto insurance. Because of the high cost of auto insurance in Michigan, many drivers opt to not carry insurance at all, which places more stress on the system. It is because of these challenges that lawmakers recently passed reforms to the Michigan no-fault law.
Frequently asked questions
At Frankenmuth Insurance, we’re here to help you understand what’s driving these changes to your auto insurance options. That’s why we’ve worked with our experts to offer answers.
How do I know if I have gaps in my coverage?
We recommend starting a conversation with your local, independent agent to identify potential gaps in your coverage that may need to be corrected, especially if any of the scenarios above describe your household. Your agent will be able to help you understand your unique coverage needs. If your agent recommends personal umbrella insurance, information on what an umbrella policy covers can be found here.
Will I be able to change my Personal Injury Protection (PIP) benefits as soon as the law is in effect?
We encourage Frankenmuth Insurance policyholders to revise their policy at their next renewal after July 2, 2020. However, you may work with your agent to sign a new PIP coverage selection form to request policy updates earlier. If you are a Frankenmuth Insurance policyholder, you will be issued a short-term policy in this case to maintain your current personal auto or commercial auto policy effective and expiration dates.
How will I select my PIP and bodily injury limits?
All Frankenmuth Insurance policyholders will receive a PIP coverage selection form and bodily injury coverage selection form by first-class mail prior to their policy renewal. Also included will be a letter of explanation to help you select the options that best meet your insurance needs and the deadline to submit your selections. If you have questions or need assistance, your agent will be best equipped to help you make your individual choices. A postage-paid envelope will be included to return your signed selection forms to Frankenmuth Insurance. To help our team quickly process your renewal and any policy changes, please return your signed selection forms on or before the deadline provided in your letter.
What is qualified health coverage and what type of proof do I need to provide?
Depending on the PIP option you choose for your personal auto policy, you may need to provide information from your health insurer or employer about your health insurance. Qualified health coverage does not exclude or limit care for auto accident injuries and has an individual deductible of less than $6,000. If you are a Medicare or Medicaid participant, you may need to provide proof of enrollment.
What do I need to know if I drive an employer-provided or transportation company vehicle?
If you drive a vehicle provided by your employer, typically, you’ll first pursue coverage through your employer’s insurance company that covers the vehicle. The next order of priority is your own personal auto policy, then that of your spouse or resident relative, then finally the Michigan Assigned Claims Plan (MACP). Or, if you drive a transportation company vehicle, you will generally pursue coverage through the insurance company that covers your transportation company’s vehicle, unless specifically excluded.
What do I need to know if I am a motorcyclist?
Generally, motorcyclists will pursue coverage in the same order of priority as under the previous law. This means that if the owner/registrant of the motor vehicle has limits less than “unlimited” selected for their no-fault policy, the motorcyclist will receive those same limited benefits selected by the driver, regardless of the motorcyclist’s own PIP coverage. If the owner of the motor vehicle involved has opted out of PIP, then the motorcyclist will go to the next order of priority, which is the vehicle driver’s insurance, then to the motorcyclist’s own insurance company.
How are out-of-state residents affected by these changes?
Typically, if you are a resident of another state, you are no longer entitled to PIP benefits for injuries sustained in a Michigan motor vehicle accident, unless you own the vehicle and it is both registered and insured in Michigan.
Why haven’t I realized immediate savings on my auto insurance premium now that no-fault reform has been passed?
While the new law was passed in Spring 2019, most of the significant reform won’t go into effect until July 2020, and even more changes will happen in July 2021. So, the first cost reduction you see will be after July 2, 2020, and after you have selected new PIP and bodily injury limits. It’s also important to note that savings may appear less significant than you expect since PIP coverage is just one portion of your auto insurance policy. We encourage you to reach out to your local, independent agent prior to July 2020 to discuss the new coverage options that will be available to you.
My auto insurance premiums actually went up after the new no-fault law was passed. Is my insurance company just trying to take more money from me before the new law takes effect?
Many factors impact your total auto insurance premium. If you made a change to your auto policy, such as adding a driver, buying a new car, moving to another home or if you were involved in an accident, these factors could have impacted your premium. The auto insurance premiums that Michigan drivers are paying today were approved by the Department of Insurance and Financial Services in Spring 2019, before the new no-fault law was passed. If you have questions about your premium, we recommend contacting your local, independent agent.
Recent news and helpful resources
While your agent is the best resource for questions about your auto insurance, we’ve gathered other resources to provide a broad perspective that may help you learn more about Michigan’s no-fault law.
Learn more about Michigan no-fault
Brief Explanation of Michigan No-Fault Insurance before it was reformed
Michigan Department of Insurance and Financial Services (DIFS) new auto insurance website
Learn more about the legislation
Senate Bill 001 was introduced by Senator Aric Nesbitt on January 15, 2019, passed by the Senate on May 7, 2019, then passed by the House on May 24, 2019 and signed by Governor Whitmer on May 30, 2019.
House Bill 4397 was a follow-up bill signed on June 11, 2019, by Governor Whitmer.
Explore more news and updates
Top 5 questions about Michigan no-fault insurance reform
June 23, 2020
Frankly, no-fault reform is complex and involves many changes to your auto insurance. We are committed to helping our customers understand these changes. We encourage you to check back here often for more updates and information as it becomes available. And, if you have questions in the meantime, you can always contact your agent or send us a message.