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Understanding the Changes to Michigan’s “No-Fault” Car Insurance Laws


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Although the state prohibits insurers from charging “excessive rates,” residents of Michigan pay some of the highest insurance rates in the United States. This is due, in part, to the state’s “no-fault,” coverage requirement.

In an effort to reduce costs for consumers, the Michigan Insurance Commissioner has issued a new law to remove the necessity of no-fault insurance and implement industry-wide reform.

What Is Michigan No-Fault Insurance

No-fault insurance is designed to protect Michigan drivers in the event of an accident. Under no-fault insurance, drivers will have Personal Injury Protection (PIP) and Property Protection (PPI), regardless of who caused their accident. No-fault insurance also limits the amount of lawsuits that can be filed after an accident, except in the cases of catastrophic injury or wrongful death.

Tell Me About the New Law

On May 30, 2019 Governor Whitmer signed Senate Bill 1 into law. The bill is referred to as the “No-Fault New Law,” and it essentially eases the requirements for no-fault PIP. Drivers no longer have to carry full coverage and can instead put a $50,000 cap on medical benefits provided by PIP. With this election, drivers are expected to see a 45% reduction of their insurance bill.

Should I Expect Savings?

Car insurance rates will definitely get worse before they get better. As you may have noticed, rates increased dramatically in 2019. This increase indicates that insurance companies are preparing for the new bill, which goes into effect on July 1, 2020.

While the bill may reduce rates for some drivers, insurance companies are expected to exploit several loopholes and keep their rates high for Michigan’s most vulnerable drivers. Insurers may be able to micro-target territories, which is legal under state law, and will technically allow them to violate the “non-driving factors” section of the bill.

With SB1, insurers are barred from basing prices on sex, marital status, home ownership, and credit scores, but adjusting their rates by territory may help insurance companies exploit this consumer information.

But Isn’t Providing PIP Expensive?

With a requirement for PIP coverage, insurance companies have to compensate driver’s in “worst-case scenarios.” Fortunately, these situations do not happen to every driver, every day.

Even though covering a driver’s lost wages and medical bills is expensive in the event of an emergency, insurers are receiving 45% of their premiums for events that may never happen.

Reducing coverage may be risky for consumers, but it can also be devastating for insurance companies.

What Does the New Law Mean for Me?

If you are insured in Michigan, you may already be feeling the consequences of the new law. If insurers raise their rates now (which they have done and are doing), they will not be overly affected if you decide to change your coverage options in July of next year.

Still, you may be eligible for savings once SB1 goes into effect. What you need to decide is if No-Fault coverage is worth it for you.

Having an insurance policy that pays your bills in the event of a life-changing accident is a promising assurance for some drivers, and it’s an unaffordable one for others.

With their recent behavior, trusting insurance companies to provide for you and your family in a “worst-case scenario” can also seem like a fool’s errand.

If you do choose to reduce your coverage, you may still be able to recover compensation in the event of a serious accident. At Goodman Acker P.C., we can help with car accident claims in Detroit and across Michigan.

If you’ve been injured or lost a loved one in an accident, contact our attorneys to learn more about personal injury claims and how they coincide with insurance policies.