Michigan residents pay the highest auto insurance rates in the country, but a recent bill signed into law by Gov. Gretchen Whitmer is being hailed as the solution to a decades-long problem in Michigan.
One of the reasons for Michigan’s highest-in-the-nation rates has to do with personal injury protection, or PIP. Under the current system, every citizen has unlimited lifetime benefits in the case of an injury during a crash. The new law creates four tiers for PIP that insurance-holders can choose from.
Those with health insurance that covers auto-related injuries can choose to opt out of PIP while the other tiers of coverage range from $500,000, $250,000 or a $50,000 minimum for some Medicaid recipients.
This will be one of the biggest cost-savers as Michigan is the only state in the country to require all auto consumers to purchase unlimited lifetime medical benefits as a part of their auto insurance. In an ideal world, we’d have universal healthcare coverage and wouldn’t need PIP to cover medical costs, though the new change is beneficial under the constraints of our current system.
Bipartisan support seems rare in today’s divisive political atmosphere, yet the bill was passed almost unanimously; it received a 95-15 vote in the House and 34-4 in the Senate. Not surprisingly, those lobbying against the bill included Insurance Alliance of Michigan, the Coalition Protecting Auto No-Fault and the Michigan Health and Hospital. Lobbying groups for insurance companies have been the main reason for the delay in a solution, as they had been successful in blocking any meaningful reform.
The law also bars insurers from using factors such as gender, marital status, zip codes and credit score when determining insurance rates. It’s frustrating that insurance companies ever used non-driving factors in the first place, so this is a great change to the system.
The law does, however, let insurers use “territory” to determine rates. The definition of “territory” has yet to be determined. This was a provision heavily criticized by Democrats and rightfully so. Insurance companies should only be able to use driving-related factors when determining rates.
Lowing insurance rates should create a snowball effect that will in turn lower rates even more. Michigan has one of the highest uninsured rates in the country, which was 21% in 2015. One of the reasons for this is the insane price of having auto insurance in the state. Any cost saving measure will likely get more people to buy insurance, increasing the number of people in the insurance pool and therefore lowering insurance rates for everyone. The question, though, is if savings from this new law will be high enough to have this effect.
The changes to Michigan’s auto insurance should bring about tangible benefits to Michiganders. While there are some shortcomings of the law, it’s a good result considering the deadlock the legislature has faced for years while trying to pass reforms.
I’d like additional reforms to target low-income communities; many trial lawyers have insisted that the law will not make coverage affordable for these communities. Additionally, future reforms should remove the provision allowing insurers to use “territory” in determining rates.
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