Brief History of Michigan’s No-Fault Law Insurance

By Needham-Pearson Agency

Michigan’s No-Fault Law became effective on October 1, 1973.

It was created by state lawmakers to:
• Assure that persons injured in auto accidents are compensated, quickly and equitably, for medical costs and lost income; and
• Limit lawsuits so that benefits could be paid quickly.

Under a no-fault system, accident victims are promptly compensated for their losses. In Michigan, those injured in auto accidents receive unlimited medical benefits for their lifetime and substantial wage loss benefits on a “no-fault” basis. Under Michigan’s no-fault system severely injured people receive immediate benefits instead of the previous system of having to wait for lawsuits with at-fault parties to be settled.

The cost of Michigan’s auto insurance system is reasonable – considering that Michigan has the highest level of auto insurance medical benefits in the country. People injured in Michigan auto crashes receive unlimited medical benefits for their lifetime. No other state comes close to such high benefits. In most other states, injured parties must file lawsuits to obtain medical benefits.

Although Michigan has the highest level of benefits in the country, auto insurance average premiums rank 11th in the country. However, the price of auto insurance in Michigan is driven by the cost of:
• offering unlimited medical benefits;
• inflation in the cost of health care and auto repair; and
• lawsuits.

Key Changes with No-Fault Reform

Today, Personal Injury Protection (PIP) is unlimited and
covers Medical (including attendant care), Loss of Wages, and Survivors Benefits. In July 2020, you can opt-out
of, or select a limit for, the Medical portion.
• Opt-out (if you are covered by Medicare A&B or health insurance covering motor
vehicle accidents)

• Limits: $50k (if you are covered by Medicaid), $250k, $500k, or unlimited.

• There are corresponding PIP premium reductions for each choice. Auto Insurers are required to maintain minimum reductions for 8 years.

• If you select a medical limit or opt-out, you will need to complete a form acknowledging the risks.

• Starting in 2021, there will be a fee schedule. Medical providers cannot charge Auto Insurers more than about 200% of what Medicare pays. This will apply to new claims and existing claims.

• Starting in July 2020, there will be an 18-month amnesty period. Auto Insurers cannot refuse to insure, or charge more, for a person who did not carry
the required auto insurance before.

Today, the minimum limits you can purchase for Bodily Injury and Property Damage liability coverages are $20k per person/$40k per accident and $10k, respectively. In July 2020, the minimum limits you can purchase will be $50k/$100k and $10k. If Bodily Injury and Property Damage are written with one combined limit, which is typical for commercial auto, the new minimum will be $110k.

• Auto Insurers are required to offer $250k/$500k for Bodily Injury and $10k for Property Damage ($510k for combined limit) or higher at initial application and at the first renewal of existing policies on or after July 2020. Insureds who want a lower limit must request it.

• Today, the Mini Tort limit is $1,000. For accidents which occur on or after July 1, 2020, the Mini Tort limit is $3,000.

• Starting in July 2020, Auto Insurers cannot use the following in rating: sex, marital status, educational level, occupation, zip code, or FICO credit score. Farm Bureau does not use these in our Personal Auto rating. Insurers can still use occupation in their group discount programs.

Frequently Asked Questions:

When do I need to act?
• Most changes are not effective until July 2020. We
recommend policyholders meet with their agent in
early 2020 to make decisions on their Medical and
Bodily Injury limits which will apply to their policy
effective July 2020 or after. They might also consider
different Collision options, given the Mini-Tort limit
increases to $3000.

Does my health insurance cover motor
vehicle accidents?

• You will need to contact your health insurer or your
employer to verify this. Also, ask about the deductible.
If the health insurance deductible is more than
$6,000, you cannot opt-out. You will need to verify
which people in your household are covered by this
health insurance. If you decide to opt-out, you will
need to certify on a form who is covered. It will also
be important for you to be regularly informed on your
health insurance. Motor Vehicle Accidents (MVAs)
which take place within 30 days of loss of health
insurance coverage for MVAs will go to the Assigned
Claims Plan. There is no coverage for MVAs which occur
after 30 days of the health insurance change.

If I have a resident relative that lives out
of state will they be covered after 7/2?

• Out of state residents are not eligible for PIP benefits
after 7/2/2020 unless they have a vehicle registered
and insured in Michigan.

What new options are available for PIP
medical limits?

The different levels of PIP Medical coverage that will be
available for new and renewal policies effective on or after
July 2, 2020 are:

Options with no eligibility requirements:
• UNLIMITED – the level you have now (estimated 10% PIP
premium savings, mostly due to MCCA savings)
• $500,000 limit (estimated 20% PIP premium savings, mostly
due to MCCA fee being eliminated)
• $250,000 limit (estimated 35% PIP premium savings, mostly
due to MCCA fee being eliminated)

Options that clients must qualify for:
• $250,000 limit with PIP exclusion (Excludes all PIP medical
benefits for those opting out) (estimated 100% PIP
premium savings due to no medical premium or MCCA fee
being charged)
• $50,000 limit – Medicaid only (estimated 45% PIP premium
savings with auto reform)
• Allowable Expense Opt-out – Medicare only (up to 100% PIP
premium savings if opting out)

For More Information Contact:

Read more about Jeff Needham and Michelle Pearson and their upcoming, “Ask the Experts” radio show here –>

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