More Michigan drivers are dropping unlimited medical coverage in their no-fault insurance, even as many still wait to see meaningful savings on their premiums since the state’s auto insurance overhaul took effect nearly two years ago.
“I didn’t save nothing,” said James Taylor, 60, who lives on the west side of Detroit and pays just under $200 a month to insure his 2012 Ford Escape. “It was supposed to be a change; no change happened. It’s still high in Detroit.”
Auto insurance has been a hot topic this spring and the overhaul remains controversial. Auto insurance companies are sending out $400-per-vehicle refund checks to customers, drawing cheers from supporters of the revamp, including Gov. Gretchen Whitmer, who signed the new system into law in May 2019.
Meanwhile, more auto insurance companies are entering the Michigan market and more previously uninsured drivers have been buying insurance.
However, critics of the law point to recent payment cuts to health care providers of accident survivors and how Michigan still ranks among the most expensive states for car insurance — despite the overhaul’s goal of lowering rates.
The critics have been pushing for legislative tweaks to reform the reform law, so far without success. The law’s supporters, including the insurance industry lobby, generally advocate for staying the course and giving more time for new cost-containment mechanisms to work.
One big change is drivers are increasingly choosing lower levels of medical coverage with their auto insurance, known as personal injury protection, or PIP.
Prior to July 2020, all Michigan drivers were required to buy unlimited lifetime medical coverage for auto accidents with their no-fault insurance. PIP often was the most expensive portion of insurance premiums in urban areas such as Detroit.
Unlimited PIP is still the default option on insurance sign-up forms if no choice is made. But fewer drivers are choosing it as time goes on, according to statewide surveys by the Insurance Alliance of Michigan, an industry group.
Drivers made the following PIP choices in the fourth quarter of last year:
- Unlimited PIP, 63%
- $500,000 PIP, 3%
- $250,000 PIP, 10%
- $50,000 PIP (Medicaid recipients only), 3%
- $0 PIP, 9%
- Unknown, 12%
Lowering PIP does result in lowered premiums, although by how much depends on a customer’s geographic area and multiple other factors.
Crash victims whose medical bills exhaust their PIP level can still fall back on health insurance, including Medicare or Medicaid, so long as their health insurance policy covers auto accidents.
Drivers who choose a PIP other than unlimited do not pay the Michigan Catastrophic Claims Association’s annual per-vehicle fee, currently $86, although it was once as high as $220. Previously, all drivers had to pay the fee, which goes toward health care for the most severely injured car crash victims.
No longer No. 1
Michigan was once the most expensive state for auto insurance by some measures, with exorbitant rates in Detroit driving up the statewide average.
After the no-fault overhaul took effect in July 2020, average Michigan insurance rates fell 18% by 2021, the biggest year-over-year decline in the nation, according to a report by The Zebra.
A more recent report this month by Bankrate.com puts Michigan at No. 5 for priciest auto insurance, behind Nevada, Florida, Louisiana and price leader New York.
Bankrate put the average price in Michigan at $2,345 per year, or 32% above the national average. A Bankrate representative last week did not know which PIP option was used in the analysis.
Despite reports of lower statewide averages, many Michigan drivers insist they are seeing little, if any, savings on their car insurance since the overhaul.
“I don’t notice no difference. Not at all,” said Darrell King, 49, who lives on Detroit’s west side and pays $248 per month to insure his 2012 Chevrolet Traverse. “I’ve tried several carriers. I’ve got good credit. I don’t understand.”
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In a poll conducted last month of more than 600 likely voters, 36% reported paying more for auto insurance than they did a year ago and 31% said they were paying about the same. The poll was conducted by Lansing-based Marketing Resource Group and commissioned by the Michigan Brain Injury Provider Council and had a margin of error of 4 percentage points.
Several reasons are commonly cited for why Michigan auto insurance is still so expensive.
One is the high minimum PIP coverage requirements in the revamped no-fault law.
For drivers without health insurance, or whose health insurance doesn’t cover auto accidents, the lowest option available is $250,000 PIP. And even though Medicaid does cover auto accidents, the minimum option that Medicaid recipients can buy is $50,000 PIP.
In other no-fault states, the lowest PIP options range from $3,000 (Utah) to $50,000 (New York), according to a December report by Poverty Solutions at the University of Michigan.
“Though eliminating mandatory unlimited PIP was a necessary step, Michigan’s still elevated rates may be in part due to its still relatively high PIP requirements,” the report said.
More time to adjust?
Another possible reason for rates being slow to come down is that price controls on no-fault medical services did not begin until July 2021, and some insurers may be waiting to see how those restraints impact claims before lowering premiums.
“I think the actuarial models take awhile to adjust to what the reality is on the ground,” said Amanda Nothaft, an author of the U-M Poverty Solutions report.
Anecdotally, some of the lowest auto insurance rates are now enjoyed by those choosing $0 PIP. This option is open to only those on Medicare or whose health insurance covers auto accidents. Detroit Mayor Mike Duggan has suggested that state lawmakers extend the $0 PIP option to Medicaid recipients as one tweak that could further lower rates.
Another reason that some drivers aren’t saving is that the 2019 law raised the minimum and default options for bodily injury liability coverage, known as BI, which pays for deaths or severe injuries to others that a policyholder causes.
The new default is $250,000 per injured or killed person and $500,000 per accident. However, drivers can opt for a minimum $50,000/$100,000 BI.
Additionally, recent increases in the cost of repairing or replacing a vehicle could be wiping out some of the legally mandated cost reductions on PIP that were part of the law.
“No-fault reform did not address coverages that pay to repair or replace a vehicle,” Emily Trevallion, a spokesperson for Citizens Insurance, said in an email. “These costs have experienced increased inflation in auto body parts, used car prices, labor rates, rental costs, delays in service and more.”
Insurers ‘gouging’
Douglas Heller, a nationally known consumer advocate and a consultant for the Coalition Protecting Auto No-Fault, recently chided auto insurers in Michigan for not significantly lowering premiums since the 2019 overhaul.
His critique focused on Citizens Insurance because the company does significant business in Michigan and its latest rate filings from the fall are relatively fresh.
On average, Citizens customers are paying $90 more for insurance than before the overhaul was passed in 2019, Heller found, and the cost of its PIP benefits has barely decreased while that of other coverages — bodily injury, collision, comprehensive, uninsured motorist — all increased.
“The reform didn’t do what it said it would do,” Heller said.
“I think (insurers) are gouging Michigan drivers by taking advantage of the fact that the regulatory infrastructure is not there to make sure that rates meet the actual costs the insurance companies incur and reflect a fair pricing for customers,” he said.
“I think that’s what’s going on. I think that’s been the problem from the beginning, and I think that that’s why the 2019 law was doomed to fail, because it did not meaningfully address the accountability questions in the market.”
The Citizens Insurance spokesperson called Heller’s analysis misleading and said it fails to account for other key factors that drive premiums, or count the reduction in catastrophic claims fees or the $400 refund checks.
“Further, a substantial majority of Citizens customers continue to choose to buy unlimited PIP coverage, the highest priced PIP coverage option available,” Trevallion said.
New insurers arrive
Since 2019, 42 new companies or new affiliates of insurance companies have applied to enter Michigan’s auto insurance market, according to Michigan Department of Insurance and Financial Services.
Of those companies or affiliates, 13 have gone ahead and filed proposed rates for regulatory approval and nine had their rates approved.
Before the overhaul, 110 companies were authorized to sell auto insurance in Michigan.
One unique entrant in the market is a not-for-profit called CURE Auto Insurance, or Citizens United Reciprocal Exchange.
CURE is one of the few auto insurers in Michigan — possibly the only one — that doesn’t use a credit score-like metric known as an “insurance score” when setting customers rates.
Although studies have found a connection between low insurance scores and the likelihood of a person filing a claim, some consumer advocates say the scores are unfair and discriminatory and make insurance more expensive for people who can least afford it.
CURE’s chief executive said one reason CURE is having success in Michigan is that legacy auto insurers have been hesitant to lower their premiums to fully account for the new no-fault medical price controls that started last July.
CEO Eric Poe said 71% of Michigan drivers who get quotes from CURE come in lower than their current insurer, on average $757 less over six months, and the majority of those getting quotes are from Detroit.
The average new CURE customer is paying $688 for six months, which comes out to $115 a month or $1,376 a year. Only 7% of customers are choosing unlimited PIP coverage.
“We had one lady scream loudly and say ‘Oh my God! It’s like I hit the lottery I saved so much,'” Poe said.
More newly insured
It is against the law to drive without auto insurance. Yet prior to the overhaul, an estimated 20% of Michiganders and 60% of Detroiters were doing just that.
To encourage people to get insurance, the law included an 18-month uninsured motorist financial amnesty period that shielded those who let their insurance lapse from expensive penalties or higher premiums.
More than 155,150 drivers took advantage of the amnesty, which ended Jan. 1, including more than 66,000 who had lapsed coverage for three or more years, according to the Insurance Alliance of Michigan.
Top 5 most expensive states for car insurance
- New York: $2,996 per year
- Louisiana: $2,864
- Florida: $2,762
- Nevada: $2,426
- Michigan: $2,345
Source: Bankrate.com, based on average quoted 2022 premiums from Quadrant Information Services.
Contact JC Reindl at 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @jcreindl. Read more on business and sign up for our business newsletter.
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