Three Insurance Agents Weigh in on Auto Insurance Reform
In a bipartisan effort, Republicans and Democrats modified auto insurance, and Michiganders will see changes next year
Michigan’s current system provides unlimited medical coverage for auto-related injuries, and the reform poses new levels of protection. A driver with Medicaid can choose $50,000 in medical coverage, whereas people with private insurance covering auto-related injuries can choose $250,000 or $500,000 in coverage. Drivers with Medicare can opt out of personal injury protection (also called PIP) altogether. Some drivers with private health insurance fully covering their households also can opt out.
Among the changes expected to have the biggest impact:
- Varied coverage levels for allowable expenses with corresponding premium reductions
- A medical provider fee schedule and utilization review process
- A change in level of priority for PIP benefits
- Limits and increased penalties for insurers, attorneys and claimants
- Michigan Assigned Claims Plan limits and modifications
- Change in tort recovery and codification of threshold
- Increased minimum liability limits
Lisa Truong is with Truong Agency in Lansing: “The mandatory rate reduction allows drivers to customize their coverage level for medical benefits. With the strict industry standards enforced, this should drive down insurance costs.”
“Premiums for these different coverages will be cut in a rolling eight-year implementation,” added Brian Kongstad, office and account manager with Kevin Kaplan – Farmers Insurance of East Lansing. “Since personal injury protection is the most expensive part of the insurance policy, savings for most drivers could be significant. It will, of course, depend on the level of protection chosen.”
Insurance companies can use ZIP codes differently once reforms are in place.
“There are ZIP codes in Michigan experiencing high claims levels and, therefore, high rates. Insurance companies will be able to set rates by designating territories the size of neighborhoods rather than ZIP codes,” explained Kongstad. “That change will bring relief to many drivers living close to Detroit and other high-risk Michigan ZIP codes areas.”
Another change: The annual Michigan Catastrophic Claims Association fee is now $220 per vehicle. That will become $43 a year, a significant savings opportunity for households with several vehicles.
Justine Bell, an agent at Cedar River Insurance in Okemos, said she expects that medical insurance rates will rise over the next few years because of the reforms.
“From a medical insurance perspective, there are definite concerns that it’s going to raise rates because a lot of those costs that used to be on the auto insurance side were medical costs,” said Bell. “So, as you shift those away from the auto insurance side, you’ll be shifting them to either a state Medicaid program or to commercial medical insurance, increasing the risk there.”
Truong added that the new legislation implements guidelines for medical providers such as requiring independent medical assessment physicians to be licensed in Michigan and places caps on attendant care provided by family/friends of 56 hours per week. She hopes some of these changes will eliminate excessive charges, payment for unnecessary services and reduce fraud.
Truong also spoke to the issue of mini-torts; a person’s right to make a claim after being involved in a collision where he or she is deemed less than 50% at fault.
“The maximum recovery limit for mini-tort was $1,000 for damages to a motor vehicle caused by a negligent driver. The maximum limit has now increased to $3,000,” Truong explained “This will certainly benefit those that do not carry full coverage on their vehicles. The decision to not allow certain rating factors for PIP such as marital status, home ownership, occupation, credit score and gender is a positive change. We now also have additional funding for the anti-fraud unit. This is necessary to keep the cost of claims severity at a minimum.”
“Another thing, that I feel is important, is that insurance companies will not be able to penalize drivers for not having had prior insurance,” Kongstad said. “This could mean fewer uninsured drivers on the road.”
Now it’s a matter of waiting until the changes start coming down the pike next year. Until then, no one can know for sure how the reforms will play out and how much relief Michigan drivers will actually realize once it’s all said and done.