Auto Insurance Fees In Michigan: Will They Decrease?

Auto insurance fees in Michigan are a hot topic, with recent changes in legislation and court rulings impacting the cost of coverage. Governor Whitmer's signing of bipartisan auto no-fault legislation was designed to lower costs and strengthen consumer protections, but the reality is more complex. While some drivers will see reduced fees, others will face higher costs due to factors such as higher assessment costs from the Michigan Catastrophic Claims Association (MCCA) and legal rulings on no-fault insurance reforms. The average cost of car insurance in Michigan for 2024 is $844 for minimum coverage and $2,976 for full coverage, with variations based on age, driving record, and other factors.

The Michigan Catastrophic Claims Association (MCCA)

The MCCA reimburses auto insurers when the size of an accident victim's medical bills exceeds a set threshold, which is currently $635,000. The MCCA acts as a form of reinsurance for auto insurers, and it is funded through an annual, per-vehicle fee charged to auto insurance companies authorized to sell policies to Michigan drivers. These costs are then passed on to drivers in the form of higher auto insurance premiums.

The MCCA recently announced that it will lower its annual per-vehicle assessments on Michigan auto insurance policies, starting July 1, 2024. Drivers choosing unlimited, lifetime medical coverage, known as Personal Injury Protection (PIP), will be charged $90, down from $122. Those choosing any other PIP option, including opting out of PIP coverage, will be charged a $20 "deficit recoupment" fee, down from $48. These reductions reflect the normalization of the MCCA's finances following a surprise court case outcome related to medical price controls for those with catastrophic injuries from auto accidents.

The MCCA's latest financial report showed a $2 billion actuarial deficit and $21.6 billion in total assets, a decrease of $5.6 billion since 2021. The MCCA attributed the fee decline in 2024 to medical price controls on recent accidents and a new utilization review process.

Personal Injury Protection (PIP)

Prior to July 2020, Michigan law required all drivers to carry unlimited PIP coverage. However, the law was amended to allow drivers to choose their level of coverage. The new available limits equal or exceed the highest benefits in the country, and Michigan remains the only state to offer unlimited PIP coverage as an option.

The cost of PIP depends on several factors, including the level of coverage, the driver's age, driving history, and income. It typically makes up about 35% of a driver's total auto insurance bill.

The Michigan Catastrophic Claims Association (MCCA) is an association of auto insurers that reimburses member companies for PIP costs exceeding a certain amount. The MCCA announced a reduction in its per-vehicle assessment starting in July 2020, resulting in savings of at least $120 per car for Michigan drivers.

The benefits of PIP include:

• Medical Expenses: Coverage for accident-related medical bills and expenses up to the selected coverage level.
• Medical Mileage: Reimbursement for transportation costs to and from medical appointments.
• Wage Loss: Reimbursement for lost wages due to disabling injuries, available for up to three years from the date of the accident and subject to a monthly maximum.
• Replacement Services: Reimbursement of up to $20 per day for the first year after the accident to cover costs for tasks the injured person can no longer perform, such as housekeeping, laundry, and child care.
• Attendant Care: Coverage for the cost of attendant care required due to accident-related injuries, including in-home care, care provided in a residential facility, or by a commercial agency.

Average insurance costs

The average cost of car insurance in Michigan is $844 for state-mandated minimum coverage and $2,976 for full coverage per year. This equates to an average monthly rate of $70 for minimum coverage and $248 for full coverage.

However, these figures can vary depending on factors such as age, driving record, and the type of car. For example, drivers of a BMW 330i may pay 38% more for insurance per year than someone driving a Ford F-150. Additionally, drivers with an at-fault accident on their record may pay about 51% more than the state average for full coverage.

Michigan law prohibits auto insurance companies from using ZIP codes, credit history, marital status, and gender as part of rate determinations. However, factors such as age, driving record, and vehicle type can still impact the cost of insurance.

In 2020, Governor Whitmer signed bipartisan auto no-fault legislation to lower costs for Michigan drivers, maintain the highest coverage options in the country, and strengthen consumer protections. As a result, insurance companies are required to reduce statewide average Personal Injury Protection (PIP) medical premiums for eight years. For example, drivers can expect an average reduction of 45% or more per vehicle for the $50,000 PIP option and an average reduction of 10% or more for the unlimited PIP option.

Furthermore, the Michigan Catastrophic Claims Association (MCCA) has announced a lowering of its per-vehicle assessment, which will save Michigan drivers at least $120 per car.

No-fault insurance

The No-Fault Insurance law was passed in 1973, and before this, Michigan had been a tort liability state. In 2019, the Legislature made changes to the auto insurance law that affected every driver, including allowing PIP Choice for the first time. The tort liability system was hurting car accident victims, with seriously injured victims being denied or under-compensated, and lengthy delays forcing victims to bear financial burdens.

The way No-Fault Insurance works in Michigan is that if a person is injured in a car accident, their auto insurance company pays their medical bills and lost wages regardless of whether they were at fault. Either their own insurer or the legally responsible company will pay once they file an application for benefits.

Under the Michigan No-Fault Insurance law, there have been some recent changes. One of these is the PIP Choice, where, for the first time, drivers can choose a coverage level appropriate for their needs and budget. Previously, the law required drivers to purchase "unlimited" PIP medical benefits, which would cover any and all accident-related medical care. Now, drivers must select whether they wish to continue with "unlimited" coverage or cap their coverage at $50,000, $250,000, or $500,000. Drivers who are on Medicare will also have the option of opting out of PIP medical benefits coverage altogether, instead turning to Medicare for medical coverage for injuries suffered in a car accident.

Consumer protections

Governor Whitmer signed a historic bipartisan auto no-fault bill to lower costs for Michigan drivers, maintain the highest coverage options in the country, and strengthen consumer protections. The bill, which applies to policies issued or renewed after July 1, 2020, offers drivers more choices and control over their coverage and costs.

The new auto insurance law in Michigan offers several consumer protections, including:

• Elimination of Certain Non-Driving Factors: The law prohibits auto insurance companies from using gender, marital status, home ownership, credit score, educational level, occupation, and zip codes to set a driver's insurance rates.
• Fraud Investigation Unit: A new unit investigates criminal and fraudulent activity related to insurance and financial markets, working with the Attorney General and law enforcement to prosecute these crimes. Auto insurance fraud increases premiums for all drivers.
• Elimination of Penalties for Lapses in Insurance Coverage: Previously, auto insurance companies could charge a penalty to people who had gone without auto insurance for a period. Under the new law, insurers cannot limit coverage, charge a reinstatement fee, or increase the premium for a driver due to a lapse in coverage if the driver applies for insurance before the amnesty period ends on January 1, 2022.
• Prior Approval: Auto insurance rates and policies must now be filed with and approved by the Department of Insurance and Financial Services before being offered to consumers.
• Increased Fines and Penalties: The new law allows for increased fines on insurance companies, agencies, and licensed agents for certain violations.
• Fee Schedule: The law establishes a fee schedule between auto insurers and medical providers to control the costs that can be charged to auto insurers for their services. This is similar to cost control provisions used by other types of insurance, such as health insurance. This makes PIP medical coverage premiums more affordable for policyholders, without affecting the services to which accident victims are entitled.
• Utilization Review: Medical care provided to auto accident victims must be reviewed by the auto insurer to ensure it is medically appropriate. Health care providers can appeal if they disagree with the insurer's decision.
• Michigan Catastrophic Claims Association (MCCA) Assessment: The MCCA, an association of auto insurers, reimburses member companies for PIP medical costs exceeding $580,000. As a result of the new law, the MCCA is lowering its per-vehicle assessment, saving Michigan drivers at least $120 per car. Drivers choosing less than unlimited PIP medical will not pay any assessment to the MCCA.

Frequently asked questions