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Whitmer, Republicans reach deal on auto insurance reform

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The bill includes mandatory rate reductions for the next eight years


Michigan Republicans, who control the legislature in Lansing, and Gov. Gretchen Whitmer had to reach a deal auto insurance reform. Voters desperately wanted it and the two sides weren’t so far apart.

On May 24, they did. The legislation is still being drafted, but expected to pass both houses by May 31.

Update: Whitmer signed the bill on May 30 at the Mackinac Policy Conference. The new law will go into effect July 1, 2020.

The essential component of the plan concerns changes to personal injury protection (PIP). Michigan is currently the only state that offers unlimited (PIP), which can cover medical benefits for potentially a lifetime. That’s why, when combined with no-fault insurance, Michigan has the highest auto insurance rates in the country at an average of $2,693 per year.

Under the new legislation, insurance providers must offer five different plans with guaranteed cost reductions based on coverage. According to the Detroit Free Press, here are the plans:

  • 10 percent reduction in PIP rates for unlimited coverage
  • 20 percent reduction in PIP rates for $500,000 in coverage
  • 35 percent reduction in PIP rates for $250,000 in coverage
  • 45 percent reduction in PIP rates reduction for $50,000 in coverage
  • 100 percent reduction in PIP rates for senior citizens and drivers who have qualifying health insurance

Those rate reductions are guaranteed for eight years, after which insurance companies can set them at their discretion.

There will be additional savings for those who opt out of unlimited coverage, as the Michigan Catastrophic Claims Association fee will drop to $43 per year. The bill also bans use of non-driving factors, like zip code or credit score, to determine rates.

Not everyone, however, is pleased with the deal. Some Democrats and other experts are worried that insurance companies will find other ways of increasing rates. For example, though zip codes no longer factor, the new legislation allows for “territories.” From the Free Press:

What “territories” means has not been defined yet, but it could be as small as a census tract or as large as a region like southeast Michigan. It could be determined that there’s an area of the state where there are more accidents and car thefts that would cause insurance companies to boost rates in that territory.

Experts from around the state have weighed in as well. Mayor Mike Duggan voiced his support for the compromise. Patrick Cooney, an assistant director of the University of Michigan’s Detroit Partnership on Economic Mobility, believes it’s a good deal.

“This legislation promises relief for Detroiters, who face the highest auto insurance rates in the country, limiting their economic opportunity,” he wrote by email. “More affordable auto insurance puts legal car ownership within reach of more low-income families and means fewer uninsured drivers will be on the road.”

Detroit has the highest auto insurance rates in the state at $5,464 per year, resulting in an estimated 60 percent of car owners driving without insurance.