The Faulty Logic of Michigan’s No-Fault Insurance Reform.
(Sure, some drivers might save a little money – but at what cost?)

Recent no-fault insurance reform legislation was billed as a solution to Michigan’s high auto insurance rates, an answer to racial, socioeconomic, and geographic cost inequities, and even as a way to reduce our state’s startlingly high number of uninsured drivers. Has it been a success… or was it a scam? We attempt to answer that question and several more in this post, starting with a very disturbing development.

A Dangerous, Unanticipated Consequence

First let’s talk about an alarming, unanticipated consequence of the changes. Starting in July 2021, medical fee reductions mandated by Michigan’s insurance reform legislation have resulted in hospitals and healthcare providers being forced to reduce or limit what they can charge for essential medical treatments. Health organizations (including brain injury specialists) statewide have said this situation threatens them with bankruptcy. The Detroit News reports that over just these past months, several thousand good paying healthcare jobs have been lost across Michigan due to government-mandated price controls. This means people who need specialized treatments following accidents, or who are suffering from other health-related issues, are less able to receive them. Is inflicting this kind of damage to our state’s struggling healthcare system a smart thing to do, especially during a pandemic? We don’t think so.

Are We Actually  Saving Money? And Is it Equitable?

The harm being inflicted on healthcare organizations may be just the start. In the past couple of years, how much have your car insurance premiums really fallen? Are you saving significantly on your premiums? And, perhaps even more telling, how do your rates compare to those paid by drivers in neighboring states?

Some articles cite glowing statistics claiming premiums dropped 18 percent in Michigan from 2019 to 2020 (which could be partially due to pandemic lockdowns). And in relative terms, Michigan car insurance charges may seem to have fallen. But, as Mark Twain is reported to have said, “There are three kinds of lies: lies, damned lies, and statistics.” An 18 percent reduction in automobile insurance costs might sound wonderful – until you discover that Michiganders are still paying more than nearly every other state for motor vehicle coverage.  And, according to a study by our very own University of Michigan, certain areas of the state (metro Detroit, for example) are still essentially experiencing price gouging by insurers. Move just over the border into Ohio (the state ranked #47 for car insurance costs), and you could save hundreds – more likely thousands – on your car insurance coverage. What’s more, the industry trade journal Insurance Business Magazine reports that the same University of Michigan study “found that the legislation has failed to reduce disparities in cost by race and geography.”  Something just isn’t right here.

What if You Need Medical Care or Rehab Following an Accident?

The Personal Injury Protection (PIP) coverage provided in your auto policy is intended to pay for medical and rehabilitation costs if you’re ever injured in a motor vehicle accident. It’s designed to protect your financial interests while you recover from your injuries, so you can eventually return to your normal way of life. Until recently, PIP benefits were unlimited in Michigan, but the highly touted no-fault reforms have permitted some individuals to choose lower coverage limits to save on insurance premiums. That might sound like a winning proposition… but what really happens if you do choose a lower PIP benefit? Could you become bankrupt if your healthcare costs exceed the benefit level you selected? Yes, it can happen. A report from NPR describes the experiences of one unfortunate driver whose seemingly solid $250,000 PIP coverage was woefully inadequate. His hospital and surgical costs – even after discounts negotiated by his insurance company – still left him personally responsible for nearly $90,000. Indeed, medical bills are the leading cause of personal bankruptcy across America. Could you come up with 90 grand out of your savings for accident-related medical bills? In our opinion, choosing anything other than unlimited PIP benefits leaves you and your family vulnerable to financial ruin.

What About Those Pesky Uninsured Drivers?

Yes, it’s true there are now fewer drivers without insurance traveling on the state’s roads.  That’s in part because of an amnesty program (which expired January 1, 2022) that allowed people with lapsed insurance policies to reinstate coverage without paying penalties or fees. Despite that generous program, the Insurance Information Institute reports that Michigan still remains the state with the second-highest number of uninsured drivers (behind only perpetually beleaguered Mississippi). In fact, every time you take to the highway in Michigan, one out of every four cars you see is being driven without insurance. That should scare you more than just a little!

Now About Those “Windfall” MCCA Payments…

“But wait,” you might ask, “aren’t I getting a $400 per car payment from the Michigan Catastrophic Claims Association?” Stop and think about that just for a minute. While you may be happy you’re getting some money back from the MCCA, it’s important to remember that those funds actually came out of your own pocket – in the form of some of America’s highest car insurance premiums that you were paying for decades! That’s not a gift – it’s merely a small refund of the huge sums you’ve spent on car insurance. Just a reminder, Michigan’s car insurance rates remain among the highest in America — despite no-fault reforms. Those rates actually increased again in 2021, and, as noted in an analysis by Michigan-based accounting firm Plante Moran, the so-called cost reductions that were enacted in 2020 are only in place for eight years. Which means car insurance costs are a ticking time bomb, set to go off in 2028. 

What Can Be Done About This?

You could contact your legislators. Let them know that the 2020 no-fault reforms are not living up to your expectations. Urge your state representatives and senators to find ways to keep premiums low without gutting the state’s healthcare system. Encourage your elected leaders to reconsider laws that artificially (and only temporarily) cut car insurance rates. Push for equity in insurance costs, regardless of your race or residence. And if you or someone you love are negatively impacted by anything having to do with car insurance after an accident, give us a call at 855-MIKE-WINS (855-645-3946) or chat with us online. We’re here to help you.

Content checked by Mike Morse, personal injury attorney with Mike Morse Injury Law Firm. Mike Morse is the founder of Mike Morse Law Firm, the largest personal injury law firm in Michigan. Since being founded in 1995, Mike Morse Law Firm has grown to over 200 employees, served 40,000 clients, and collected more than $1.5 billion for victims of auto, truck and motorcycle accidents. The main office is in Southfield, MI but you can also find us in Detroit, Sterling Heights and many other locations.