Auto insurance reforms take effect

Auto insurance reforms take effect

For years, people called for changes to the state’s auto insurance system, arguing they were paying nearly double the national average and could simply no longer afford it.

Michigan passed its auto no-fault law with the promise it would save drivers money. The reality is the one-size-fits-all system often forced drivers to choose between having a car, and between other essentials like food and rent. Many others drive without insurance, putting themselves and other drivers at risk.

Fixing the state’s broken auto insurance was a top priority and the first bill introduced in the Senate at the start of the new session. Senate Bill 1 sought to make meaningful reforms and drive down rates. The bill was approved by both chambers with bipartisan support and signed into law.

The new law took effect on July 1, and finally allows drivers to choose the level of coverage that best fits their needs and budget. The reform gives drivers more coverage options, cracks down on fraud and lawsuit abuse, and reduces sky-high medical costs. It also includes tougher fines and penalties for bad actors in the insurance industry and eliminates nondriving factors, like ZIP code and marital status, from determining rates.

Motorists will now be able select the level of coverage that is best for their budget. Insurers are required to reduce the health care portion of policy premiums depending on the personal injury protection (PIP) option drivers choose. The unlimited plan must be lowered by an average of at least 10% per vehicle; the $500,000 plan by at least 20%; and the $250,000 plan by at least 35%.

Drivers who have Medicaid can also choose the $50,000 option, which requires a decrease of at least 45%. Others with qualifying health coverage may opt out of PIP medical coverage entirely or receive exclusions resulting in up to 100% savings on the PIP portion of their bill.

Seniors on Medicare can also choose to opt out of PIP medical coverage altogether. In order for individuals to completely opt out, the policy holder must have both Parts A and B of Medicare and other members of the household must have qualified health coverage or must be covered under another auto policy with PIP medical coverage. Individuals who choose to opt out will have their PIP medical premium reduced by 100%.

In a change that came as a result of the new law, every driver’s Michigan Catastrophic Claims Association (MCCA) assessment will go down by $120 per vehicle. Drivers choosing a coverage option other than unlimited will see the MCCA fee eliminated from their rates.

The new law also ensures those already receiving care through the MCCA will continue to get lifetime care as promised.

Before choosing a plan, drivers should consider the financial impacts and insurance protections of each PIP medical coverage level, who is covered under their private health insurance plan, and if their health insurance covers automobile accident injuries.

I encourage everyone to consult their local insurance agent to learn about their options and how much they can save before renewing their policy.

To help answer questions about the auto insurance updates, I am offering a free brochure on my website at For more information, visit, email [email protected], or call 1-833-ASK-DIFS.

Sen. Jon Bumstead, R-Newaygo, represents the 34th state Senate District, which includes Muskegon, Newaygo and Oceana counties.

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