How Will Michigan Car Insurance Reform Affect My Rates?

How Will Michigan Car Insurance Reform Affect My Rates?

With the new laws related to Michigan auto insurance coming in 2020 (link to How Michigan Car Insurance Will Change in 2020), what will that mean for drivers’ insurance costs? The new law requires insurers to reduce the cost of only the Personal Injury Protection (PIP) portion of insurance. This makes up for about half of a typical insurance premium. Drivers who keep their unlimited PIP coverage will see approximately 10% in savings. Conversely, those who seek to lower their coverage will see a greater increase in discounts.

Some lawmakers believe that drivers who opt out of PIP coverage could save more than $1,000 a year. Insurers will still be allowed to raise prices on the non-PIP portion of car insurance. However, lawmakers continue to believe drivers will see an overall monetary savings. With the new limits on medical billing, Michigan drivers can also expect insurance costs to drop. Despite these savings, Michigan’s changes could raise car insurance rates.

Lawmakers more than doubled the required amount of liability coverage drivers must purchase from $20,000 for 1 injured person and $40,000 for 2 injured people to $50,000 for 1 injured person and $100,000 for 2 injured people.

Insurance representatives believe this increase in liability cost could cut into driver’s savings from the PIP reductions. Michigan’s new changes may shift costs around; insurers will need to adjust their pricing formulas to account for the new ban on certain non-driving ratings factors. Since things like education level or whether a person owns their home won’t impact what they pay for car insurance, companies will need to adjust their formulas. The change won’t likely reduce the overall cost of car insurance, but it will change how those costs are distributed to drivers.

The rating factors that still apply have the potential to carry more weight. To prepare for these changes, drivers should:

  • Obtain and keep car insurance: doing so will illustrate drivers are responsible and low-risk, which could lower rates
  • Add uninsured motorist coverage: doing so will protect drivers from paying their own damages if they are in an accident with someone who has no insurance
  • Research insurance companies: drivers should shop around for a company that suits them best. They should compare prices and coverage and decide which they prefer

Once the new law goes into effect in July 2020, it is a good idea to obtain quotes and compare rates again to ensure you’re getting the best rate.

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