Michigan Auto Insurance Reform Overview
This presentation covers Michigan's auto insurance reform presented by Kyle Stablein, Mitch Caster, and James Ridgeway. It discusses the background of Michigan personal auto insurance, current issues faced by the state, the new reform bill Public Acts 21 and 22 of 2019, and the impact on insureds and insurers. It also delves into complications of the current system and details the new legislation including changes in Personal Injury Protection (PIP) limits and Bodily Injury/Property Damage coverage.
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Presentation Transcript
Michigans Auto Insurance Reform Presented by Kyle Stablein, Mitch Caster, and James Ridgeway April 30, 2020
Agenda Background of Michigan personal auto insurance Current issues the state faces Introduction to the new reform bill Public Acts 21 and 22 of 2019 Impact on insureds and insurers Insurers response 1
Background of Michigan Personal Auto Insurance No-fault state Michigan mini-tort discussion File and use rating system for insurance carriers Average yearly personal auto insurance cost: $2,738; highest nationally (ustreasury.gov) National average: $1,517 Bodily Injury / Property Damage minimums Up to $20,000 for a person who is hurt or killed in an accident Up to $40,000 for each accident if several people are hurt or killed Up to $10,000 for property damage in another state Required unlimited personal injury protection (PIP) Covers all lifetime medical costs from an accident Covers up to 85% of income for three years Michigan Catastrophic Claims Association (MCCA) 2
Complications for the Current System Significantly higher premiums than other states for similar coverage Michigan is the 14th highest state in poverty in 2018 (14.2%) 36th in GDP per capita at $43,372 Fourth highest rate of uninsured drivers nationally (15%) High risk of fraudulent claims MCCA operating with significant reserve agendas 3
New Legislation Bipartisan bill signed into law by Governor Whitmer Public Acts 21 and 22 of 2019 Effective July 1st, 2020 Mandatory no-fault coverage remains New limit options exist Acceptable rating criteria has changed 4
New Personal Injury Protection (PIP) Limits PIP coverage remains mandatory Exceptions/exemptions: Individuals covered through their health insurance for automobile accidents may subsidize PIP coverage Individuals with Medicaid or Medicare can apply for partial or complete PIP exception Carriers required to reduce premium by the following schedule (for eight years): Average Cost Reduction 45% 35% 20% 10% New PIP Limit 50,000 250,000 500,000 Unlimited 5
Bodily Injury/Property Damage Coverage Default Coverage Limits: $250,000 for a person who is injured or killed in an accident $500,000 per accident if multiple people are hurt or killed $10,000 for property damage in another state Lowest Coverage Limits: $50,000 for a person who is injured or killed in an accident $100,000 per accident if multiple people are hurt or killed $10,000 for property damage in another state 6
Michigan Mini-Tort Limit increased from $1,000 to $3,000 Claims cannot be paid by insurance carriers Claims paid on a comparative fault basis Uninsured motorist discussion 7
Fee Schedules New preset 3 tier fee schedule between auto insurers and medical providers: Amount payable to the person for the treatment or training under Medicare Amount payable under the person s charge description master, in effect on January 1, 2019 Average amount the person charged for the treatment on January 1, 2019 Prices are regulated and based on Michigan s worker compensation fees Interesting discrepancy between no-fault medical bills and other line of business 8
Michigan Catastrophic Claims Association (MCCA) Reinsures member companies for claims excess of $580,000 Will lower fees from $220 to $100 per vehicle for 1 year Non-unlimited limited policy exempt In a 3.9 billion dollar deficit Paid out 1.2 billion to claimants in 2018 10
Regulation Changes The Department of Financial and Insurance Services must approve all rates and policies Increased fines and penalties for violations by insurers Increased penalties for driving without insurance New fraud investigation unit 11
Regulation Changes Continued Certain rating criterion are now prohibited Sex/Marital status Home ownership Credit Score Education Zip codes Insurer Workarounds: Geography can be used as long as there can be a connection to risk Geocodes Counties or cities Credit reports (but not the scores they create) are allowed 12
Other Inadequacies Addressed by Reforms Reforms passed in the spring of 2019 don t take effect until July 1, 2020 Michigan is allocating additional funds to oversight Changing File and use system adjustments Saving percentages are based on policies that were in place May 1, 2019 Companies might file rates under new name 13
Conclusion Lower PIP limits and new fee schedules could lead to lower premiums Savings appear overstated and coverage will be reduced Additional expenses may be passed to customers New territories, pricing models, etc. The MCCA reserve requirements are still a concern 14
Thank You for Your Attention Kyle Stablein Kylestablein@gmail.com Mitch Caster MCaster@pinnacleactuaries.com James Ridgeway JRidgeway@pinnacleactuaries.com
