reWorking Michigan: Insurance Companies Adjust to Helmetless Bikers

May 14, 2012

Michigan’s new law allowing motorcyclists to ride without a helmet is affecting insurance companies and agencies.  A major provision of the law requires a biker to add at least $20,000 of medical coverage to their policy.

That has led to new activity for insurance companies. WKAR’s Scott Pohl reports that the extra work doesn’t seem to be adding much to the bottom line.

Whenever Michigan resident Robert McGeorge used to ride his motorcycle across the Indiana state line, he would stop at the first rest area to take his helmet off, where it was legal to do so.

On the day Governor Rick Snyder signed the new law allowing bikers to ride without a helmet in Michigan, McGeorge called Progressive Insurance to add the required coverage. In fact, he acted so quickly that his call seemed to take the agent by surprise.

“I think they were more or less trying to figure out if the law had actually passed,” McGeorge explains, “because when I first spoke with them, they told me that Michigan was a helmet state. I said not as of 9 a.m. this morning! That has changed. He came back on the line and said we can add any level of coverage that you would like and quoted me a rate, and I told him to go ahead and do it.”

That rate turned out to be an extra $175 a year on top of his existing policy, a price he says is in the same ballpark as his friends.

“We did hear stories throughout the shop here of varying rates,” McGeorge states, “but that seems to be about the average, $150 to $200 additional coverage. It’s not going to forbid you from doing it, that’s for sure.”

McGeorge, who’s the parts manager at Capitol Harley-Davidson in Dimondale, wasted no time. He paid the price and rode home, in his words, “without a lid on” that day.

With motorcyclists adding medical coverage, you might think insurance companies in Michigan are getting a lot of new revenue. That would be an exaggeration.

Paul Rathbun of the Rathbun Insurance Agency in Lansing sells motorcycle coverage through four providers: Auto Owners, Progressive, Foremost, and American Modern.

“Most companies didn’t offer limits that high,” Rathbun says. “We’ve had a couple of people I looked up that did add the coverage. One was with Auto Owners; they were paying $18 every six months for the $20,000 required coverage. We had another one with Progressive; they were paying $200 a year for it. So, I’m guessing that companies actuarily don’t have a feel for what kind of claims they’re going to have, so the rates are all over the board.”

Scott Hummel is vice president for governmental affairs with the Michigan Association of Insurance Agents, which represents more than 800 members across the state. He says there’s some confusion in the business about what the law really requires to be covered.

Hummel says covering medical payments is less expensive than covering medical benefits, a distinction that he thinks will be worked out by the legal system.

“And until some of this gets litigated in court over the next couple of years,” Hummel continues, “you’ll probably see that variance. And if we see a higher experience rating in terms of injuries, that sort of thing, that may close that gap as well.”

Paul Rathbun of the Rathbun Agency hasn’t had a customer switch companies over the price difference. Access to coverage, though, is another matter.

“We had at least one person that wanted to ride right away,” Rathbun says. “The carrier we had them with was caught off-guard, didn’t have the ability to add it, was going to be months before they could add the ability for it, so they changed carriers to Progressive strictly so they could ride helmetless. I think I told him in an email, if you want to ride to blow your hair back, it will cost you $200. Apparently, it was worth it for him.”

The new law doesn’t give insurance agencies much more profit. Adding the coverage for a customer requires time and paperwork, and an agency’s profit margin on $200 a year, or $18 every six months, is in the range of petty cash. And, since police can’t pull a helmetless biker over just to determine if they’ve added the coverage, at least some of the people you’ve seen riding without a helmet haven’t added the coverage at all.


reWorking Michigan examines our evolving economy, as citizens of the Great Lake State explore new ways to make a living and build a future for their families. A project of WKAR NewsRoom, WKAR-TV and WKAR Online.