Michigan drivers who renew or buy car insurance face a choice starting Thursday: stick with unlimited medical coverage, go with less or -- for seniors with Medicare -- opt out entirely.
The decision, a signature feature of a new law that will lower the cost of personal injury protection benefits in a state with the country’s highest auto premiums, boils down to people’s risk tolerance and desire for savings. But unlike with choosing between a $500 or $1,000 deductible, this selection can have long-term implications in the event of a serious crash.
Insurance agents report that, early on, many people whose policies are up for renewal are staying with unlimited medical, which became mandatory in 1973 but no longer will be required. That’s because, on average statewide, PIP rates will drop 15.5% for those who do nothing and stand pat -- largely because an annual $220 fee assessed on every vehicle to cover catastrophic claims is dropping to $100.
“Most people are saying, ‘Yeah, I’m good with that. It’s been the law for 50 years. I’m going to sit this out and wait a while,’” said Will Lemanski, an agent with Meiers Lombardini Lemanski Insurance in East Lansing. “With this, we’re dealing with bigger issues because you’re not talking about damage to your car. You’re talking about potential life-threatening injuries that can affect you for the rest of your life.”
PIP generally accounts for almost half of a premium, according to the state Department of Insurance and Financial Services.
Motorists can avoid the Michigan Catastrophic Claims Association fee altogether -- saving an additional $100 a year -- by forgoing unlimited coverage and picking $500,000 of coverage (30.6% PIP savings on average) or $250,000 (41.8% savings). Those on Medicaid can choose $50,000, while people on Medicare can opt out completely as long as everyone else in their household has another auto policy or health insurance that covers auto accident injuries.
The savings will be offset some, however, because the new law raised the level of required bodily injury liability insurance -- which generally represents about 10% of a premium. It covers claims made against an at-fault driver for serious injuries to others. Such lawsuits are expected to rise since fewer people will have unlimited medical.
The bodily injury minimum limit was $20,000 per person and $40,000 per crash. It will rise to $50,000/$100,000. But unless a motorist fills out a form, the coverage will default to $250,000/$500,000. PIP coverage will default to unlimited if the form is not returned.
“We just wanted to make sure that if somebody hasn’t made a choice, they’re better off making sure that they have coverage until such time that they make the choice rather than the opposite -- getting less coverage than they wanted, having an accident and then looking at what they maybe intended and just overlooked,” said Anita Fox, director of the state insurance department.
People can always change their policy, she said.
Fox said concerns that higher bodily injury coverage would completely negate PIP savings have not been borne out. Someone with unlimited medical and the default bodily injury coverage, for example, will still save about 10%, according to state data.
The Coalition Protecting Auto No-Fault, a group that opposes the revised law, said motorists in Detroit, where premiums are much higher, will not save much and will have to give up substantial protection to get even marginal benefits. While insurers will be prohibited from using nondriving factors such as ZIP code in setting rates, critics said other avenues for potential discriminatory prices remain.
Saundra Gay, who was paralyzed 20 years ago in a single-car crash, said unlimited medical benefits for rehab and in-home care have allowed her to return to some type of normalcy. She said people who choose less coverage and see themselves or a family member seriously injured are “going to be really in trouble — because if we didn’t have that insurance, Gods knows where we’d be.”
Backers of the historic law said it gives people a chance at real savings and will, beginning next year, stop health providers from charging three and four times more for auto accident injuries — a factor in high premiums.
Agents said they are getting calls from customers who are confused after receiving forms from their insurer. The state said calls to its auto insurance hotline are up tenfold from May.
Insurance companies, agencies and state regulators have created videos and websites to explain the changes to the law.
Fox urged consumers to shop around for insurance and to visit the state website or call their agent.
“There is information out there and it is manageable,” she said. “It may sound complicated. Sometimes people hear ‘insurance’ and think they’re not going to understand. But there really are only a couple choices.”