Gov. Gretchen Whitmer signed bipartisan auto insurance reform into law Thursday that will guarantee lower rates for all drivers in the state with the highest premiums in the country.
“By signing this legislation, we are providing relief to millions of drivers across the state and guaranteeing a better auto insurance system for everyone,” Whitmer said in a news release. “This historic deal shows that, when we put party aside, we can find common ground on our state’s toughest issues to provide realistic and affordable coverage options for drivers across Michigan.”
The legislation will eliminate a mandate that required every driver to purchase unlimited, lifetime personal injury protection (PIP) coverage. The PIP portion of a person’s auto insurance bill makes up about half the cost. The new legislation will allow drivers to choose from a series of options, all of which reduce their total bill.
A driver that chooses to keep 100 percent PIP coverage will receive 10 percent off of the PIP portion of their bill. Drivers who choose $500,000 worth of coverage will receive a 20 percent reduction and drivers who choose $250,000 worth of coverage will receive a 25 percent reduction. Medicaid-eligible recipients can choose coverage worth $50,000 and receive 45 percent off of their PIP costs.
Seniors on Medicaid will be eligible to completely opt out of PIP coverage as will drivers with health insurance that would cover their entire family in the case of an accident. These drivers would save 100 percent on the PIP portion of their bill.
An analysis from the Senate Fiscal Agency warned that eliminating the mandatory unlimited coverage could increase the cost of Medicaid.
The legislation will also forbid insurers from using certain non-driving factors when deciding rates. It forbids the use of zip codes, marital status and gender, among other things. However, it will still allow the use of other geographical boundaries for determining rates.
“After a lot of hard work, I am happy to see the governor sign into law reforms that are long overdue,” Sen. Aric Nesbitt, R-Lawton, said in a news release. Nesbitt was the primary sponsor of the legislation.
“This bipartisan effort will end the outdated system that has burdened Michigan drivers for decades,” Nesbitt said. “Families, seniors and all drivers will finally be able to choose their auto insurance coverage after nearly 50 years. The new law will also stop the massive overcharging for care involving auto accidents and crack down on fraud and lawsuit abuse. I applaud the governor’s action today. Lower rates will benefit drivers from every corner of our great state.”
Currently, Michigan drivers have the highest insurance costs in the country, nearly doubling the national average. Drivers in Detroit pay nearly four times as much as the national average. It will not be clear how low the new average will be until drivers choose their coverage plans.
The bill will be filed with the Office of the Great Seal next week and take effect immediately.