New Michigan Auto Law Doesn’t Guarantee Savings


Motorists in Michigan must buy significantly more liability coverage under the new auto insurance law. According to a top insurance industry executive, there are no assurances those extra costs will not offset reductions the law requires in the personal injury protection (PIP) portion of motorist premiums.

An expert in insurance at Penn State Law, Christopher French, said he expects that an increase in cost in both the liability insurance portion of Michigan auto insurance premiums and private health insurance. However, French said he still expects motorists to enjoy overall savings because fewer medical costs will be covered. There will also be fewer medical procedures.

Current Michigan law

Under current Michigan law, motorists must have $20,000 in liability coverage for the injury or death of one person in the accident. They need $40,000 in coverage for the injury or death of two or more people in a crash.

The expected increase in liability insurance costs was significant enough to prompt lawmakers to rush a separate bill through the Legislature last week. This ensures increased liability insurance costs will not take effect until July 2020.

Generally, under no-fault auto insurance, each ‘driver’s auto insurer covers individual costs related to vehicle damage. Also, medical treatment and lost earnings, regardless of which driver was at fault. An at-fault driver can only be sued when someone involved in the accident suffers death. Also, severe impairment of body function, or permanent serious disfigurement.

What will change

That aspect won’t change under the new law. However, Michigan motorists aren’t required to purchase policies with unlimited medical coverage anymore. With that in mind, fewer medical costs from such scenarios will now be covered by auto insurance. Beginning in July 2020, the recovery of those costs can be sought through legal action against the at-fault driver.

The new law, Senate Bill 1, ends Michigan’s status as the only state in the nation where motorists have to purchase PIP coverage. The law mandates eight years of savings in that portion of the insurance premium. It ranges from 10% to 100%, depending on the level of PIP coverage.

At Penn State Law, French said that studies show the more a state moves away from pure no-fault insurance, the lower that state’s overall insurance costs become. Based on that analysis, Michigan motorists should save money under the new law, French said.

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