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Auto insurance in MI has changed. Reforms written into a 2019 state law went into effect last week

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Darlene Waller owns a truck. It’s parked right outside her home in Highland Park. The vehicle runs but she doesn’t drive it because she can’t afford to pay the insurance. 

"The highest quote I got was $480 a month. The lowest quote I got was $285 a month."

Waller says these high rates have put her in a bind. 

"I kind of figured that I could only go one of two ways. I could pay for one month and then illegal after that month, and take a chance that I can't really afford to take or I could do what I've been doing since I've gotten the truck, which is -- use public transportation until--I can afford car insurance."

Auto insurance rates in Michigan are the highest in the nation according to industry analysts.

Part of the reason insurance is so expensive in the state is that about half of drivers’ bills goes to paying for one thing: health care.

All Michigan drivers are required to buy medical coverage on their auto insurance in case they get into a car crash. This means people with health insurance essentially pay twice. Michigan isn’t the only state that requires this. A dozen others do too – but as Detroit Mayor Mike Duggan explains in a virtual town hall…the coverage here is unparalleled. 

"The only state in America that says all of your medical bills in your car accident have to be paid in your car insurance is Michigan."

Michigan is the only state to require that all drivers take out unlimited medical coverage on their car insurance. But that’s about to change.

A law passed by the state in 2019, set into motion several auto insurance reforms. One of them will make it so that Michigan drivers can now choose how much medical coverage they want to pay for on their car insurance bills. 

"Do you want to go from car insurance medical care to your own medical care? This law -- it gives you choice."

Drivers now will be able to choose from different tiers of Personal Injury Protection…or PIP…which is what covers them right now if they get hurt in an accident. If they want unlimited PIP, they can keep it. Or they can choose to lower the coverage to $500,000 or $250,000.

Drivers on Medicaid can bring their PIP down to $50,000, if they choose.  

And, if every member in a driver’s household has Medicare or some other form of qualified healthcare, they can exclude themselves from paying for PIP entirely. 

But – as Mayor Mike Duggan explains – none of these changes will happen automatically. 

"Nobody's coming to help you. You have to take the initiative yourself if you want change."

Drivers looking to reduce or eliminate medical coverage on their auto insurance bill will need to fill out a form and provide health insurance documentation. If they make a change, the average consumer will see their Personal Injury Protection rates reduced by 10 to 45 percent, or more if they opt out entirely. 

But while many will see these reductions… everyone is going to see another part of their bill rise. 

"So the law does require that the that you have an increase in the amount of bodily injury liability coverage."

That’s Erin McDonough, the Executive Director of the Insurance Alliance of Michigan. 

"The bodily injury liability insurance, it covers claims made against drivers, for injuries to others if they are at fault in an auto accident."

Michigan has “no fault insurance”. It ensures that every driver will have medical coverage if they get in an accident…regardless of who is at fault. But that doesn’t mean that drivers can’t get sued if someone is seriously injured or if the accident involves out-of-state motorists. Bodily injury insurance helps pick up the tab in these instances. The required minimum coverage here is jumping from $40,000 per accident to $500,000 by default – but can be reduced if a consumer fills out a form and reaches out to their agent.

Anita Fox is the Director of the Department of Insurance and Financial Services for the State of Michigan. She says the average driver should still be able to save money with the reforms included in this law. 

"We were able to determine from the filings that we reviewed that the increase for Bodily Injury and for other non-mandatory coverages would not negate the statewide reductions that we're going to see on the medical portion of the policy."

But Fox explains that not every driver is guaranteed to save. 

"The way the law is written is in terms of statewide averages."

In other words: insurance companies simply need to show that any required rate reductions impact the average driver… not necessarily every driver.

But the law doesn’t just dictate rate changes. It also weighs in on what the industry can use to determine rates. Education level, occupation, credit score and zip code are among the factors that can no longer be used. Some advocates had hoped banning zip codes would make insurance prices fall in Detroit, where residents pay the highest rates in the nation. But as Fox explains, her department still has to allow insurance companies to use geographic areas that aren't defined by zip codes.

"We really tried to honor the intent of the law to not allow zip code to be a factor while still allowing territorial rating, if it could be justified. "

To justify using the location of a driver’s residence, a company simply needs to show – without using a zip code - that people living in a particular place are a higher risk to insure. 

Overall, the law, makes some landmark reforms… but because it’s made up of compromises, it isn’t perfect.  Yet Highland Parker Darlene Waller says she’s been looking into the statute and she’s optimistic about it.

"We as citizens, we have to realize that legislation takes time. So I kind of have to say that, you know, despite the fact that we're always you know, mad at the politicians, they got something right this time."

Waller is hopeful that when she goes to get a new quote it will be low enough that she can take out an insurance policy on her truck. The only problem is… she already made an appointment to register her vehicle at the Secretary of State’s office… and she says they’re backed up until September.