On July 2nd of 2020, Michigan put in place it’s no-fault auto insurance reform law. This law changed much of what we currently know about Personal Injury Protection(PIP), giving drivers a variety of auto insurance coverage options to choose from.
In order to understand these changes better, as well as understand how these changes might impact our clients at Verde, on July 16th the Verde team invited Corey Wilson to come talk on the topic in one of our series of fireside chats. Corey is the Vice President of Business Development at Oakland Insurance. In addition to giving insight on what these changes truly mean, Corey was able to discuss a number of questions from the audience.
In order to keep our clients informed and in the loop, we’ve attached the fireside chat to this post as well as time tags and a general transcription of topics covered in the chat. We hope you find the information informative!
1:24- “What is PIP?”
-Personal Injury Protection (PIP): Coverage under the current law, passed in Michigan to provide unlimited lifetime benefits for any type of injury sustained in an auto accident in the state of Michigan.
-Covers medical, replacement service costs, attendant care, modifications to home/vehicle as needed, as well as work loss.
-A lot of people attribute PIP to higher car insurance rates in Michigan.
-Most people don’t know it’s not 100% covered by the auto insurance carrier.
3:59- MCCA: Michigan Catastrophic Claims Association
-Provides unlimited coverage. Auto insurers are only responsible for the first $580,000 of medical coverage on the auto policy. After that, the insurance policy is reimbursed for the remaining costs.
-Founded in 1973, the cost currently stands at $220/year per vehicle in the state of Michigan.
4:17-No-Fault Insurance Reform & PIP:
-New MCCA Rate will change to $100/year per vehicle (large savings)
-New PIP Limits and Reductions for 2020-2021:
1: $50,000- reduced by minimum of 45% (only available to those on Medicaid, with proof)
2: 250,000- reduced by minimum of 35%
3: 500,000- reduced by minimum of 20%
4: Unlimited as we have it today- reduced by minimum of 10%
5: Opt out available to those who are on medicare or those with qualifying health coverage, must be verified through a letter stating
1)that they don’t exclude auto accidents,
2)the deductible on the plan may not be more than $6,000
3)those with medicare parts a and b can opt out of the coverage, eliminating the entire MCCA fee as well as all benefits associated with PIP coverages. True for the $250k and $500k options. This just means you will not have access to MCCA funds.
9:03- How much of a difference in savings is there going to be from unlimited to 500k and 250k?
–There isn’t a very big difference when looking at the size of the reduction. There’s roughly a $106 dollar decrease. The savings isn’t necessarily justifying the lost coverage. If a policy holder has 10 vehicles for example there may be a bigger discount.
11:13- Interesting Changes on the PIP Reform:
-The old PIP benefited literally everyone, even the individual who may have stole your vehicle if the individual was injured from wrecking your vehicle: your auto policy was covering their medical costs. This has changed however. There is also a change stating that the passengers in a vehicle are not covered on your policy. Injured passengers are now covered up to $250k by the state and they must sue the other party in order to receive the rest of the money.
13:12- How did PIP work before?
Order of Succession:
14:15- How has PIP changed now?
New Order of Succession:
**The individual who owns the car and the driver of the accident motor vehicle are removed from the order.
15:25- Out of State Drivers
–The state now specifies that only the driver benefits as an in-state driver. Any other situation would go to the provision of the state that that individual was from.
-If an individual wrecks your vehicle by wrecking property, there is no longer afforded cost coverage. The owner of the vehicle assumes the liability. Insurance policy doesn’t cover the cost with an out of state driver.
17:15- What does PIP cover?
–A lot more than just medical.
-Funeral and burial expenses (ranging rom $1750-5000 depending on policy)
-Work Loss: pay up to 85% of lost wages (up to 5718/month) for a three year period.
-Replacement Services: laundry, lawn care, household maintenance (up to $20/day)
-Survivor Benefits: survivor spouse and children payments
-Medical expenses covered by PIP including doctors visits, hospitalization, surgeries, MRIs and diagnostic tests, physical therapy, rehab, prescription medications, and attendant care.
-Vehicle Modifications: things such as wheelchair lifts, or special modifications you may need on the vehicle
-Home modifications: elevator lift, wheelchair lifts, walk in showers eat.
-Medical Mileage: any time you drive to and from a medical appointment
21:26- Liability Claims
-Minimum liability limits were $20,000/person and $40,000/accident
-Mini-Tort: The previous maximum recovery for damage to a motor vehicle by a negligent driver was $1000
-New Required Liability Limits as of July 2, 2020:
-Minimum liability limits: $50,000/person $100,000/accident
-Default liability limits of $250,000/ and $500,000/accident. Automatically done unless you sign a waiver form reducing your limit down.
-Combine Single Limits: $510,000 with signed form, $500,000 bodily damage/$10,000 property damage
-Mini-Tort: New maximum recovery is $3,000 for damage to a motor vehicle by negligent driver
23:58- Potential exposure for your family
-Under Old Law
-An injured person could seek damages for pain and suffering (non-economic damages), and damages in excess of PIP coverage (economic damages including wage loss and survivors benefits extending beyond three years after the accident) from negligent drivers and owners.
-The injured person must have had experienced a serious impairment of bodily function, ie. loss of limb, scarring, etc.
-Under New Law
-An individual can be held responsible for the medical injuries and the work loss of the other individual.
-Rear-ending someone with no insurance for example: if you injure that person, they would have max $250,000 and you would be held responsible for anything above that.
25:57- Coverage Option Guide
26:47- Options to chat with your insurance agent about
-Umbrella Policy: Specific personal umbrella policy for liability that will extend over your auto policy (your home policy, your boat ect), to give you an extra liability blanket. Discounts could come for buying this policy. Under the new law, it’s potentially scary to think about what you could be sued for for injuring someone as compared to what it was before.
-Review underlying limits on bodily injury liability
28:38- Question and Answer
28:47- At verde, we discuss the idea of ‘Accept/Transfer/Combo’ as far as deciding whether to accept risk, push it to the insurance company, or a combination of taking a risk up to a certain point. Does this new law allow for people to accept more risk if they want?
-If you’re a Verde client, and you have very generous benefits, this policy could potentially be a very good thing because they might not have to pay for as much coverage if their medical insurance pays for things. Could be a good thing as far as the reduction of cost and the duplication of benefits?
-It could be but there’s also a caveat. Insurance companies in reality are going to be raising the rate of the other provisions of the policy (liability, umbrella rates ect), because there is a greater exposure for lawsuits. Even if you chose to lower your benefit down, you may experience overall cost savings because liability exposure is going up.
31:04- Are you seeing most rates go down or rates go up?
-We’re seeing an average of about 2% reduction overall. We’re honestly seeing more increase because we’re recommending higher coverages now. Raising their liability for better asset protection.
31:46- Do you anticipate because the law changed, there might be more competition with new insurance companies coming to the market?
-Under current law, hospitals/doctors don’t have any set rates for their services, they can charge the insurance anything they want. Cost predictability is void. Once the market becomes a little more predictable in the future, we might see more insurance carriers coming to the market.
33:33- Given the fact that we live in the ‘automotive state,’ and the biggest trend in driving is autonomous driving… If you get into an autonomous vehicle, no matter the stage of development, and you get into an accident with a vehicles, how will this impact things? How do you gage risk when it comes to something like autonomous vehicles?
-Currently a black box for insurance companies, we don’t have a great answer, however this is on the auto policy so you should be given the same level of coverage.
37:50- Did I understand correctly that I should receive the 120 dollar reduction for the MCCA portion automatically from my insurance?
-Yes you will, that is state law. The thing to be aware of, we had only one insurance carrier that automatically did that effective July 2nd, regardless of the renewal date. However, when the policy renews, it will automatically be reduced. If you’d like the reduction sooner, you’d have to call and request.
38:57- If my auto insurance is up for renewal within the next 2 months, should I wait or consider making the change now?
-It depends, if it’s that close, I would wait. You should get all your forms in the mail roughly 60 days before renewing. They do a mid term endorsement, to see if you’re subject to any other rate provisions/modifications. Sometimes we have clients who want to do it midterm right away, however when we did the change, the cost of liability was also impacted and didn’t save them a whole lot. Depends on your current circumstance.
40:00- Will my insurer, who is currently State Farm, contact me to discuss changed options to the law, or will I automatically be placed into the coverage that most closely mimics what I was placed into previously?
-All insurance companies do need to notify you in writing in advance (about 60 days) via mail to make the selection. Some companies are calling, it depends. All agencies right now are being flooded with calls and questions. Your coverage will automatically be placed into what closely mimics yours, yes. When you get your packet in the mail, if you have less than $250,000 in auto liability, that will go up automatically. If you have unlimited benefits, your policy will remain on unlimited benefits unless you choose something else. To change, you would need to sign the pages they send you, as well as choosing the option you want, and mailing that back in to them.
41:37- With all these changes, what coverage does someone with young teenage drivers take? Unlimited? Your suggestions please.
-First, I would recommend higher liability protection. Young drivers are the most high risk drivers. In terms of medical benefits, it’s specific to your circumstance. I would recommend the unlimited just because it does give you the lifetime benefit.
43:58- For those individuals who after this fireside, would like to dive into additional details, what would you say are the top items that they should review, almost like a checklist of sorts that they should go though?
-First, start with your medial insurance provider. Understand what your provisions and contracts are. Do they cover auto accidents? Better educate yourself on what your policy is. What we’ve seen, is that a lot of carriers have preemptively started excluding auto accidents and gearing up for this law, because they know that passing these costs onto your employers group plan, is going to drive up the cost for their benefits packages. You also need to monitor this if you choose to go for lower limits on the auto policy.
-Second, look at your liability part on the policy. Look at what your limits are, talk to the verde team about your assets and your risk, and what you should have for proper liability protection, and then the rest of the policy won’t change until your renewal, so you’ll have the ability/time to evaluate this information before the time comes.
-As part of the Verde client portal, we do provide an area where you can enter in your insurance information: home, auto, medical, disability, life. As part of a comprehensive financial plan, we do a review periodically, at least once a year. If you provide us with your information, we can go through that and leverage partners that we have in order to say, “given your specific circumstances, and your tolerance for risk, what we would recommend.” What we’ve been able to do with these reviews, is going to someone like Corey or whoever you work with, we go through your policies, and look at the gaps. We look at things like you living in a flood zone and you don’t have flood coverage. Or, you’re sitting on 200k but you’re on the unlimited policy, maybe there are some changes to be made. Our goal is to get you to pay the minimum amount necessary to get the coverage that you want. We want you to leverage us for 100% of what we offer.
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