Insurance alliance touts no-fault savings for Michigan drivers. Here's how much
Michigan drivers have saved a collective $4 billion on auto insurance premiums since reforms to the state's no-fault insurance law took effect in July 2020, the Insurance Alliance of Michigan said Wednesday.
Because of those reforms, Michigan drivers pay reduced fees to the Michigan Catastrophic Claims Association, the nonprofit that manages a fund designed to pay for care for people with serious, long-lasting injuries. Those fee reductions totaled $1 billion in savings, the insurance association said.
The MCCA also will issue refunds of $400 per vehicle to drivers this year, another $3 billion in total savings.
"The results are abundantly clear: Michigan's auto no-fault reforms are working and saving Michigan drivers billions of dollars on their car insurance premiums," said Erin McDonough, insurance alliance executive director.
She described the news as a "huge win for Michigan drivers" and said costs may continue to decline.
State lawmakers overhauled Michigan's auto insurance law in 2019. The reforms allow drivers to purchase cheaper but less robust personal injury coverage — previously, they had to have unlimited personal injury protection.
More than 155,000 drivers have purchased car insurance since the reforms kicked in July 2020, the insurance group said. More than 66,000 of those drivers had not had car insurance for at least 3 years.
No-fault reforms also slashed reimbursement rates paid to companies that provide long-term care to people who have been injured in automobile crashes. For home health and residential care providers that help crash victims with things like bathing, eating and other daily activities, insurers and the MCCA pay just 55% of what they paid in 2019.
Advocates say the huge reduction has caused some providers to shut down or offload crash victims, which means some injured patients can't get services like home health care.
Approximately 1,500 crash victims have been discharged by their health providers since the fee schedule took effect in July, according to a survey of brain injury service providers conducted from Sept. 29 through Oct. 20. The survey was commissioned by the Brain Injury Association of Michigan and conducted by MPHI, an Okemos public health group.
More than 3,000 jobs were eliminated because of the fee reductions, the survey found. More than half of care providers reported they have had to significantly reduce their services because of the cuts.
Auto insurance companies contend the fee reduction stopped "egregious overcharging by medical providers," including long-term care providers, the Insurance Alliance of Michigan said in the Wednesday release.
While auto insurance premiums have declined statewide, reforms have not put Michigan in line with most other states and did not fix the disparities in cost by race and geography, a team of analysts from Poverty Solutions at the University of Michigan found in December.
Using data from The Zebra, which collects and compares auto insurance rate information, UM analysts found average auto insurance rates fell by 18% from 2019 to 2020, from $3,106 to $2,525. While rates fell in Detroit, average rates for city residents remained high, at $5,146 in 2020.
But Michigan rates are no longer the highest. Louisiana surpassed Michigan in 2021 with an average annual rate of $3,265, according to The Zebra's latest report.
UM analysts said auto insurance costs are still highly correlated with race. They suggested requiring insurers to consider driving-related factors and prohibiting the use of credit scores and geographic "territories" when setting rates.
They also suggested lawmakers revisit the reimbursement rate cuts enacted last year and consider using MCCA funds to cover higher reimbursement rates.
"The 2019 reform law was a first step, but lawmakers should not be content. More must be done to eliminate discriminatory rate-setting practices and further reduce premiums," said Amanda Nothaft, Poverty Solutions senior data and evaluation manager and coauthor of the policy brief. "We also need to consider the impact on people who have been catastrophically injured in auto accidents and ensure medical providers are appropriately reimbursed for long-term care."