By Max Dorfmann, Research Writer, Triple-I
Michigan’s No-Fault Reform Act, which takes effect in 2020, has resulted in personal auto insurers paying fewer claims and many drivers paying lower premiums, according to recent research from two non-resident researchers from Triple-I.
the study, Michigan’s No-Fault Auto Insurance Repair: A Preliminary AssessmentCo-author: Patricia Born, Ph.D. from Florida State University and Robert Klein, Ph.D. From Temple University, a significant reduction in average liability premiums and loss costs for Personal Injury Protection (PIP) was observed in 2022. PIP covers treatment of injuries sustained by the driver and passengers in the policyholder’s vehicle in the no-fault auto insurance scheme.
“Our initial assessment of the potential impacts of the reform legislation indicates that it significantly reduces auto insurance costs for many Michigan drivers,” the paper says. “The amount of these reductions for any given driver will depend on which PIP option they choose, among other factors.”
The average Michigan policy holder paid $2,611 annually for personal auto insurance coverage in 2019 and $2,133 in 2022, a decrease of 18 percent, according to Insure.com. Before the state’s auto insurance reform law went into effect in July 2020, Michigan was regularly ranked as one of the most expensive states in the United States for personal auto insurance coverage.
The enactment of the Reform Act of 2020 allowed for:
- reduce auto insurers’ payments from high-PIP medical benefits;
- setting controls on medical costs;
- expanding state authority to regulate personal auto insurance rate filings;
- Creation of a fraud investigation unit within the Department of Insurance and Financial Services; And
- Restricting the auto insurer’s use of “non-driving” rating factors (for example, credit-based insurance scores).
Michigan was the only state to offer unlimited medical benefits through the PIP portion of the auto insurance policy. Insurance companies have also been severely restricted in controlling medical costs arising from PIP claims. This cost contributed to more than one in four drivers (26 percent) on Michigan roads being uninsured in 2019, according to estimates by the Insurance Research Council (IRC), nearly double the national average (13 percent). Michigan is one of 12 no-fault states in the United States. These systems allow policyholders to file claims with their insurance company after an accident, regardless of who caused the accident. No-fault states limit lawsuits to serious cases and promote faster claims payout.
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