Yet another attack on Michigan’s no-fault system appears to be imminent. Mlive.com ran an article last week stating that representative Jason Sheppard, R-Temperance, will introduce House Bill 5951 when the legislative session resumes after the November elections. This bill looks to completely destroy the present Michigan no-fault law by creating a no-fault PIP choice system.
Presently, the Michigan no-fault law mandates that auto insurance companies must pay for all medical expenses for treatment related to a car or truck accident. There is dollar amount limitation. HB 5951 seeks to change this, by giving policyholders the chance to purchase medical policies with a $250,000 limit, $500,000 limit, $1,000,000 limit as well as the current “no maximum” limit.
The problem with this plan is that the bill is that does not include any mandating decrease in insurance rates by Michigan car insurance carriers and agencies. Although representative Sheppard told Mlive.com he believes the bill would save motorists as much as 30% on insurance rates, this number is not guaranteed anywhere in the bill and doesn’t appear to make much economic sense.
The reason the large decrease in auto insurance premiums sounds dubious is because much of the cost for most Michigan car insurance policies does not come from the unlimited medical expense benefit. Instead, most of the cost derives from insuring the motor vehicle itself.
For example, I recently renewed my policy with a large Michigan insurance company for two vehicles, my own personal vehicle and my wife’s vehicle. Charges related to the unlimited medical expenses, also known as personal injury protection (PIP), and the state mandated Michigan Catastrophic Claims Association fee made up only 22% of my total premium.
However, charges related to physical damage coverages, including broad collision, comprehensive coverage and roadside assistance made up almost 53% of my premium costs!
So the major costs for my Michigan auto insurance premium was not from the no-fault PIP coverage. Instead it came from the property insurance for the vehicles.
House bill 5951 does absolutely nothing to address the escalating costs for property coverage here in Michigan. Instead the bill represents nothing more than a naked money grab by Michigan insurance companies to offer way less benefits for little to no savings.