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Michigan Legislature May Change Car Insurance

Michigan's system of insurance for motor vehicles has been either praised or decried for years, depending on how you feel about government involvement in insurance. While always among the highest average premiums in the country, Michigan also has the best-protected drivers of any state. Now, however, it looks set to change, as new legislation comes up for debate in Lansing's legislative bodies.


Will there be a new system? If so, what will it be like?

The Current Law: Benefits and Problems

Currently, the state of Michigan is the only state in the US to require all drivers buy unlimited medical and rehabilitation benefit coverage if they want to drive legally. This means that, if someone is injured in a crash, the insurance company covers all of their medical needs up to a point, from where the state assumes responsibility.

The upside of this has been very few lawsuits compared to other states, as well as the obvious benefit that is people having their injuries covered. It also still means that, if you want unlimited injury protection, Michigan is the cheapest place to get it.

The downside is that everybody, no matter their financial background, has had to buy high-priced insurance. It is true that not everybody can afford to buy coverage like this in Michigan, the state with the worst unemployment in the nation, which may be causing more uninsured illegal driving, rather than driving with a smaller level of coverage.

This has also been very expensive for the state. In order to make premium prices drop and allow everyone to afford the great coverage, Michigan set up the Michigan Catastrophic Claims Association (MCCA), which reimburses fees that insured drivers receive after $500,000 of coverage through their insurer is surpassed. With nearly 13 thousand Michiganders on the books, the MCCA tab is simply too much for the state.

Possible Changes to Michigan's Auto Coverage Mandates

State Republicans are the ones largely backing the proposed changes. They argue that the system is simply too expensive for the state. Eventually, they say, Michigan won't be able to afford the bills and balance the budget - which its constitution requires it to do each year.

The changes would end the unlimited coverage mandates and allow people to get policies with a lower level of mandated coverage. The coverage levels being discussed are minimums of $50,000 to $200,000, government insiders believe.

The MCCA is also likely to stay open, but will not take on any future claims. Currently it operates with a $2.4 billion deficit, so it cannot really even afford to pay for everyone it does. To fix this, all motorists would be required to contribute a "pre-vehicle special assessment", which amounts to a yearly fee. This year it would cost drivers $29.

The insurance industry and Republicans are in agreement on the changes to auto insurance mandates. A cynic would say the industry stands to make more money with the changes, but they say it is about consumers having a right to choose.

Legislation would also end the choice of an unlimited policy, capping auto insurance coverage at $5 million.

Healthcare workers, economists, and trial lawyers all stand against this auto insurance proposal. They argue it would increase healthcare costs, make unemployment worse, and hurt consumers.

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