Michigan Legislature Takes Another Stab at PIP Reform

“Anyone who is involved in committing a crime should never be able to collect benefits if they get into a car accident in the process,” Says Michigan Congressman Ben Glardon (R). Seems like a no-brainer, but apparently they can until two amendments, HB 5587 and 5589, passes into law. It has already been passed through the House and

is awaiting Senate approval.

Shawn Nordstrom of LiveInsuranceNews.com reports these are all attempts at reforming the current, extremely expensive, no-fault Michigan insurance laws. One amendment, HB 5588, denies drunk drivers injured in an accident from receiving PIP benefits. The other amendment, HB 4993, disallows PIP to undocumented aliens.

Considering that the average PIP claim in Michigan rose nearly $13,000 between 2002 and 2011, these changes are long overdue. It’s very hard for Michigan residents to get affordable insurance, particularly in and around Detroit. Runzheimer International rates Detroit as the most expensive city in the US to insure. They calculate the average cost of auto insurance for a mid-size four door with full coverage to be about $5950 a year. As a point of reference, the cheapest city, Roanoke, Virginia, boasted an average annual premium of $937.

Another study by the Insurance Research Council shows a 192% spike in claims during the same tenure of 2002-2011, as reported by Julie Campbell of LiveInsuranceNews.com. The Insurance Research Council study has determined that it’s not that there are a higher number of claims, but that there is higher costing claims that are hurting the PIP insurance systems.

In a RAND research study, Paul Heaton highlighted the issue of the extreme high cost of Michigan auto insurance leading to a high number of uninsured drivers that will only further drive up the PIP claims and insurance rates. He proposed an multi-approach effort to alleviate burgeoning costs:

• Allowing the policyholder to select a higher deductible;
• Allow the policyholder to limit their own payout or offering a broader range of choices for PIP;
• Have fee schedules for medical services;
• Let the personal health insurance companies integrate as first benefit more easily and PIP be secondary.

Most Michigan residents agree that something must be done to make the costs more manageable. Detroit has had its share of struggles and troubles. A challenging economy and tight city budgets will be faced with worse problems when people and

companies pull out because they can’t afford to insure their fleet of vehicles or personal autos in Detroit.