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Michigan No-Fault Reform

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We’re committed to helping our customers navigate Michigan’s
new no-fault law.

The reformed Michigan no-fault law now offers drivers more choices, as well as changes to their auto insurance. While some of these changes will be phased in over time, most will go into effect on July 2, 2020. At Frankenmuth Insurance, we want to help our customers understand how their insurance coverage is affected.

What’s on the horizon for Michigan drivers

Previously, it was mandatory for drivers to carry unlimited Personal Injury Protection (PIP) benefits, but starting July 2, 2020, drivers will be able to choose from different coverage options:

  • Unlimited PIP coverage
  • $500,000 limit
  • $250,000 limit
  • $50,000 limit; this is the lowest limit available, but only for drivers who are on Medicaid. (Your spouse and other relatives who live with you may be on Medicaid or have other qualified health coverage.)
  • Opt-out of PIP coverage entirely; however, you, your spouse and all relatives who live with you must have Medicare or qualified health insurance to be eligible.

Additionally, these changes will also take effect July 2, 2020:

  • Insurance companies must reduce PIP premium rates, and guarantee that they will be reduced for eight years. The rate reduction applies only to personal injury protection premiums, which is one part of your entire auto insurance costs. The average reduction takes into account both the PIP premium and Michigan Catastrophic Claims Association (MCCA) vehicle assessment fee, which cannot be reduced by insurance carriers. The reduced amount will depend on the PIP coverage that a driver selects – the higher the coverage, the lower the reduction. For example:
    • Unlimited coverage would receive on average a 10% reduction
    • $500,000 in coverage would reduce on average by 20%
    • $250,000 in coverage would reduce on average by 35%
    • $50,000 in coverage would reduce on average by 45%
    • Individuals with Medicare or qualified health insurance could opt out and receive a 100% rate reduction on certain portions of PIP, depending on their individual circumstances. MCCA deficit fee would still apply ($0 for 2020 has been announced for MCCA).
  • Non-driving factors can’t be used to set insurance rates. These factors include postal zone, credit scores, home ownership, education level and occupation.
  • Minimum liability coverage limits will be increased from $20,000 per person and $40,000 per accident to $50,000/$100,000. The policy will default to $250,000/$500,000 (or $510,000 for commercial auto policies) if you do not make a choice. Drivers must sign a selection form to choose limits lower than $250,000/$500,000.
  • Tort damages will also be recoverable for excess allowable expenses and work loss. And, the “Mini-Tort” damage cap will increase from $1,000 to $3,000 for accidents occurring after July 1, 2020.
  • Policyholders will be given the option to select their PIP coverage at each renewal. If policyholders do not make a specific selection with their new policy or when their current policy renews after July 2, 2020, their policy will be issued or renewed at the default level of Unlimited coverage.
  • The order of determining who will pay for a no-fault claim – called the “order of priority” – has changed in some cases involving:
    • Relatives who do not reside in the household of the named insured unless they are away at school. These relatives (such as your children) would need to have their own insurance policy, even if they are driving a car you own.
    • Non-relatives who reside in the household, even if they are listed drivers. They would need to have their own insurance policy.

Brief history of Michigan’s no-fault law

Michigan’s no-fault auto insurance law has been in place for nearly 50 years. When it was passed in 1973, the no-fault system was designed to:

  • Make the claims process more straightforward for auto accident victims, especially if more than one driver contributed to an accident
  • Allow injured persons in auto accidents to collect benefits in a timely manner, so they can recover more quickly – ultimately saving time and money
  • Compensate accident victims promptly and equitably for medical costs and lost income
  • Limit the number of lawsuits that result from auto accidents, and reduce the burden on the state’s court system. (Before the law was passed, there were about 69,000 auto injury lawsuits per year. Today there are about 29,000.)

Under Michigan’s no-fault law, those who are injured in auto accidents receive unlimited lifetime medical benefits and significant wage loss benefits. Severely injured persons receive these benefits immediately, rather than having to wait for a settlement to be reached in court, like the traditional tort system in other states. And, all drivers are required to carry these coverages: personal injury protection, property protection and residual liability.

However, there have been challenges with the no-fault system, such as the rising cost of auto insurance for Michigan drivers. The Insurance Alliance of Michigan (IAM) cites that Michigan’s unlimited, lifetime medical benefits, inflation in the cost of health care and auto repair, and lawsuits are driving up the cost of auto insurance. Because of the high cost of auto insurance in Michigan, many drivers opt to not carry insurance at all, which places more stress on the system. It is because of these challenges that lawmakers recently passed reforms to the Michigan no-fault law.

Frequently asked questions

At Frankenmuth Insurance, we’re here to help you understand what’s driving these changes to your auto insurance options. That’s why we’ve worked with our experts to offer answers.

How do I know if I have gaps in my coverage?

We recommend starting a conversation with your local, independent agent to identify any potential gaps in your coverage that may need to be corrected, especially if any of the scenarios above describe your household. Your agent will be able to help you understand your unique coverage needs.

What do I need to know if I drive an employer-provided or transportation company vehicle?

If you drive a vehicle provided by your employer, typically, you’ll first pursue coverage through your employer’s insurance company that covers the vehicle. The next order of priority is your own personal auto policy, then that of your spouse or resident relative, then finally the Michigan Assigned Claims Plan (MACP). Or, if you drive a transportation company vehicle, you will generally pursue coverage through the insurance company that covers your transportation company’s vehicle, unless specifically excluded.

What do I need to know if I am a motorcyclist?

Generally, motorcyclists will pursue coverage in the same order of priority as under the previous law. This means that if the owner/registrant of the motor vehicle has limits less than “unlimited” selected for their no-fault policy, the motorcyclist will receive those same limited benefits selected by the driver, regardless of the motorcyclist’s own PIP coverage. If the motor vehicle involved has opted out of PIP, then the motorcyclist will go to the next order of priority, which is the vehicle driver’s insurance, then to the motorcyclist’s own insurance company.

How are out-of-state residents affected by these changes?

Typically, if you are a resident of another state, you are no longer entitled to PIP benefits for injuries sustained in a Michigan motor vehicle accident, unless you own the vehicle and it is both registered and insured in Michigan.

Will I be able to change my Personal Injury Protection (PIP) benefits as soon as the law is in effect?

We strongly encourage Frankenmuth Insurance policyholders to revise their policy at its next renewal after July 1, 2020. However, you may work with your local, independent agent to sign new PIP benefit selection forms to request policy updates earlier. If you are a Frankenmuth Insurance policyholder, you will be issued a short-term policy in this case to maintain your current personal auto or commercial auto policy effective and expiration dates.

How will I select my PIP and bodily injury limits?

All Frankenmuth Insurance policyholders will receive PIP benefit selection forms by first-class mail in advance of their policy renewal. You will also receive a letter of explanation to help you select the option that best fits your insurance needs and the deadline to submit your selection. If you have questions or need assistance, we encourage you to contact your local, independent agent. A postage-paid envelope will be included to return your signed selection forms to Frankenmuth Insurance for processing prior to when your policy will renew.

Why haven’t I realized immediate savings on my auto insurance premium now that the No-Fault reform has been passed?

While the new law was passed in Spring 2019, most of the significant reform won’t go into effect until July 2020, and even 2021. So, it could take some time before drivers see any cost reductions in their auto insurance premiums. It’s also important to note that savings will not be as significant as you might think since much of the reform focuses on PIP coverage selections, which is just one portion of your auto insurance policy. We strongly encourage you to reach out to your local, independent agent prior to July 2020 to discuss the new coverage options that will be available to you.

My auto insurance premiums actually went up after the new No-Fault law was passed. Is my insurance company just trying to take more money from me before the new law takes effect?

Actually, if you recently made a change to your auto policy, such as adding a driver, buying a new car, moving or being involved in an accident, these are the factors that could have impacted your premium. The auto insurance premiums that Michigan drivers are paying today were approved by the Department of Insurance and Financial Services in Spring 2019, which was prior to when the new No-Fault law was passed. If you have any questions at all about your premium, we recommend contacting your local, independent agent.

My auto insurance premium has increased. What can I do about it?

While you can always shop around and compare insurance quotes, we recommend that you talk with a local, independent agent. As your local expert, they can review your current coverage, answer any questions and help you find the right insurance protection at the right price for your needs. Find an agent now.

Recent news and helpful resources

While your agent is the best resource for questions about your auto insurance, we understand that you may still have questions. We’ve gathered other resources, such as recent news articles, updates and the legislation passed earlier this year to provide a broad perspective that may help you learn more about Michigan’s no-fault law.

Learn more about Michigan No-Fault

Brief Explanation of Michigan No-Fault Insurance before it was reformed

Michigan Department of Insurance and Financial Services (DIFS)

IAM No-Fault Reform articles and FAQ

Learn more about the legislation

Senate Bill 001 was introduced by Senator Aric Nesbitt on January 15, 2019, passed by the Senate on May 7, 2019, then passed by the House on May 24, 2019 and signed by Governor Whitmer on May 30, 2019.

House Bill 4397 was a follow-up bill signed on June 11, 2019, by Governor Whitmer.

Find recent news and updates

DIFS Launches New Website and Consumer Hotline to Address Auto Insurance Reform Questions and Complaints
February 5, 2020

What the No-Fault Auto Reform Deal Means for Michigan Drivers
May 24, 2019

10 Things to Know About Michigan’s New Deal on Auto Insurance Premiums
May 24, 2019

Frankly, no-fault reform is complex and involves many changes to your auto insurance. We are committed to helping our customers understand these changes. We encourage you to check back here often for more updates and information as it becomes available. And, if you have questions in the meantime, you can always contact your agent or send us a message.

Disclaimer: The information, content and materials provided on this website has been prepared to the best of our knowledge and information available at the time of publishing; it is intended for general informational purposes only. The information presented here does not, and is not intended to, constitute legal or insurance advice and should not be construed as such. Contact your local independent agent to understand your coverage needs or the Michigan Department of Insurance and Financial Services to obtain advice with respect to any particular insurance matter.