By Paul J. Mueller, Regional President, Citizens Insurance
Michigan is the undisputed auto capital of the world. It’s also home to the most expensive auto insurance in the country—but hopefully not for long. As of July 2, the state’s drivers now can tailor their insurance policies to their own coverage needs, which could translate into savings.
Last May, legislation was passed to eliminate Michigan’s requirement that drivers purchase a no-fault auto insurance policy with unlimited lifetime medical benefits for injuries resulting from an auto accident, provided through personal injury protection (PIP) coverage. While most auto claims don’t result in the need for these unlimited benefits – the average Michigan PIP claim Michigan is around $34,000 – Michigan drivers’ annual premiums were well above the national average because of them.
Now, a new menu of six PIP medical coverage options is available to the state’s drivers. Prior to reform, a survey of Michigan consumers conducted by Citizens Insurance showed 70% of respondents planned to switch from unlimited PIP, and the majority planned to weigh coverage and price equally.
Six months into reform, it’s clear drivers are taking advantage of the new options. To date, Citizens Insurance has seen about 48% of customers who elect PIP options in its customer portal select one of the new coverage levels ($500,000 or $250,000).
But choice can bring questions, and there is no one-size-fits-all approach. In fact, not everyone qualifies for each of the PIP medical options. Drivers on Medicaid and Medicare, or those with qualifying health coverage, for example, can select different PIP levels than other individuals. For customers, the biggest challenge is finding the best balance of coverage and price. For example, historically, 99% of Michigan PIP claims are under $500,000, making the new $500,000 PIP option appropriate for many consumers.
In addition, it’s important to consider the state’s new legal environment. Unlike pre-reform days, auto accident lawsuits may now include additional financial damages. As a result, some customers may wish to consider higher bodily injury liability limits, uninsured/underinsured coverage limits, or an umbrella policy.
In fact, a combination of insurance coverages and policies may be the best way to balance protection and price. And, often, bundling policies with one insurance company can lead to cost savings, so it is worth exploring those options.
Though selecting the right combination of coverage is often confusing, the good news is, help is available. Around the state, independent insurance agents are helping drivers understand their options under reform. And, at Citizens, we’ve spent the last several months changing the way we do business to better anticipate and help meet customer needs, adding online resources, hiring additional staff, and updating policies.
These three steps can help customers as they review their policies:
- Seek professional advice. Begin with an independent insurance agent. Auto reform introduces a variety of changes, which can leave Michigan drivers at risk. Before getting a quote, talk with an agent to understand the risks involved and ensure the proper protection is in place.
- Determine the amount of personal injury protection (PIP) needed. Customers’ personal situations will dictate what level of PIP is appropriate, and independent agents can help customers make this decision.
- Consider whether other insurance coverages are needed. As more drivers choose lower PIP levels, the litigation environment in Michigan will shift and customers may consider adjusting other coverages to make sure their assets are protected in the event of a claim or a lawsuit. Independent agents can help assess whether other coverage levels, such as bodily injury liability, should be adjusted, or whether an umbrella policy and/or uninsured/underinsured motorist coverage should be added.
The process of settling on the right insurance coverage requires consumers to think about how much risk they can tolerate and at what cost. For most drivers, reaching out to an independent insurance agent is a great way to start.
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 2019 Insurance Research Council report on auto insurance affordability
All products are underwritten by The Hanover Insurance Company or one of its insurance company subsidiaries or affiliates (“The Hanover”). Coverage may not be available in all jurisdictions and is subject to the company underwriting guidelines and the issued policy. This material is provided for informational purposes only and does not provide any coverage or guarantee loss prevention.