Michigan Senate Committee Approves Bill Changing State’s No-Fault Insurance

Altering Michigan’s no-fault auto insurance system has been a hot issue in the state for some time. Recently approved changes to the state’s insurance law has garnered the attention of those in opposition and support of a no-fault auto insurance system.

Altering Michigan’s no-fault auto insurance system has been a hot issue in the state for some time. Recently approved changes to the state’s insurance law has garnered the attention of those in opposition and support of a no-fault auto insurance system.

The Michigan Senate Insurance Committee voted 5-3 Wednesday in favor of Senate Bill 248, making several changes to the state’s no-fault insurance law. The bill creates a new association to oversee catastrophic medical expenses covered by the state and an new authority to better combat fraud, among other changes.

Legislation in 1978 made Michigan the only state with no-fault auto insurance to provide unlimited lifetime coverage for medical expenses as a result of an auto accident. Current policies are structured such that policyholders submit claims for their medical expenses under no-fault coverage to their insurance companies, who pay it out in full. Any expenses in excess of the $530,000 limit per claim gets reimbursed to the insurers by the Michigan Catastrophic Claims Association (MCCA), which is the private, non-profit and unincorporated association that handles the expense payments.

In 2014, the MCCA paid out more than $1 billion, mostly for brain and spinal cord injuries, multiple fractures, and back and neck injuries, according to The Associated Press. To cover the cost of the expenses, the MCCA requires an annual per-vehicle fee of $186 that will drop to $150 beginning this summer.

The modest decrease in the fee hardly erases larger fiscal concerns related to the Michigan’s no-fault system.

Insurance companies have been pushing for changes in Michigan, arguing they are unfairly charged more than other entities, such as workers’ compensation, for similar medical procedures and care. As a result, the cost of auto insurance in the state is higher for drivers. Michigan had the 7th highest average car insurance rates in the nation in 2012 at $1,049, according to the National Association of Insurance Commissioners. This belies the wide range of costs within the state however. Detroit, for example, typically ranks as the most expensive city nationwide for auto insurance costs.

Those opposed to Senate Bill 248 are worried about the speed at which it was passed and feel uncertain of the amount of cost savings the new system will result in. The Coalition Protecting Auto No-Fault (CPNF) already published their own analysis of Senate Bill 248 which details the organization’s issues with the bill.

Bill 248 can go before the whole Michigan Senate at any time but hasn't yet as of publication.

Mark Fitzpatrick

Mark is a Senior Research Analyst for ValuePenguin focusing primarily on the insurance industry, primarily auto insurance. He previously worked in financial risk management at State Street Corporation.

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