No-fault claims fee to drop 55% under new Michigan law; many motorists will pay nothing

Paul Egan | Detroit Free Press

Show Caption Hide Caption State. Rep. Chatfield talks no-fault auto insurance reform House Speaker Lee Chatfield (R-Levering) talks no-fault auto insurance reform early Thursday morning.

LANSING – After years of double-digit increases, the catastrophic claim fee paid by Michigan drivers as part of the no-fault insurance law will be cut 55% next year, to $100 per vehicle, officials said Wednesday.

And that’s only for motorists who opt to continue with unlimited medical coverage.

Those who choose lower limits for medical coverage, available under a law passed in May, will avoid the fee altogether, officials said.

Wednesday's announcement by the Michigan Catastrophic Claims Association is the first tangible and specific good news motorists have received about their auto insurance premiums since Gov. Gretchen Whitmer signed a no-fault auto insurance bill into law in late May.

Still, it's too early to say exactly how anyone's overall insurance bill will be affected by the new law when it begins to take effect in July 2020.

The new law also guarantees eight years of savings of between 10% and 100% in the personal injury protection (PIP) portion of the auto insurance bill, depending on what level of medical coverage is selected. But insurers also have said that motorists are likely to face higher premiums in the liability insurance portion of their premiums.

Both Whitmer, a Democrat, and Republican legislative leaders cheered Wednesday's announcement.

Whitmer said the planned reduction "demonstrates that our historic bipartisan legislation will provide real savings to Michigan drivers."

But John Cornack, president of the Coalition Protecting Auto No-Fault, made up of medical providers and other groups that support mandatory unlimited medical coverage, said Wednesday's announcement is part of an insurance "shell game."

"All across Michigan, we are hearing reports of auto insurance companies jacking up premiums at renewal, so they can keep their profits high when they are forced to offer savings on Personal Injury Protection insurance next summer," Cornack said in a news release.

On July 1, the catastrophic claims assessment increased to $220 per vehicle. That was a 14.6% increase from the previous year.

For next year, "the 55% reduction results directly from savings created by cost controls for medical treatment and other changes made to Michigan’s no-fault insurance law," the MCCA said in a news release.

"These changes are estimated to erase the MCCA’s deficit of approximately $2 billion and reduce the annual MCCA assessment by approximately $1 billion."

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The MCCA increased the fee by 13% in 2018 and 6.3% in 2017.

The fee, which covers medical claims that exceed $580,000, is set annually and added to drivers' insurance premiums.

But those who opt for less than unlimited medical coverage will no longer have to pay the fee, at all.

The new law ends Michigan's status as the only state in the nation where motorists have been required to purchase unlimited PIP coverage.

PIP premiums sometimes make up 50% of a driver's total auto insurance premium, and some motorists are expected to save more than $1,000 annually on the PIP portion of their bills, depending on what level of PIP coverage they choose.

The catastrophic claims fee has been controversial because the association board is controlled by insurance companies and state courts have ruled that although the MCCA was created by an act of the Legislature, it is not subject to the Michigan Freedom of Information Act. Critics complain it is not transparent in how it calculates the fee.

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on Twitter @paulegan4. Read more on Michigan politics and sign up for our elections newsletter.