Auto insurance rates have always been outrageous in Michigan. In Grand Rapids, someone can expect to pay more for auto insurance than someone in Beverly Hills or Manhattan. That’s recently changed, though. New legislation focused on Michigan auto insurance reform was passed in July 2020 that will put more money back in your pocket in 2021. Learn how the new legislation will affect you and how it will save your hard-earned cash.


Michigan Personal Injury Protection (PIP) Reform 2021 FAQ

Here is a quick rundown of what you need to know as you renew or re-evaluate your current auto insurance policy. Previously, Michigan required all drivers to carry unlimited PIP coverage as part of their car insurance policy. It had many health and recovery benefits for injured drivers, but it came at a high cost to Michigan residents.

Reduced PIP Coverage Costs

The new reform law requires insurers to reduce the cost of the PIP part of your insurance and gives you coverage options. The required reductions as of July 2, 2020, are as follows: 

  • 10% reduction on unlimited PIP coverage
  • 20% reduction on $500,000 of PIP coverage
  • 35% reduction on $250,000 of PIP coverage
  • 45% reduction on $50,000 of PIP coverage
  • 100% reduction when you opt-out of PIP coverage

More Liability Coverage is Required

As of July 2, 2020, the default minimum liability coverage offered to drivers will be $250,000 for one person injured or killed in an accident and $500,000 for two or more people injured or killed in an accident. Drivers can request reduced coverage of $50,000 for one person injured or killed in an accident and $100,000 for two or more people injured or killed in an accident. Previously, the mandated minimum coverage level was $20,000 for one person injured or killed in an accident and $40,000 for two or more people injured or killed. 

Limited Personal Information Used in Pricing

Another aspect of the new reform covers how insurers arrive at pricing. They generally take into account various factors, including the make and model of your auto vehicle, credit rating, how many miles you drive, and your level of education. As of July 2, insurers are banned from using marital status, gender, occupation, credit score, zip code, residential status, and education when pricing coverage. They can still use territories instead of zip codes. They can also use some credit info like payment history.

Caps on Medical Procedure Fees

In the past, Michigan state law required insurance companies to pay what’s reasonably necessary to treat a crash victim. This resulted in auto insurers paying astronomically high medical fees. For instance, an MRI that cost Medicare $500 was billed at $3000 to a car insurance provider. Michigan PIP reform implements a new medical fee schedule to limit how much auto insurers are forced to pay for medical bills. Initially, medical bills can be charged at 200-250% of what Medicare would pay. Then rates would drop to 190-230% of what Medicare would pay (depending on the type of facility) starting in 2023.

Required Approval of Rates

Before the changes, Michigan allowed insurers to submit rates and begin using them immediately. New oversight mandates rate approval prior to adjusting customer’s charges. 

These combined reforms are meant to rein in costs associated with PIP and reduce the overall cost of auto insurance. However, the reform only covers PIP which is about half of a driver’s premium, meaning it doesn’t guarantee your bill will be lower.
Get a Car Quote from Compass Insurance Agency and Save $796


Save Money Without Risks

Do you know how much coverage you need? Opting for too little coverage will be shooting yourself in the foot. Overcompensating will increase your premium. Confirm you have no gaps with your medical provider before choosing a lower PIP coverage option.

At Compass Insurance, agents are PIP reform experts. They have spent countless hours over the past year preparing a comprehensive guide for policyholders to explain the changes made by the PIP reform bill. When you trust Compass Insurance Agency with your home and auto insurance needs, our agents will ensure you don’t make costly mistakes when you choose your PIP coverage.

That’s not the only benefit to working with us. On average, we are able to save customers $796 a year when your car, homeowners, motorcycle, and boat insurance policies are bundled together. 

We know no one wants to pay more on insurance than they need to. With Compass Insurance Agency you can save with a few clicks of the mouse. Our agents work with roughly the top 20 insurance carriers to get the best prices for you. We’ll present you with all of the options and provide you all of the advice you need to make a decision.  

Get affordable auto insurance with an appropriate level of PIP coverage. Schedule a time with one of our agents to explore your options.