State Sen. Sylvia Santana (D-Dearborn, left) and state Rep. Abdullah Hammoud (D-15th District) answer questions about Michigan no-fault auto insurance reform during a town hall July 25 at Fordson High School.
By ZEINAB NAJM
Times-Herald Newspapers
DEARBORN — State Sen. Sylvia Santana (D-Dearborn) and state Rep. Abdullah Hammoud (D-15th District) presented information on the changes made and what can be expected with the new no-fault auto insurance reform signed into law May 30.
The town hall July 25 at Fordson High School, 13800 Ford Road, is one of the several town hall-style meetings that will be held on the bill before it goes into effect on July 1, 2020.
The new law reforms a broken auto insurance system and offers historic protections for drivers across the state, a May 30 press release from Gov. Gretchen Whitmer’s office said.
“Today Gov. Gretchen Whitmer signed Senate Bill 1, which passed with overwhelming bipartisan support, to reform Michigan’s auto insurance system to guarantee lower rates for every Michigan driver, protect insurance coverage options, and strengthen consumer protections,” the release said.
Santana and Hammoud said there were parts of the bill they did not agree with, but that they voted for it because it was overall a step forward. Santana said it was important for her to add an amendment asking gender not be used as a non-driving factor because women were already paying 10 percent more for insurance compared to men.
The new law aims to save Michigan drivers money by:
• Guaranteeing lower rates for drivers for eight years.
• Protecting people’s choice to pick their own personal injury protection options with coinciding PIP rate reductions, offering unlimited coverage (10 percent PIP reduction), $500,000 coverage (20 percent PIP reduction), $250,000 coverage (35 percent PIP reduction), $50,000 coverage for Medicaid eligible recipients (45 percent PIP reduction), or a complete opt out for seniors or anyone with sufficient private insurance (100 percent PIP reduction).
• Increasing consumer protections by banning companies from using non-driving factors, such as ZIP code, credit score, gender, marital status, occupation, education attainment, and homeownership, to set rates.
• Setting fee schedules for hospitals and providers to prevent overcharging for auto-related injuries.
In 1973, changed from state insurance to no-fault auto insurance to insure individuals were covered in case of an auto accident. In 1975, insurance companies had to provide a level of coverage of $550,000 to make sure if a person was in an accident, that the insurers were able to cover up to the $550,000 and then the Michigan Catastrophic Claims Association fund was created. What that fund was designed to do is to make sure that once an insurer has covered up to $550,000 that the insurer could go into the fund — actually they have to file to get reimbursed for any additional fees that a driver may incur in an accident.
Michigan drivers also could see savings due to the annual MCCA fee, which is expected to drop to $43 per year from $220 for people who decide other levels besides the unlimited benefits option or to opt out of the PIP coverage.
That fee is paid by all drivers which has funded unlimited benefits for people who suffered severe injuries in an accident, which is 18,082 people as of June 30, 2018, according to the MCCA claim statistics.
Under the new law, the use of ZIP codes is prohibited by insurance companies but they are still able to use territory as a rating factor. Also, while credit score cannot be used, credit reports can be.
This was one of the questions asked by an audience member during the town hall, to which Santana responded.
“Also when you look at the territorial conversation, factor in that currently your health insurer — that’s how the rates are factored for your health insurance,” she said. “We have 16 territories across the state of Michigan and that’s how they currently look at us as a demographic when it comes to health insurance coverage. So, what we’re doing with this policy is mirroring what your health insurance company is currently doing.”
Michigan has the highest auto insurance premiums in the country, with the Detroit being No. 1 and Dearborn No. 2 in the state.
A town hall attendee asked if Dearborn would be getting relief with the ban of ZIP codes under the non-driving factors. Hammoud said he believes people will see a rate reduction off the PIP portion of their auto insurance bills due to multiple aspects.
Other questions asked were if Medicare covers accidents to which Hammoud said it is the assumption that Medicare Parts A and B do depending on the plan. Another attendee asked if other states had to legislate non-factor projections and the answer to that was yes.
When Hammoud and Santana were asked what is going to stop auto insurance companies from charging more for rates with no restrictions, they said the Department of Insurance and Financial Services reviews and approves before they’re implemented.
Michigan uses a file and use policy where insurance companies files rate changes with DIFS and begins using them, with approval. The file and review system Michigan changes to would require that rates are approved by DIFS before companies can charge customers.
“We just switched to a system called file and review,” Hammoud said. “California does this, and other states do this. What this means is now the insurance companies will file the rates they want to use and DIFS has been given more authority, more power to look at everything they want to use to calculate their new premium and determine if it’s allowed or not. The insurance companies can submit their rates, but DIFS has the power to push back.”
Santana explained that insurance companies will automatically put an individual in the $250,000 PIP option bracket and it is up to the person to make sure their health insurance and auto insurance coordinate. She also said insurance companies are required to provide individuals with information on the benefits.
Hammoud said that as more is learned about the new law over the next year, there will be more town halls hosted, including one with auto insurance companies which are willing to participate.
(Zeinab Najm can be reached at [email protected])