In the state of Michigan, it is not clear that no-fault insurance has much longer to live.
The state has the highest rates for automobile insurance in the country.1 For many, this high cost makes it difficult to afford a car; this cost imposition has led to a high number of uninsured vehicles in the state. Although Michigan is not the only state to mandate no-fault insurance, many attribute the high cost to the extent of coverage that these plans offer.
The laws of Michigan require that a Michigan no-fault policy provides “unlimited medical and rehabilitation benefits, wage loss benefits for up to three years, and $20 per day for replacement services if you are injured in an auto accident.”2 In addition, Michigan is the only state with a requirement that insurance providers pay unlimited medical costs to people seriously injured in accidents. These costs are not solely borne by those involved in the accident, but rather by an association to which insurers are required to contribute.
All insurers that sell auto insurance in Michigan must pay the Michigan Catastrophic Claims Association (“MCCA”) an annual fee for each vehicle insured. This cost is then passed onto drivers, who pay a fee.
However, Michigan limits the occurrence of high payouts for accidents with a heightened standard for tort liability for non-economic damages. Simple negligence does not suffice, and a burden is placed on the plaintiff to demonstrate that they have suffered “Serious impairment of body function.”3 MCL Section 500.3135(1) provides that a person remains subject to tort liability for noneconomic loss caused by his or her ownership, maintenance, or use of a motor vehicle only if the injured person has suffered death, serious impairment of body function, or permanent serious disfigurement.4 “Serious impairment of body function” is defined as an objectively manifested impairment of an important body function that affects the person’s general ability to lead his or her normal life.5
Another contributing factor insurance companies attribute to the high cost of insurance is the existence of the Michigan Assigned Claims Plan (“MACP”). The MACP exists to protect those who have been injured in automobile accidents in situations where insurance is not available. Similar to the MCCA, insurers are required to contribute to the MACP.
The cost of insurance has been prohibitively expensive for many, encouraging many to forego being insured. Evidence of this can be seen where insurance arbitragers create one-week insurance plans so that a car can be insured long enough to be registered.6 When their policy ends, the burden of paying for their subsequent accidents is placed on the MACP, and the cost of funding the MACP is placed on those who continue to insure their vehicles. This creates an iterative process of ever-increasing costs as more and more continue to go without insurance because of the price.
The countervailing goals of accessibility and protection make it difficult to ascertain the correct direction for Michigan legislators and insurers to take policies in the future. These concerns about insurance may be lessened as public transportation becomes more readily available, as driverless automobiles replace traditional cars, and if the movement to remove state borders for insurance gains footing.
Tyler Scott, Study: Michigan Most Costly State to Own a Car, Michigan Radio (Mar. 20, 2017), http://michiganradio.org/post/study-michigan-most-costly-state-own-car. ↩
A Consumer’s Guide to No-Fault Automobile Insurance in Michigan, https://www.michigan.gov/documents/cis_ofis_noflt_gd_25094_7.pdf. ↩
The Insurance Code of 1956 Act 218 of 1956 § 3135(1), M.C.L.A. 500.3135. ↩
Chad Livengood, State May End Sale of 7-day Auto Insurance Plans, CRAIN’S DETROIT BUSINESS (Mar. 31, 2017), http://www.crainsdetroit.com/article/20170331/NEWS/170339975/state-may-end-sale-of-7-day-auto-insurance-plans. ↩