Michigan’s new car insurance fees: What you’ll pay and why

JC Reindl, Detroit Free Press
Updated ·2 min read
13

The cost of car insurance is going up for everyone in Michigan starting July 1 when new and higher "catastrophic claims" fees begin.

Ambulance speeding by a gray car flipped over
Ambulance speeding by a gray car flipped over

Why it's happening

The Michigan Catastrophic Claims Association, or MCCA, decided last fall to raise its annual per-vehicle fees for all no-fault auto insurance policies. The fee increases are happening because of a deficit in the MCCA's statewide fund that pays for medical services for catastrophically injured car crash survivors.

The new fees

  • Drivers who choose unlimited, lifetime medical coverage — known as personal injury protection or PIP — will be charged $122, up from $86.

  • Drivers who choose any other PIP option, including zero-dollar PIP, will be charged $48 for "deficit recoupment."

Why there's a deficit

The Michigan Catastrophic Claims Association fund swung last year from a $5 billion surplus to a $3.7 billion deficit for three primary reasons:

  • A court decision last summer overturned some no-fault medical cost controls for crash victims.

  • Declines in the stock market.

  • The cost of issuing $400 per-vehicle refund checks in spring 2022. Those checks were prompted by the previous surplus.

More: Car insurance rates to jump for Michigan drivers as 'catastrophic claims' fees take effect

Why the court decision mattered

A Michigan Appeals Court panel said in a 2-1 decision last August that cost controls on medical services should not apply to services for people whose catastrophic accidents occurred before Gov. Gretchen Whitmer signed into law in June 2019 an overhaul of Michigan's no-fault insurance system.

That case is now before the Michigan Supreme Court, which could have a decision before the end of its term July 31.

Previous MCCA fees

Prior to the no-fault overhaul, all car insurance policies in Michigan had to include unlimited lifetime medical coverage or PIP. The last full MCCA fee that all drivers paid was $220 in 2019-20.

Drivers were given a first-ever choice in PIP coverage starting in July 2020. Up until now, drivers who chose any other PIP option besides unlimited didn't have to pay an MCCA fee.

Number of catastrophically injured

The MCCA is a nonprofit corporation controlled by the insurance industry that manages the catastrophic care fund. It acts as a form of reinsurance that reimburses auto insurers once the size of an accident victim's medical bills exceeds a threshold, currently $600,000.

As of June 30, 2022, there were 16,800 individuals in Michigan who had crossed the threshold.

This article originally appeared on Detroit Free Press: What the new Michigan auto insurance fees are