Michigan Auto Insurers to Reduce PIP Premiums with New Legislation

Michigan auto insurers are set to implement further reductions in personal injury protection (PIP) premiums following the introduction of House Bill 5981. This legislative proposal, presented by Rep. Rogers and 20 others, aims to extend the current PIP premium reduction requirements for auto policies effective before July 2, 2028. The bill is now under review by the House Committee on Insurance.

Under existing mandates, Michigan auto insurers must reflect specific average reductions in PIP coverage compared to rates from May 1, 2019. These reductions vary based on the coverage tier selected by the driver, ranging from 45% or more for the highest tier to 10% or more for policies without a coverage limit. This structure incentivizes drivers to choose coverage tiers suitable for both their needs and budget.

The proposed bill intends to sustain these stipulations by applying them to all policies effective before mid-2028. It requires insurers to continue submitting compliance filings for policies issued or renewed starting July 1, 2024, and again beginning July 1, 2026. A critical aspect of the bill is upholding the rule preventing insurers from issuing or renewing auto policies in Michigan without approval of PIP rate filings.

For drivers opting out of PIP coverage or holding policies with specific exclusions, the bill mandates that the filings result in no PIP premium charges. Insurers still have the option to seek relief if the reduction requirements pose a risk to their financial stability, particularly concerning risk-based capital levels. Nonetheless, constitutional grounds for such exceptions were phased out as of July 2023, strengthening the compliance requirements.

Insurers are also required to pass on savings realized from certain insurance code sections related to treatments for accident victims before July 2, 2021. Compliance involves providing necessary documentation to the director for evaluation. Additionally, a severability clause in the bill stipulates that if any core section of the rate-reduction mandate is invalidated by a court, the entire legislative act, including amendments from 2019, would be nullified.

Another critical component is the tie-bar clause; the bill will only take effect if a corresponding Senate bill or another House bill is enacted. Insurers should be aware that if both this bill and its companion are passed, Michigan's auto insurance industry will continue to follow the existing PIP rate reduction framework and its regulatory compliance requirements until mid-2028.