Catastrophic claims fees to take effect in Michigan auto insurance rates

Michigan Auto insurance - Umbrella Car

Drivers across the state will need to start paying the additional fees starting with July premiums.

Michigan drivers are going to be paying more for their auto insurance starting in July, when higher catastrophic claims fees go into effect.

This is the case even for motorists who have opted out of catastrophic no-fault coverage.

Last year, the Michigan Catastrophic Claims Association (MCCA) decided to increase its annual per-vehicle assessments on all auto insurance policies in the state. The fee hikes resulting from that decision will become effective as of July 1.

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Michigan drivers who have opted for unlimited, lifetime medical coverage (also known as personal injury protection, PIP), will have their fees increased from $86 to $122. Drivers that have opted for any other form of PIP – including the zero-dollar PIP – will see a $48 assessment charge for “deficit recoupment.” At the moment, motorists who have selected any option aside from unlimited will not pay any of the fees or MCCA assessments.

The new and increased auto insurance fees are meant to help address the MCCA’s statewide fund deficit.

The MCCA’s statewide fund is what pays the medical expenses of victims of car crashes that have been the most severely injured. In 2020-2021, that fund had a $5 billion surplus. However, it fell into a deficit within the last fiscal year due to several different reasons.

This began with a court decision in the summer of 2022, overturning some of the no-fault medical cost controls for victims of car crashes. It caused a projected loss of about $3.7 billion. Stock market declines led to a further loss of $2.8 billion. Finally, the cost associated with issuing the spring 2022 refund checks of $400 per vehicle which were issued due to the previously existing surplus brought on an additional loss of $3.1 billion.

The auto insurance fees are meant to help ensure the MCCA will have adequate funding in the face of deficit. The Michigan Supreme Court may arrive at a decision ahead of its July 31 term end in the case that had overturned the catastrophic crash survivor medical cost controls.

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