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How Did Michigan Get Our One-of-A-Kind Auto Insurance System?

May 15, 2019

Last week the Michigan House and Senate passed reforms to Michigan’s auto no-fault insurance system. In recent polling data, vehicle insurance rates are listed as one of the top two issues for Michigan voters. During the 2018 election cycle, auto insurance rates were a main policy theme of candidates on both sides of the aisle. While the focus in the media has been on the policy changes being considered by the Michigan legislature, a question most Michigan residents don’t know is how we ended up with a no-fault system that is so unique and different from every other state in the nation, which many believe is the cause of the state’s high rates.

Michigan’s no-fault auto insurance law took effect nearly 50 years ago under Governor William Milliken. Challenged in court, the Michigan Supreme Court upheld Michigan’s no-fault law in 1978. That same year, in order to fund the most serious and expensive auto injuries in the system, the Michigan Catastrophic Claims Association fund, which all insured motorist pay into with an annual fee, was created.

Following increases to insurance rates and questions over the fiscal sustainability  of the system, two ballot proposals went to the voters in 1992 and 1994.

    • The 1992 ballot proposal was a citizen-initiated proposal that made its way onto the ballot through signature collection. In part, the legislation would have capped the allowable expense of personal injury coverage at $250,000 and require a 20% rate reduction in car insurance rates. 63% of Michigan voters said no at the ballot box.
    • The 1994 ballot proposal was a referendum on a law passed by the legislature in 1993. Enough voter signatures were collected to put the legislatively passed law on the ballot for voters to decide. The proposal capped allowable personal injury expenses at $1 million and required car insurance rates to be reduced by at least 16%. Voters once again rejected this proposal, with 60% saying no.

Since 1994 there have been numerous legislative attempts to reform Michigan’s no-fault system, but none of them have been successful. As car insurance rates have climbed to the most expensive in the nation, we may be at the tipping point for reforms. The Senate has been able to pass legislative changes to the system over the past several years, but the reforms have always stalled in the House. The changes passed by the House last week are a stark contrast to the failed attempts of past legislatures. It still remains to be seen if one of these proposals can make it to Governor Gretchen Whitmer’s desk and if she would sign either of these reform proposals. However, this is further than any legislature has progressed on this issue in a long, long time. Should any of the reforms be signed into law, we may ultimately find out if auto no-fault insurance is the cause of the high auto insurance premiums in Michigan.

Michigan Legislative Consultants is a bipartisan lobbying firm based in Lansing, Michigan. Our team of lobbyists and procurement specialists provide a wide range of services for some of the most respected companies in America. For more on MLC, visit www.mlcmi.com or connect with us on LinkedIn and Twitter.