[Pt. 1] Understanding the Michigan Auto Insurance Reform

About this episode

January 24, 2020

Today, Michiganders are required by law to maintain a "No-Fault" automobile insurance policy, which includes coverage for Personal Injury Protection (PIP) benefits. The existing No-Fault law has been reformed so that on July 2, 2020, and later, many changes will take effect, including giving Michigan drivers a choice of six options for their level of PIP coverage. In this episode of the GEEK FREAKS PODCAST, we put Bill Springer, Principal at Conrad Insurance Agency on the Insurance Hot Seat to discuss the impact this new law will have on the insured Michiganders.

Bill Springer | Principal

Conrad Insurance Agency
8518 Canton Center Road
Canton, MI 48187
(O) 734-416-8280
(F) 734-416-8287

Website: www.conradagency.com

THIS WEEK ON THE HOT SEAT

RON HARRIS

VICE PRESIDENT

15 years in the industry.
Enjoys spending time with his family, riding his Harley, and finding time to sleep.
Fun fact: Ron broke both of his arms.
He's a simple person, enjoys work, but also enjoys being alone reading a book or learning something new. Loves candy DOTs!

BILL SPRINGER

PRINCIPAL AT CONRAD INSURANCE AGENCY

I help business owners who are worried about their liability and workers comp exposures, are fearful of their cashflow position, and are angry that the only time they hear from their incumbent agent is when they see their name on a renewal bill.

I also help auto owners, and home owners who are frustrated that their agent does not constantly shop the market for better rates/coverages, and are mad that their business is being taken for granted.

Specialties: I have vast experience correcting issues with small businesses, and their owners, most notably those who are fearful they are not getting the attention they deserve. I also help car owners, and home owners who are angry because they feel their business is not appreciated.

VIEW TRANSCRIPT >

Ron: (00:00) Welcome to the Insurance Hot Seat. A special series by the Geek Freaks Podcast dedicated to answering the tough questions in the insurance industry.

Music: (00:08) [Intro music]

Ron: (00:21) Our guest this week is Bill Springer with the Conrad Insurance Agency. And today we're going to talk about the auto reform act. Bill, how's it going?

Bill: (00:28) It's going all right Ron, how are you?

Ron: (00:30) Oh, I'm not too bad. I'm not too bad. So auto reform is the new kid on the block, the new thing that's coming down the pike here. So I guess start with what does it mean to the agency, this auto reform act that's happening?

Bill: (00:45) Well for the agency, what it means right now is a lot of education because even though the official effect, well the effective date that's been advertised is July 2nd of this year, there are parts of this bill that actually could become, uh, effective immediately depending if the insurers take a, uh, take certain actions. So on the agency end, it's a lot of education and trying to get that education out to our insured as well.

Ron: (01:14) So right now it's all kind of new. I mean, we've seen it, the news, right? Everybody's been stumping on it as far as elections and so forth. So from my aspect, it seems all good things. But uh, you know, as you kinda look underneath the, the bill here, there's, there's some changes and those changes can have longterm effects on a lot of people in the state of Michigan. What, you know, if you had to pick, I guess the top three things that are going to be changing and that could have effect on, you know, users or consumers, what would that be off the top?

Bill: (01:45) Well, the first, the first change is going to be the guaranteed premium reductions on, on the personal injury protection piece of, of your auto policy. So those are tiered depending in for the first time you, you're able to pick out your PIP benefit, whereas it used to be you have to buy unlimited PIP coverage and PIP stands for personal injury protection and unlimited. Uh, it would, would be just that in case someone gets injured in an auto accident currently as things stand now, it provides unlimited lifetime medical benefits to the injured party. That's going to change, but also the premium you pay is going to change and there's guaranteed rate reduction for the next eight years on that line item on your auto policy. The second thing that's a huge change is once you start peeling back the onion on the, um, on, on after the savings is actually what the new PIP replacements going to be. Um, previously the personal injury protection premium funded the NCCA, the Michigan catastrophic casualty association, um, that's going to change. It's going to fund a different association, uh, and that different associations going to have a lesser benefit. And then the third thing that's going to really impact insurance especially is going to be, um, the personal injury protection order of priority. And so those are the three things we see in the agency as things we need to get in front of. Um, real quick because some of the order of, uh, the PIP order of priority can be effective at any time from now through July 2nd depending on the insurer.

Ron: (03:38) What does the order of priority, I mean, what does that mean to the consumer?

Bill: (03:42) What that means is how, how the personal injury protection benefits pay out. Um, and currently that's, that's going to change and where it impacts people the most, at least for right now is, um, is if you have non-resident relatives, if you have a car titled in your name, you're paying the insurance on it and say you have a son or daughter in their early to mid twenties who's not a student who is using that car and not living in your house. That's, that's the first, those are the first set of people we've looked at in the agency to try and get out in front of, to educate them on what this new law is going to do for them. And again, that that could be effective at any time. That's not just going to be effective July 2nd that could be effective now.

Ron: (04:33) So if you're not the primary insurance holder, you're the secondary or you know, a son or a daughter, that's, that's who's getting that could, that could be lessened benefits for your, for, for them or for you?

Bill: (04:44) There could be no coverage.

Ron: (04:45) Oh boy. Yeah. Okay. Yeah. Yeah.

Bill: (04:47) If someone is a listed driver on their parents' policies. They had 23 - 25 year old is a listed driver on their parents' policy. And they have one of the cars that's titled to the parents and they live a couple, you know, couple towns over or out of state and they think they're covered once this becomes law and effective, they're not, that PIP will not provide them coverage.

Ron: (05:10) Interesting. So essentially what all you know, so if I, if I had to look at it from the consumer side, is it's gonna make my son or daughter get a policy sooner than that they would traditionally. So adding more expense on all the kind of the savings that were supposedly supposed to be seen are still going to be coming out of our pocket just in a different form.

Bill: (05:28) Absolutely.

Ron: (05:30) Interesting. So what does that mean for agencies? Producers too? I mean, so right now, you know, if you're a personal lines agency and you're doing a lot of that volume, what does that look like? As far as you know, is you hit on education. So now we have to educate the consumer. So now it's a longer sales cycle. So are the producers being trained on what's going to change or is that something that, you know, we're just going to pick up on in language and move on down the road? Cause it's big and scary.

Bill: (05:56) Well, I can, I can speak to my agency and I guess we have a fear that, um, come July 2nd, we're just going to get a slew of calls with people, have questions and things of that nature. Um, well we've been trying to do here is educate the producers. We've tried to, um, we've tried to initiate a, uh, uh, an email campaign to start educating our insured so that we start spreading this work and starting now, rather than waiting for July 2nd, uh, over that timeframe to at least get the questions out of the way, get a game plan for each insured that this may impact and, and move forward so that way come July 3rd. we're not wondering, you know, we're not, uh, wishing that we're out of the business because it's just been nothing but re quoting existing policies.

Ron: (06:52) Yeah. And then, so I imagine that's what, that's what's going to happen, right. Is the floodgates are gonna open. People are gonna say, Hey, you know, you, you call your insurance agency, you could probably save some money, blah, blah, blah. It's going to be that thing again. But like you were just stating that there's a lot of caveats to it that I don't think we fully understand as insureds. Right. Is that...

Bill: (07:11) Yeah. And, and, and I, I, we've been trying to stay on, like I said, we've been trying to stay on top of this and the Detroit Free Press had a pretty good article on Sunday, um, and it's not just the PIP order of priority, but now, uh, there, the, the standard, uh, BI limit, bodily injury injury limited liability is going to increase to a default of 250,000 per occurrence, 500,000 aggregate. Um, whereas now the state minimums 20,000 per occurrence, 40,000 aggregate. And, um, that's the state minimum to standards 100,000 per occurrence 300,000 times aggregate. So, um, not only will there be questions that we need to have with our insureds as far as what they want to do with their PIP coverage, which that kind of the PIP coverage itself kind of peels back the onion even more. But now you have mandatory increases in your liability coverage. You got non-resident relatives you may have to ask some questions on. So, uh, there's, there's some things we've been trying to ramp up force to that we're ready for when those calls come. We're trying to actually start getting some stuff out to our insureds to at least prompt them to call in so that we might have that conversation with them earlier than July.

Ron: (08:37) Yeah. And that's, so that's, you're doing that via email, you're reaching out phone calls, emails you're doing, you're doing all forms of communication. Cause I'm just like smaller agencies might struggle with, you know, picking up the phone and dialing all their insureds or is it, you know, have you seen anything yet that's working better for your agency, whether it's a email, phone calls or that kind of stuff?

Bill: (08:57) Well with the, the, the law, it was weird because the legislator legislatures passed the law and then they seem to pass the bunch of talking points and then they threw it to the department of, uh, of insurance and financial services to actually figure out what they passed. So it's taken awhile for DIFS the department of insurance and financial services to start clarifying some of these questions. And actually a lot of them were up in the air still. So we're not, we're, we're, we're using an email campaign which will bring up the conversation with people we know, um, may be impacted when they call in. Um, but until we get some further clarification, um, you know, those, those are the steps we've taken right now. And we're by no means a, a huge agency, but, um, you know, calling each insured is, is going to be tedious and whether that's even feasible or not, I haven't figured out yet. We're trying to amass the, uh, the email addresses and send out the email alerts. At least prompt to call in if nothing else.

Ron: (10:07) No. And it seems like you're, cause I was thinking back if anybody's reached out to me from my, um, agency or any of the insurance agencies that I use for certain things, and I really haven't heard much about it. I did some research prior to talking with you and it seems there's just that there's a lot of gray right now and it's, it's kinda scary. Uh, and I know that we're going to be having more conversations wrapped around this policy. So it's very interesting. It's the same thing. They have a data protection act that's getting pushed out in 2023 that has really no changes in it besides the limits, uh, for what they put out a couple of years ago. So it's just interesting to see kind of how the government is pushing out policies. You know, you don't really know until you, you know, until you need to know. But unfortunately for some people it's going to be too late.

Bill: (10:50) Yeah. And it's getting even dicier because with that change in the order of PIP priority, uh, you know, that that is now changing, uh, funds from the MCCA to the MACP and a, the MACP doesn't have a funding mechanism currently until after the law passes in July. So now the, uh, Michigan auto-placement facility is suing department of information, financial insurance and financial services to, to stop, uh, the immediate implementation of the PIP order priority. And I haven't heard where that's ended up, but you know, we have the state suing the state on this, it's a mess.

Ron: (11:32) Yeah. And that's usually how it goes. Right? Is it we, we pass it cause it seems good and we get all behind it, but then there's all this infighting and just gray nasty area that we have to sift through. And I wouldn't be surprised if nothing really shakes out until that day. Right. Is that, Oh, we got to have an answer for this.

Bill: (11:49) I would, I would agree. And I mean the talking points that were passed everybody can get behind. I mean who doesn't want to pay less for their auto insurance on face value. But then when you start digging down and you find out the actual benefit changes that are going to impact people, whereas, you know, on the MCCA you have unlimited, uh, you know, medical medical benefits for life. And that includes, you know, if that includes adjusting ramps and walkways for people who are, who are, uh, who are physically disabled and unable to take advantage of home attendant care, that that now has to be afforded into the MACP's $250,000 max, which not a whole lot left over for that. Health insurance won't pick that up. So now you have to have the conversation on what type of coverage you really, really want with the insured because you know, every, if you take a lesser PIP selection, most of the carriers I'm speaking to, well at least offer a, a, an attendant care endorsement. But it's still something that you're going to have to ask people to make sure they're aware that, that, uh, this is this, this is not, this is an option that can be covered. And then, uh, then the E and O issues arise thereafter too. If you're not on top of it.

Ron: (13:06) So right now, if I'm in an automobile accident, I get, I'm hurt, I need assistance for the rest of my life. I'm covered. I'm taken care of by the plan as, as it is going forward after July. Um, I will, I will be able to use as much as I have until the $250,000. Once that's up, it's up. It's your on your, on your own. You got to figure it out.

Bill: (13:30) Right.

Ron: (13:30) And then that's where the insurers, so the insurance companies will then have righters or amendments or whatever the case is to have other plans in place so you could then spend more money to get that attended care coverage or you know, whatever else the coverage may be. So yeah, it looks great on paper that we're going to be saving money, but longterm we might be still, you know, we might have more that we have to pay out.

Bill: (13:55) Yeah. And, and, and we did some dummy mock ups on, um, on some of the, uh, some of, some of our people in the, uh, in the agency to see what would, what would happen with the lesser PIP selection. And, uh, we had one person who chose the half million dollar PIP limit rather than unlimited. And I think it turned out that it was only about $190 savings over the course of the year by choosing that option.

Ron: (14:23) Yeah, that's a, it's not a lot for, you know, unlimited or whatever, $500,000.

Bill: (14:29) Right, right. That, that's kind of what, uh, what we came up with. So, um, it's been, it's been an interesting process as far as trying to educate our, our, you know, everybody in the agency and then getting this out to our insureds.

Ron: (14:44) I like, I like the process though, right? I like the thought of, okay, we need to train internally. We need to say this is what we're doing. This is our stance as agency, you know, we don't want to have lower limits or whatever the case is. You want to work with everybody individually, but then to try to educate everybody, whether it's email, maybe it's a hard copy, maybe it's every time they call in, they can speak to their producer and kind of have that conversation. I think you guys are doing it right. Uh, hopefully that other agencies will pick up on, you know, it's, it's essentially education at some level. It's not really a change to the agency per say. It's a change to how we're going to educate.

Bill: (15:20) Yeah. Without question. And, and I know a lot of people, I, I don't know anybody in the agencies not dreading July 3rd.

Ron: (15:27) Oh, that phone is going to be ringing. Yeah. There's...

Bill: (15:29) Yeah, yeah, yeah, yeah. That's, that, that's going to be one that, uh, you know, we've talked about, uh, hiring, you know, maybe someone as an intern or something along those lines to at least take some of the work that we might otherwise set, be free to do, uh, put it on them. So now we've got our licensed agents available to at least answer questions. So the staffing is staffing issues. One of those that we've had early conversations with as well.

Ron: (15:57) And that is the third, which is a Friday, and then we're then the independence day. So yeah, you're gonna have a lot of closures. A lot of people very, uh, concerned. Right. Is Saturday, that's I think the third of Friday. Yeah. Saturday is the fourth woof. It's going to be a busy Monday.

Bill: (16:13) Right. Well, I mean, even if, you know, I haven't looked at the calendar, but if the third is a Friday and Saturday is the fourth, it might be that we're closed that Friday. The only benefit is on something like this, these changes for most people aren't going to take effect until renewal.

Ron: (16:28) Oh yeah. That's a good point.

Bill: (16:30) Well, although, um, you know, you'll, you'll always get the people in, we'll probably get a slew of them. They'll call in July 2nd hearing that they can get lower car insurance and want to change so that, that's, that's where a lot of the work's probably going to come in that first week.

Ron: (16:45) Yeah, no, it's a, I don't envy that position on, uh, the day before holiday. Right. Is, it's gotta be a tough one. Bill, I appreciate it. It's been very educational for someone that only knew a little bit about it. Um, I'm excited to see how agencies handle this, uh, unique situation. It doesn't happen very much. I'm excited to see how everybody starts training and educating everybody. It's very, uh, exciting for me. I know it's tough for the agency owners and principals, but we'll get there.

Bill: (17:13) Well, it's, it's, I wouldn't call it exciting. It's, it's, it's something that needs to be done. One one on one curious thing that I found to that, that I just wanted to mention is the motorcycle PIP order priority has not changed. The legislature did not decide to change that. So, um, right now and after July 2nd, if you are involved in an accident with a motorcycle, that PIP claim actually goes on the vehicle operators coverage. It does not go on. It goes on to the, even if, even if the motorcyclist is at fault, uh, it goes on to the motor vehicle that was involved in the accident, that that has not changed, which kind of shocked me.

Ron: (17:58) So if I'm in my car and I hit a guy, there's an accident with a motorcycle, my insurance, no matter what is picking up the motorcyclist.

Bill: (18:06) If you're in your car and you're driving and a motorcyclist that is drunk, runs a red light and T-bones you, it goes on your policy.

Ron: (18:15) Oh, okay. That's interesting. Yeah. Interesting. So they just go, they just don't want to address it.

Bill: (18:23) No, I don't. I don't know. I'm not sure why but, but that, that's, that's been the way, and when we went through this PIP order priority educationally, it kind of opened my eyes to it. But, um, you know, I, I guess they decided that it was in whatever, for whatever reason, they weren't going to change.

Ron: (18:42) That's crazy. Again, that's more of that gray area, right. As you sift through and as users and everybody sifts through what's happening, there's gonna probably be more stuff that we pull out that's like, no, that doesn't really make sense, but they, they put it in so we got to figure it out.

Bill: (18:58) Yup. Yup. Absolutely. Right.

Ron: (19:00) Well, Bill, I appreciate it. Uh, thank you so much for your time today. Very exciting to learn about auto reform. I know a lot of people don't know much about it because it's just been in the news as a really good thing. So it's always interesting to kind of hear the other side of it and how it's going to affect everything. I appreciate it. Um, yeah. And we'll talk to you soon, Bill.

Bill: (19:18) Alright thanks Ron.

Ron: (19:18) Thanks buddy.

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