[Pt. 2] Understanding the Michigan Auto Insurance Reform
About this episode
FEBRUARY 21, 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 Jeremy MacDonald, President at Mid-Michigan Agency, and Jason Verlinde, President at Verlinde Insurance Agency, on the Insurance Hot Seat to discuss the impact this new law will have on the Michigan insurance agencies statewide.
Jeremy MacDonald | President at Mid-Michigan Agency
email: jeremy@midmichiganagency.com
call: (989) 463-2450
website: www.midmichiganagency.com
Jason Verlinde | President at Verlinde Insurance Agency
email: jason@verlindeinsurance.com
call: (586) 727-6525
website: www.verlindeinsurance.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!
Jeremy MacDonald
PRESIDENT AT MID-MICHIGAN AGENCY
One of the owners of Mid-Michigan Agency Jeremy ‘Rit’ MacDonald, has been a part of the agency since 1995, and as a licensed agent since 1998. Rit also holds his Certified Insurance Counselor (CIC) designation from The National Alliance. A 1993 graduate of Sacred Heart Academy in Mt Pleasant, Rit went on to graduate from Central Michigan University in 1998 with a Bachelor’s Degree while working at the Agency throughout college. Currently, Rit serves on the board of directors of the Professional Insurance Agents of Michigan as well as the Mt Pleasant Little League.
Jason Verlinde
PRESIDENT AT VERLINDE INSURANCE AGENCY
Licensed Insurance Agent Property/Casualty Life & Health since 1999. Graduated from Oakland University with a degree in Management Information Systems in 1997. After his father purchased what is now known as Verlinde Insurance Agency in 1999, Jason joined him and used the knowledge he gained at Oakland to bring the agency up to speed on technology. He became Vice President of the Agency in 2009, and took over the role of President in October of 2012. Outside of the office Jason is very active in both industry and community groups including: board member of the Michigan Professional Insurance Agents Association and President of the Armada Education Foundation.
VIEW TRANSCRIPT >
Transcript #20
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 guests today are Jeremy MacDonald with Mid-Michigan Agency and Jason Verlinde with the Verlinde Agency. How's it going guys?
Jeremy: (00:30) Good, how are you?
Jason: (00:30) Excellent.
Ron: (00:30) Oh, not bad. It's Thursday. It's not snowing here or in Kalamazoo, so can't speak for the rest of the state. So Jeremy, go ahead and tell us a little bit about your company, your agency, size wise. Uh, you know, what maybe what you guys are doing out there. We'll start with you.
Jeremy: (00:49) Okay. I would say I'm located in Alma, Michigan. We have some offices in Shepard and a small one in Mount pleasant that I remotely work out of. But we're just a, I would say small to midsize personal lines, primary agency. We do commercial, you know, some life insurance. Don't much matter with health insurance, but I'm mostly a small community based agency. Very similar to how Jasons set up. That is what a lot of people would know in their town. There seems to be always one of them around.
Ron: (01:19) Yeah. Very cool. Uh, Jason, go ahead buddy. Tell us a little bit about you guys.
Jason: (01:25) Yeah, very like Jeremy said, very similar to the Mid-Michigan Agency, Verlinde Insurance is in Richmond, Michigan. So I am Northern Macomb County. Um, but uh, our agency primarily personal lines, probably 80%, 20% commercial. We as well do life insurance and we as well do not do any health insurance, um, been in business in the community since the 60s. Um, family owned and my family for the last 21 years.
Ron: (02:00) Awesome. That's very cool. I have family in Macomb County. Oh, Harrison township.
Jason: (02:05) Oh yeah, yup, yup. Not far from here.
Ron: (02:08) No. So we were over there quite often. Um, so I guess the meat, the meat today is going to be about auto reform and what's that mean in your guys' eyes for the agency, whether it's education or you know, even what it means for the producers. And then we can kind of get into again, what it means for the consumers a little bit to touch on that. So I guess whoever wants to go first, who's got the best summary about what is about to happen to us in July?
Jason: (02:34) I can hop in Jeremy, if you don't mind.
Jeremy: (02:36) Sure, go ahead.
Jason: (02:37) Um, no I don’t...for our agency it’s been something that uh, well since it was announced, you know, last July or so... or June, whenever it was, we’ve been preparing. Um, for a while we actually made the decision to not prepare for a few months, just because there were so many moving parts, and it seemed on a weekly basis it was changing. Um, you know, now that we are, um you know, 6 months out. But not only six months out, probably 2 and half months out before our clients will be receiving, um, the forms in the mail that they will have to try to decipher and choose what option for PIP coverage they want. We are really full steam ahead in training the staff on the different options.
Ron: (03:32) Well, and I think that's um, going to always be the situation is that people are going to look at price first. I know you guys are gonna...that date's going hit and you're going to get a bunch of people saying, Hey, I can save money on car insurance. Let's do this. And that's going to be chaotic. I think it goes into effect the 3rd of July if I'm not mistaken, or the second or the first and it's the weekend and it's the, it's the weekend...
Jason: (03:56) Uh yeah that is correct.
Jeremy: (03:57) July 2nd, they worded it after July 1st for some reason, but...
Ron: (04:03) We don't, we don't count the first, but then most of you guys are going to be closed for the holiday. So it's like, wow, we our, phones can be ringing off the hook, but you know, we're going to be celebrating America's birthday. Or independence I should say.
Jeremy: (04:17) Well they can be, you know, but this all doesn't need to transpire on the second. So if you're somebody out there, if your policy renews, you know, even in August or later in July, I would say let your policy renewal, it'll renew automatically into the new system. So you don't need to, you know, go ahead and blow up the phones the first day this will all take effect because it's going to be an extreme revitalization to the agency and everybody's going to have their hands full for several months while we try to process the paperwork and the requests and answer all the questions that go along with it. So, you know, like Jason was saying, from our perspective, we not only have to be able to inform clients, but we have to inform our staff, you know, in our room with the most information possible because there are a lot of parts to this bill and some people are just going to race to the lowest limit they can take when they can take it and other people will take more of a time to educate themselves. But even then, it's still going to be difficult to make a good guess as to what coverage you want. Um, they did announce recently that the annual vehicle fee for the unlimited medical, it's going to drop from $220 to $100 and that's actually real progress. So if you have a two car family, you're going to automatically see at least $240 of savings a year, which hopefully in my, from my perspective will, will incentivize people to keep the unlimited.
Ron: (05:50) Yeah, no, that would be, that's, and if there was so or or I guess the people I've talked to order of priority is going to be changing. Right. I don't understand that fully. So what does that mean to the consumer order of priority?
Jason: (06:09) Um, actually that has already changed. That was one of the items, um...not with every company, but once a company had the ability to file new rates, that could change. Uh, and several companies already have done that. Basically, what that means to the consumer is: Before, before the changes, um...the only way that you would really have any sort of limited coverage on your PIP was if you were breaking the law. In other words, you were driving a vehicle that you own that you did not insure. You were driving uninsured. Now, um...the order of priority is very simple. If you are in an accident, the company is going to ask a couple of questions. The first question will be: Are you a name insured on an auto policy? So, in other words, do you have a policy in your name? If the answer is yes, that policy is what pays for your medical bills. If the answer is no, the next question is: Are you a resident relative of someone who has an auto insurance policy? So, do you live with mom and dad? Do you live with grandma? Do you live with a brother or a sister that has an auto policy? If the answer is yes, then that policy would pick up your bills. Uh, but if the answer is no, to both of those questions, you would fall into the assigned claims facility, and you would only have $250,000 of medical bills. Um, so the big one that we’re seeing right now that we’re dealing with, with our clients is... mom and dad provide a vehicle to their son. Their son, you know, we’re east siders. All the kids want to be hip and cool and live in Kalamazoo or Grand Rapids, so they get a job out there and they move, they get an apartment. Then mom and dad say, you know what, it’s okay Junior, you can keep mom and dad’s car, we’ll keep insuring it, you know, not a problem. Well, there is a problem because now they are no longer a resident relative. So, they think they have unlimited medical coverage, in reality they only have that $250,000 in coverage.
Ron: (08:20) And it's simply because they do not live at home anymore.
Jason: (08:25) Uh yeah, that is correct. They don't have an auto policy in their name and they do not live with a relative that has an auto policy in their name.
Ron: (08:33) Got it. Got it. Okay.
Jeremy: (08:34) A lot of what I was going to say, a lot of what the new law wasn't trying to do is remove the people that were getting these full benefits of the unlimited medical. They weren't really paying into the system. You know, they've carved out some things for out of state people that used to be able to pick up unlimited, um and people that weren't intended to be picked up on here that weren't paying premium, that now are more defined so that they're not just going into the system where they were non-contributors. And Mitch Albom had an article that was a heartstring type of attempt, a couple of months ago. But problem is he's discussing two people. Neither of them had ever had insurance or paid into the system, but he was furious that they weren't getting full, unlimited lifetime benefits when they were hit by a car.
Ron: (09:22) Yeah, no, no, no...
Jeremy: (09:24) Can't have it both ways.
Ron: (09:24) Nope. You can't, you can't have your cake and eat it too. So as we look, as you guys look at this as principals and you know, for the agency, what does that mean for your producers? Is it, is it a longer sales cycle? Is it more, you know, we're kicking tires cause we want a lower rate or is it more of like, Hey, we're going to train you guys, we're going to educate you and this is pretty much all it is, is just policy change, education change, you know, verbiage change.
Jeremy: (09:52) Well I think now more than ever it's, it's always important obviously to be educated in what you're selling. But now more than ever you're going to have opportunities to speak to people. If you know your topic, and I think about commercial insurance. Currently, the way the law said you could pick Ron, you could pick on limited benefits just in your personal policy and you could work for, you know, let's say you work for a plumber and you go take his vehicle and he lets you take it home and all that and you're hurt with his vehicle. You get his limit no matter what you pick. So that's a concern. Something we've been trying to change and address. Um, but what you're really going to run into and need to be armed with is all the things that'll change where people are going to go out and try to get quotes from other people and it's going to be harder than ever to match those up. You know, somebody can say, well this guy is $300 less than you and you're not going to have a chance to really look at the ins and outs of it. You want to make sure that you do because now it's difficult to get people to understand that there's a lot of variances and small nuances that can change a policy significantly. But when this happens, it's going to be incredibly difficult to slow people down, make them look at their policy, make them understand what they've selected.
Ron: (11:18) And it's never going to be apples to apples because of all the, now the limits and so on. So I have a question for my personal side. I have a, so the how this is going to impact me is I have three, two cars under my three cars in there, my insurance, but my nanny, our nanny drives one of our cars exclusively. She would no longer be covered. She will no longer be covered under my insurance. Or will she?
Jason: (11:48) For the medical that is correct. She will not... there won’t be a time if she’s injured in an accident that your auto policy will pay her medical bills. She will fall down at order of priority because she will answer those first two questions no and she will have $250,000 of coverage, uh from the placements. Now, if that is something that your nanny...well, let me take that back. Does your nanny have a personal auto policy herself?
Ron: (12:30) Yes.
Jason: (12:30) Then her policy will pick up her medical bills. Even if she’s injured... Yeah, pick up her medical bills even if she is injured while driving your vehicle.
Ron: (12:34) So that's, that's a real life scenario.
Jason: (12:38) Yeah. If you go to those questions, the first question is, are you a named insured on an auto policy? She would be able to answer yes. Then that policy is the one that pays those bills.
Ron: (12:48) Got it. Well now nothing...So I have a motorcycle doing, nothing's really changing with the motorcycle stuff, right? It's just the, the cars, the auto,
Jeremy: (12:56) Well, no, I mean by nothing changing a lot is changing because previously if you were on a motorcycle, it didn't matter if you just walked out of the bar at 4:00 AM and just finished a case of beer and couldn't see straight if you ran into a vehicle, that vehicle paid all your bills. Okay? So unlimited for the rest of your injuries, no matter the fault of the vehicle. So now let's say a guy ops out for the $50,000 Medicaid option and a motorcyclist on his personal auto buys unlimited. He's going down the road, the guy has 50,000 pulls out in front of him. You know, the joke was made in our industry of you better ask the guy what kind of limits he has before you decide whether to hit him or lay your bike down because you get his limits now.
Ron: (13:42) So you absorb it, whoever you're impacting, you absorb what they got.
Jeremy: (13:46) Exactly. It was great for the motorcycles for a lot of years because you always got the other person's unlimited and it didn't go on yours. But now you could find yourself in a real pinch if that situation were to happen the same way.
Ron: (13:59) There's, so there's still, you know, as, as this gets closer to rolling out, there's still a lot of gray areas. There's still a lot of things that, uh, have to be flushed out. I know there's a lawsuit that's pending and all of a sudden all kinds of fun stuff. Um, but it sounds like...
Jason: (14:14) Yea, I don’t think we’ll know the full implication of all these changes until there are several lawsuits. You know, it’ll be...someone is going to get hurt in this certain situation, uh, and then it’ll end up going to court. And you know, so I think it’ll be, you know, a full couple years before you can guarantee how things are going to be.
Ron: (14:37) That's it. That's, yes. I guess that's a very good takeaway is like you kind of got to let the dust settle before we know what this is gonna look like. Is there anything that you guys are specifically doing in the realms of educating clients or consumers that maybe other agencies can pick up on? You know, is it, are you guys sending out papers, uh, you know, notification in the paper? It sounds like the companies are going to start sending out stuff, but is there anything that you guys are specifically looking to do, are going to start to do that? Maybe we can take away for other insurance agencies?
Jeremy: (15:08) We personally, I've been trying to put together, like Jason said, kind of hurrying up and wait because I've tried to put together a letter that explains it in pairs it down as much as possible, but it's complex so people need to take a few minutes and pay attention to what this does. But you know, they're going to need to understand how the process works. As it sits right now, you get your renewal about 30 days ahead of your effective date, well around 90 days ahead of your effective date. Now you're going to get two forms that you're supposed to sign depending on the coverages you have. And these forms are from the state and they're not simple. They're five pages each. Last I've seen. So people are supposed to get these forms, then return them, right? Well, if they don't return them, your policy will be changed to 250,000 - 500,000 bodily injury if it's not that high already and unlimited medical. Now the unlimited is not as big a deal now because everybody's on unlimited. But you know, if the other, if you don't return them, people aren't gonna understand, you know, what they're selecting. And I don't think people understand what the levels are too. I think people hear those limits and they think, Oh boy, if I go from a 100,000 to 300,000 to 250 - 500,000 it's going to double my premium. Well no, I mean on average, you know, a six month, two car policy that makes that change will go up $10 - $15. Very reasonable. But you know...
Ron: (16:34) ...and the state is just send it out.
Jeremy: (16:36) We're trying to put out something the people can understand.
Ron: (16:38) This has nothing to do with the companies...
Jeremy: (16:43) Uh, just to answer your question, we are going to uh... Um, I will be doing a couple of, ugh I guess lack of better terms, town hall meetings, one you know, in conjunction with the chamber of commerce meeting to try to be able to educate people, answer questions, and then I also plan to do a, um, a video series for our YouTube, Facebook, um, but not like a 20-minute video explaining the whole thing. You know, a 2-minute video on order of priority and then maybe a, you know, 3 to 4-minute video on each of the different uh, options, you know, coverage level options. Um, just to try to.... try to get people to be able to watch it without or learn, or get educated without calling here, because we’re just not staffed to answer, you know, a thousand questions in a week.
Ron: (17:39) No. And I, that to me, that's, that's awesome. Right. That's, that's another form of taking this in. We've talked, I've spoken with some agency owners that were, you know, starting to send out letters and saying, Hey, you're going to start seeing some stuff about this. Let's try to have a conversation. But, but to me that's just opening the floodgates for phone calls. So my, my feedback to them is like, why don't you do a video? Why don't you post something on your website that's easily broke down and you know, easily to understand and big chunks I guess or smaller chunks. Cause it sounds like it's still very complicated and people are going to see those numbers and be like, Oh man, it's going to cost me more. I want to save all this money and then something's going to happen and they're going to be like, well now I can't, you know, I, I need a wheelchair. Well that's not covered or I need a wheelchair ramp. That's not covered anymore. It's, it's going to be, like you said, no matter what we do, I think right now it's just going to be a matter of let it happen and people are going to have to react unfortunately.
Jeremy: (18:31) Yeah. My thought was as people call, have this document ready to send to them. Say, look, obviously you're interested in in the thing, please do this. Give us your email, take a few minutes, read this letter. Or if they stop in, we'll have a copy of the form and then come back to us with your questions. Because generally what you're going to see is a lot of barroom experts that read some of the paper that think they know how the whole thing's going to work or they might've been given bad information somewhere or even old information, which is always a problem too. And that sometimes complicates and muddies the waters even worse because everybody has a different impression of what's going to happen. And even in the conversations I've had in the last six months, no two conversations are the same. Everybody has different interpretations and they're all confused. And quite honestly a lot of agencies are confused.
Ron: (19:21) Well, I think a lot of people that are involved with it seem to be confused. You know, it's, I was reading through some of the legislation about it and I was like, yep, I don't understand any of this and I don't know how you know anybody else is going to understand it right now until somebody, you know, comes from upon high and says this is what we're doing, this is what it means and this is definitively what's going to happen. It's just kind of scary. But I think people are seeing dollar signs and that doesn't matter to, you know, some, some people purchasing stuff.
Jeremy: (19:50) Exactly. And here's another thing that's going to be confusing these forms as the way the law sits right now that you're going to get, you have to fill out every renewal, okay? Now we have several companies and they don't even all agree that you have to fill out both forms, but let's say you opt for a different limit other than unlimited. Okay? You got that letter three months before your renewal. You let it sit for three weeks, a month before...a month later. You turn it in. Okay? You think you're all good, you think you've done your duty, you get your policy renews on March 1st, three months later you get the same letter again. You're like, what the heck is going on here? I just told you I want, you know what I want it and if you don't return that letter, it's going up to unlimited. And we tried to ask the legislature, why can't you fix this? And all the answer you get is, well we got to work with the Democrats and give them something they want. When in reality this is a problem that Republicans and Democrats will be flooded with when they keep getting these forms and we don't have to ask somebody every renewal if they still don't want full coverage in their car, we have to ask, you know, we would not be able to keep up there's just not enough manpower. It's great to review, but you need to be able to be efficient as well.
Ron: (21:03) No, I talked with one agency owner that was thinking about the, you know, end of summer there, is hiring another person to help answer the calls because they're worried about how much, you know, I guess extra work this is going to add on during that season. And I was like, well I didn't even think about that from a labor side of it like, oh, well now we need two people to answer the phones because we're getting so many questions.
Jeremy: (21:23) Right. And not only answer but educate them and they have to learn. You know, they have to be somewhat familiar with the whole, you know, you just, just nothing against, but somebody that works in the accountant's office isn't going to know anything about car insurance. So you're going to bring them in and throw them into the biggest reform we've had, you know in 50 years and hope that they can get people through it. So...
Ron: (21:46) And now, what is the, I guess as we wrap up this podcast, what was the, the driving force of this? Was it just to save money or they're going to be like, you know, is it going to the roads? I didn't get that far in the gambit. Like, what, what is the payoff here for Michigan as a whole?
Jason: (22:04) Well, I think the payoff was 2 things: Number 1, some rate savings right now. So, uh, you know, each of the different levels that people choose are supposed to come along at a certain percentage of uh, savings on the PIP portion of the policy but, in addition to just the savings right now, it is... the long term goal is to make it affordable, you know, long term. When I started in this business, that MCCA charge was $8 per vehicle, um, today it’s $226 per vehicle. And unlike, or, not unlike anything in this world, uh, unlimited, that word “unlimited” isn’t always a good thing. If you go to the unlimited, all you can eat buffet, you probably overeat. If you go, uh, to the hospital, and the hospital knows that you have unlimited medical coverage, they’re going to run every test, every scan that they can, because they know the auto insurance is going to pay for it.
Ron: (23:17) Yeah.
Jason: (23:18) Um, and not only that, and this could be a topic of a whole other podcast, but, um, there was no fee schedule for those bills, um, prior. So, a hospital could charge $2,500 to an auto carrier for an MRI, when they charge Blue Cross $500. So that is also a part of the bill, the cost control, there will be a fee schedule that comes in later on in 2021. Um, so I think it’s the savings now, and the long-term feasibility, uh, of the whole auto insurance system
Ron: (23:58) So kind of putting it under control.
Jeremy: (24:02) Well I think the other main factor was Detroit. So I live in the central Michigan area. I can drive a around a six County radius and never see a billboard advertising, you know, were you injured in an auto accident? I was at the Detroit airport yesterday and I saw six of them when I left within 20 minutes. And you know, when you have an unlimited system and people would, you know, rumor to be around 60% in the city proper Detroit without insurance, you need some sort of option for those people that they don't have to pick the Cadillac. And that was a huge driver in making this work. But like Jason said too, you might have a person who is ninety years old. If he gets injured in auto accident, he's not going to use the same exhaust, the same limits that a 20 year old person would, you know, living a life the remainder of their lifetime. So they wanted to give people some options to say, Hey look, I can't afford it because Jason, I have shared in the past experiences where some we knew scraped together enough money to afford a car but then couldn't afford the car insurance. So hopefully that will give some options to the people that are out there that really want to have car insurance but previously couldn't afford it.
Ron: (25:16) Yeah. And that's, that's I guess the bright side of it, the fair side of it. I know that's all good stuff. It's just I these things pass and you really don't know what that, what it means, you know, to, to the end game. What does that pay off? So that's good to hear. I mean, I know it's going to be a pain in the tookus. What does it mean for your producers? Is it going to be less funds, less monies to them when they're selling policies or are policies going to be valued less or is it just going to be kind of the same, same situation?
Jeremy: (25:45) Well, the MCCA fee, which is what Jason just referenced, the 220 plus dollars. Now we were never paid on that anyway. So if that was 200 and that's what we spend all our time talking about. But if that's 220 hours or $50 that reduction or increased wasn't ma, you know, mattering to a producer and agencies volume. Um, but when that kind of thing changes for the person that it's meaningful savings. So there is another guaranteed reduction to your bodily injury premium, which is guaranteed for eight years. So depending on which level you pick, you get, you know, at least a 10% savings.
Jason: (26:25) Not the bodily injury premium, the personal injury premium. Not the savings on the bodily injury, you’ve just misspoken.
Jeremy: (26:25) Oh yeah. Oh, sorry. I misspoke because what I meant to say was your bodily injury potentially will go up now because what we've created is almost a worst of both worlds, where a no fault state and we become a tort state because somebody, if they picked the lower liability limit can be sued, you know, or if the person that they're hitting in are at fault for hitting sues them because they had a lower limit of medical. So that's the big thing people are gonna want to look for, for an umbrella to have coverage for themselves to make sure, because you can still pick unlimited, but before if you hit somebody, they had unlimited medical themselves. Now you can't be sure of that.
Ron: (27:15) Oh, that's, that's a good point. That's a good point. Yeah. Awesome. Gentlemen, I appreciate it. This has been a, these, these couple podcasts we've been talking about auto reform have been very eyeopening and very informal. Uh, I appreciate it. Jeremy MacDonald, MacDonald's with Mid-Michigan Agency and Jason Verlinde with the Verlinde Agency. I want to make sure we get that out there. Again, I appreciate it guys. Um, if you have any questions, I'm sure you can find these two fellows on LinkedIn and uh, they, they'll help educate you. It cause it was very informative for me. Thanks fellows. I appreciate your time.
LISTEN ON:
SPOTIFY
APPLE PODCASTS
GOOGLE PODCASTS
STITCHER
CASTBOX
RADIO PUBLIC
POCKET CASTS
OVERCAST
BREAKER
TUNE IN
IHEARTRADIO
PANDORA