Michigan Insurance Market at a Glance

The reform of Michigan’s auto insurance market, which went into effect on July 1, 2020, brought the promise of much-needed premium relief for Michigan drivers.

An April 2019 study by the Insurance Research Council (IRC), a division of The Institutes, ranked Michigan third — behind Louisiana and Florida — for the least affordable auto insurance in the country. In the study, the IRC stated that “the high cost of personal injury protection (PIP) claims, the rapidly increasing frequency of bodily injury (BI) liability claims, and the increasing litigiousness of the system,” were key drivers keeping the state’s auto insurance costs high.

The new law allows insureds to choose the amount of PIP coverage they prefer (given several options) or to opt out of it completely under certain circumstances. It also provides for “a fee schedule between auto insurers and medical providers designed to control the costs that medical providers may charge auto insurers for their services,” according to the Michigan Department of Insurance and Financial Services (DIFS).

Under the new law, insurers providing auto coverage in Michigan are required to lower the average cost of PIP medical premiums for eight years. The average required per vehicle reduction ranges from 45% or greater to 10% or greater depending on the PIP option chosen.

Regulation, Licensing

Among the entities regulated by the DIFS insurance division are 123 domestic insurance companies, 1,500 foreign insurance companies, 291,524 individual insurance agents and 20,833 insurance agencies, according to the DIFS 2019 annual report.

Michigan Surplus Lines

An insurance producer in Michigan may write coverage in the excess and surplus insurance market after they have researched coverage in the admitted market and found none to be available for a particular risk. An agent may also write surplus lines coverage if the agent’s customer, who must be a Michigan resident, insists that the insurance be placed with a non-admitted insurer. Producers may also go to the surplus lines market for the types of coverage included in the DIFS Surplus Lines Eligible Insurance Coverages List:

• Animal mortality
• Environmental impairment
• Kidnap and ransom or extortion insurance
• Liability for entertainment, recreational or sporting events or facilities written to include injury to participants
• Personal injury and/or assault and battery when not written with bodily injury and property damage liability
• Product recall insurance
• Property and liability insurance on mobile, traveling, or fixed recreational or amusement businesses
• Property insurance on vacant buildings not insurable through the Michigan Basic Property Insurance Association
• Rain or pluvious insurance
• Product liability when written alone
• Railroad liability
• Flood insurance not provided under the National Flood Insurance Program (NFIP)
• High hazard cargo insurance

Surplus lines tax revenue collected in in Michigan 2019 totaled $19,406,810, representing a 5.18% increase from 2018.