I recently received an email from my auto insurance carrier that said, “Great news! We’ve lowered auto prices in Michigan by 28%. This is the perfect time to quote again.” It went on to say, “Also, as of July 1, 2020, Michigan enacted a new law reform that could save Michigan residents like you $748.”

I immediately deleted the email. I know what I pay for auto insurance and I’m happy with my rate. More importantly, I know what sort of coverage I have. I have great coverage: lifetime medical if I’m injured, a half-million dollars in liability coverage if I injure someone else, uncoordinated wage replacement benefits if I get hurt and miss work.

Not everybody knows their coverage as well as I do (after all, not everybody is a personal injury lawyer who handles auto cases). So I’m sure many consumers would jump at the chance to lower their insurance rates. In fact, I’m sure many consumers are doing exactly that even as I type this blog article. And taking the bait and lowering those premiums could have dire consequences for those people if they ever get injured in an auto accident.

Let’s stop and ask ourselves, why would an insurance company (which makes its money at least partially from collecting premiums), offer to lower those premiums? Remember, this is not some new company trying to gain a client by undercutting their competition, this is my own insurance carrier, who I’m already signed up with and pay premiums to. Are they offering to lower my rates out of the goodness of their heart? Are they willing to cut into their own bottom line just to save little-old-me some money?

The answer is obvious: OF COURSE NOT. Insurance carriers are for-profit corporations. For them, it’s all about the bottom line.

So, why are they doing this? The answer lies in the coverage. I can reduce my rates with them, but only if I give up my lifetime medical coverage. If enough people across the state drop their lifetime medical coverage, then my carrier will save big bucks by paying limited medical to catastrophically injured motorists in the future. In other words, lowering my rates a little bit right now while also lowering my coverage exponentially into the future is great for the insurance company’s bottom line, and that’s why they’re making this offer.

The changes in the law this letter is referring to are all about coverage. Michigan used to require lifetime medical coverage for auto insurance. But now carriers can offer as little as $250,000 of medical coverage. That might seem like a lot, but if you are seriously injured in an auto accident and have to spend time in the hospital trauma center, inpatient rehab, follow up surgeries with additional hospitalizations, etc., that money will be eaten up very quickly. And when that happens, you’ll have to look to the negligent driver for additional medical coverage (assuming you weren’t at fault in causing the accident). Minimum liability coverage in Michigan is a mere $50,000 (that barely covers the cost of even a simple surgery). So if the at-fault driver has minimal coverage and you run through that money, what next? Well, for people with private insurance, they pay with their own health coverage and start to incur costly premiums and will likely have to exhaust their annual deductible each and every year. Of course, most private insurance plans are tied to employment, and most catastrophically injured people are unable to return to work and end up losing their jobs, so that private insurance is going to go away as well.

We’re left with the big societal question here: For people who don’t have private coverage, who pays? The answer: Taxpayers. Those folks will have to get on Medicaid and/or Medicare, and we’ll all be paying the bill.

So, while saving a quick buck might sound nice, this is a terrible long-term change in the law and it will cost all of us more than what we bargained for. In fact, the only ones saving money in the long run are the insurance carriers.

If you’ve been injured or you need advice about auto insurance laws, call the experts at Bolhouse Hofstee & McLean today.

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