Finally, there is good reason to believe Michigan will drop the infamous distinction of being the one of the most expensive states in the country in which to insure a vehicle. As of July 2, the state’s drivers now have the opportunity to tailor their insurance policies to their own coverage needs, which for many, will translate into cost savings.
The average PIP claim in Michigan is around $34,000, according to the 2019 Insurance Research Council report on auto insurance affordability. That figure indicates most of the state’s drivers didn’t necessarily need the previously required unlimited medical benefits that drove up insurance costs. While auto insurance reform will offer consumers choice in the form of six new PIP medical coverage options, it also brings questions for many. This presents yet another opportunity for independent agents to demonstrate the tremendous value they offer their customers.
A survey of 300 Michigan consumers conducted by Citizens Insurance and Zeldis Associates over the last few months showed more than half are unsure what actions they will take when reform goes into effect. The large majority, nearly 70%, cited keeping costs down and having enough coverage in the event of an accident as their top concerns. The good news is 65% of consumers plan to rely on their independent insurance agents to help guide them to the right decision.
Are agents ready to offer that guidance?
According to a similar survey of Michigan agents from Citizens Insurance and Zeldis, only 50% of surveyed agents reported being prepared to provide coverage recommendations around auto reform. This could be because there is no one-size-fits-all approach. In fact, not everyone qualifies for each of the PIP medical options. Drivers on Medicaid and Medicare, for example, have exclusive PIP options only available to them.
The central challenge of reform from the consumer perspective is finding the best balance of coverage and price. The survey of Michigan agents found 69% planned to always recommend unlimited PIP coverage to their customers; however, early indications show this may not align with consumer behavior. Citizens Insurance built an online self-service tool that allows current customers to select their new coverage levels. To date, nearly 70% of consumers have opted for a PIP level other than unlimited. With price as a key concern for consumers, especially in today’s economic environment, lower PIP levels may offer financial benefits for consumers. In addition, historically, 99% of Michigan PIP claims have been below $500,000, making the new option offering of $500,000 effective for many consumers.
It’s also important to consider the state’s new legal environment, in which auto accident lawsuits often include additional financial damages. As a result, some customers may wish to consider higher bodily injury liability limits, uninsured/underinsured coverage limits, or an umbrella policy. Of those surveyed, 88% of agents agreed no-fault reform will increase the need for additional liability coverage and umbrella policies.
In fact, a combination of insurance coverages and policies may be the best way to balance protection and price, addressing both of customers’ key concerns. With that in mind, customers likely will be increasingly open to insuring both their auto and homeowners policies with the same carrier.
As agents respond to new customer concerns and requests for help, they will be busier than ever. Fortunately, help is available. Whether it’s offering customer service centers or hosting webinars, carriers are helping agents by providing the tools and resources they need to be more efficient and effective during this time of change. At Citizens Insurance, for example, we’ve spent the last several months changing the way we do business to better anticipate and meet agent and customer needs, adding online resources, hiring additional staff, and updating policies.
Three important things agents can do now to help serve their customers are:
- Take advantage of carrier resources. Carriers are working to listen and respond to agents’ needs. Many offer support, such as customer service centers, educational resources and training, and marketing content.
- Determine the amount of personal injury protection (PIP) needed. Customers’ personal situations will dictate what level of PIP is appropriate, but exploring all of the coverage levels rather than simply recommending unlimited coverage may help their clients find balance between coverage and price.
- Consider whether other insurance coverages are needed. Auto reform may result in a more litigious environment, leaving Michigan drivers liable for losses. Independent agents can help assess whether other coverages, such as bodily injury liability, should be adjusted, or whether an umbrella policy and/or uninsured/underinsured motorist coverage should be added to help protects assets in the event of a claim or lawsuit.
The process of settling on the right insurance coverage requires consumers to think about how much risk they can tolerate and at what cost. If experience tells us anything, it’s that many will turn to their independent agents for help, and that independent agents around the state will rise to the occasion.
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