Since Michigan changed its auto insurance laws about seven years ago, auto accidents are costing insurers more than they used to. That’s one reason auto insurance premiums have been rising. Here’s how this has played out.
To save money, roughly 30% of Michigan drivers have dropped Unlimited Personal Injury Protection (PIP) — the part of the auto policy that pays for auto accident medical bills and related expenses — in favor of lower limits. That means they’re relying more on their health insurance—and the legal system—to cover medical costs after an accident.
If you’re involved in an accident with someone who doesn’t have Unlimited PIP, they are more likely to have unpaid medical bills and may hire an attorney to sue you. That attorney’s job is to pursue all available damages, including medical costs, economic damages, and often the largest part of the claim – pain and suffering.
Attorneys are very good at what they do, and they have more incentive to take cases today. That’s because most Michigan drivers now carry at least $500,000 of liability coverage per accident, far higher than the $40,000 minimum that existed seven years ago or so.
Another factor is something insurers call “social inflation.” Today’s juries tend to respond more favorably to injured plaintiffs and aggressive legal strategies. In some cases, that leads to very large jury awards.
Also, some lawsuits are also supported by third-party litigation funding, where outside investors finance cases in exchange for a portion of the recovery. These investors fund expert witnesses, accident reconstruction, and even living expenses for plaintiffs while a case works its way through court.
All these factors have come together to create somewhat of a perfect storm for more high-stakes lawsuits.
If a large bear were chasing you, your best bet would be to toss him a large side of beef, so he eats it instead of you. Your liability coverage is the large side of beef protecting you from the legal system. Now would be a good time to talk with your insurance agent about your auto liability limits—and the cost of adding an umbrella policy. Dollar for dollar, liability coverage is the least expensive protection on your policy!