2020 Commercial Auto Reform: Strategies for Cost Saving
Brian Pilarski, Commercial Insurance Advisor at Brown & Brown of Detroit
Effective July 2020, Michigan Auto Reform brings choice to policyholders for the first time since the passing of No-Fault in 1973. While the public discussion has been focused on personal auto insurance choices, employers with fleets also now have a choice of coverage levels.
Employers with a commercial auto fleet can now choose which level of Personal Injury Protection they want to purchase on their commercial auto policy.
The decision is a policy-level decision, which means the Personal Injury Protection limit applies to all vehicles covered by the policy. This notation is a key fact in developing the strategies to maximize cost savings and protect the people driving company owned vehicles.
What is Personal Injury Protection (PIP)? PIP provides insurance money to pay for expenses that arise due to an auto accident. The specific items PIP will pay for are medical expenses, lost wages (up to three years), attendant care, and home modifications for injuries sustained in an auto accident.
What is Best for Your Business?
Scenarios to consider when attempting to arrive at a final decision on a PIP limit:
Vehicles’ Use- Business Use ONLY, No Take-Home or Personal Driving:
- Health plan excludes auto accidents (risk involved)
- Health plan is primary for auto accidents (great candidate for lower PIP)
Personal and Business Use- Vehicles Business Use, Taken Home by Employees:
- Health plan excludes auto accidents (high risk involved)
- Health plan covers auto accidents, primary (possible but some risk)
*Health Plan must meet criteria as a “Qualified Health Plan” defined by law
**Assumed employers purchase workers’ compensation and employees drive commercial autos
Does the Commercial Auto Pricing Change at Different PIP Levels?
- Unlimited PIP
- $500,000 PIP
- $250,000 PIP
- Excluded PIP (May not be an option offered by certain insurance carriers)
*Ensure a price-break is given and MCCA charges will be eliminated
If We Reduce or Exclude PIP and Health Insurance is Sole Remedy-What Will it NOT Pay For?
- Work loss for three years (not work-time auto accident)
- Money for attendant care and daily assistant (could be work or personal auto injury)
Talk with an insurance advisor about your specific business and its auto exposures. The options available may offer some premium relief in a very challenged line of insurance. In many cases, leaving PIP unlimited may make the most sense, in other scenarios, a calculated reduction in coverage may be the best decision.