Michigan's attempts to lower its famously high insurance rates seem to be working: Every driver in the state will be refunded $400 for each vehicle they own, Michigan Gov. Gretchen Whitmer says.
The money comes from a projected $5 billion surplus held by the Michigan Catastrophic Claims Association, a nonprofit that reimburses auto insurers for personal injury medical costs.
"Michiganders have paid into the catastrophic care fund for decades," Whitmer said in a statement sent to NPR, "and I am pleased that the MCCA developed this plan so quickly after unanimously approving my request to return surplus funds to the pockets of Michiganders."
The refunds apply to any vehicle covered by an active auto insurance policy as of 11:59 p.m. on Oct. 31, 2021.
Drivers can expect to get their part of the payout in the second quarter of 2022. People who are eligible for the money don't need to take any action — the state says that the MCCA will send the money to insurance companies in early March and that the funds must be sent to drivers within 60 days.
"These refunds are a major win for all drivers — especially Detroiters — who have paid the highest insurance rates in the nation for decades," Lt. Gov. Garlin Gilchrist said.
After analyzing its accounts and projected costs, the MCCA said it could return roughly $3 billion of the overall surplus to policyholders while still maintaining care for accident survivors.
The push to return money to Michigan drivers comes two years after the state's Republicans and Democrats worked together to pass a no-fault insurance reform bill into law. The change lets drivers choose how much personal injury protection medical coverage they want to purchase when they take out or renew an insurance policy. It also sets limits on payments to providers caring for accident victims.
"When the law changed, Michigan had the highest auto insurance rates in the entire country," Anita Fox, director of the Michigan Department of Insurance and Financial Services, told Michigan Radio in October.
"We're the only state in the nation with unlimited lifetime benefits available to auto accident survivors," Fox added. "So, the new law was intended to give people choices, and we were able to maintain this unlimited lifetime benefits."
The law was praised for addressing decades of high costs — but it's also been blamed for creating new problems. Advocates for Michiganders with long-term injuries say they're unable to find care because new cost limits have forced some providers out of business, as Michigan Radio reports.
Those problems have arisen despite acknowledgements from lawmakers that the new law wasn't perfect and would need to be tweaked.
But the MCCA's board praised the law last month as it unanimously approved the refund plan, stating, "It has attracted more competition to the market and allowed previously uninsured individuals to afford insurance for the first time ever, creating a more stable, sustainable and equitable market."
Michigan's legislature created the Michigan Catastrophic Claims Association as a private entity in 1978. In the decades that followed, Michigan law required anyone who owned or registered a motor vehicle in the state to "buy unlimited lifetime coverage for medical expenses resulting from motor vehicle accidents," according to the MCCA website.
The MCCA reimburses insurers who are on the hook to pay hundreds of thousands of dollars in personal injury protection — or PIP — medical claims. Under the current threshold, the claims association compensates insurance companies for costs higher than $600,000.
To cover its payouts, the MCCA calculates a per-vehicle assessment every year that companies tack on to drivers' insurance costs. For 2021-2022, the assessment is $86 — a drop from the $100 required in the previous year. Both of those figures are a sharp departure from the $220 assessed for the 2019-2020 period.
A version of this story originally appeared in the Morning Edition live blog.