Why Are Michigan Auto Insurance Rates Among the Highest in the Nation?

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In recent studies, Michigan ranked among the highest in the nation for auto insurance rates.  In Michigan, a hypothetical 40-year-old man with a clean driving record can pay up to $2,541.00 per year in premiums.  According to one survey, the rates for auto insurance in Michigan went up more than 21% in one year, overtaking Louisiana as the highest rates in the nation.   What are some of the factors leading to the high auto insurance rates in Michigan?

PIP Benefits

Michigan is the only state to guarantee PIP payments.  PIP payments are unlimited personal injury protection payments to people injured in auto accidents.  Michigan auto insurance carriers pay up to $480,000.00 in PIP benefits and the Michigan Catastrophic Claims Association then reimburses insurers for the anything above that amount.  The Michigan Catastrophic Claims Association is a non-profit, created by state law.  Auto insurance companies in Michigan also must pay up to three years in lost wages due to an accident and replacement costs, which also lead to higher rates.

Payment for Medical Care

In addition to PIP payments, Michigan auto insurance companies have to pay for medical care when people suffer catastrophic injuries.  Auto insurance premiums in Michigan include an annual assessment for each vehicle.  In one study, this assessment resulted in a cost of $143.09 per insured vehicle, through July 30th of that year.  In some cases, the costs of this unlimited medical coverage can be 50% of the entire auto insurance premium paid. 

Uninsured Motorists

With more uninsured motorists, auto insurance companies have a higher risk, which can result in higher auto insurance premiums.  Studies vary, but approximately 17% of Michigan drivers do not have auto insurance.  High unemployment has been cited as one factor for this high percentage.  Some Michigan drivers simply cannot afford auto insurance and, unfortunately, drive without coverage. 

Motorcycles as a Factor

Motorcycles are not considered motor vehicles in Michigan so motorcycle drivers do not have to buy auto insurance.  Motorcycle drivers are only required to have minimal liability coverage in case of an accident.  As long as these drivers maintain the minimum liability amount, they can still collect the unlimited medical benefits if they are injured in an accident with a car.  In that event, the auto insurance company pays out first and provides unlimited medical benefits to the motorcyclist.  This puts further strain on Michigan auto insurance companies and, unfortunately for consumers, raises rates.

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