If you live in Michigan, you probably have some fairly high car insurance premiums compared to drivers in other states. While Michigan car insurance premiums have dropped significantly over the past two years, they still remain some of the highest in the country. But why does Michigan have the highest car insurance premiums in the US? Two words: No-Fault.
Why Are Premiums So High?
Before the Covid-19 pandemic, Michigan car insurance premiums were significantly higher than they are today. In early 2020, the average Michigan driver paid around $3,000 per year, with drivers in major cities paying as much as $5,000 per year in car insurance alone. That made Michigan car insurance on average twice as expensive as the national average.
What you might not realize is that there was a time when Michigan residents were promised some of the lowest premiums in the country. Michigan has been a no-fault state since 1973. When the law was initially passed, insurance companies claimed it would enable them to offer lower premiums. Instead, 50 years of data shows that premiums for no-fault states are universally higher than those in comparative negligence states.
Feedback Loop
When higher premiums became an unavoidable fact, the insurance companies who once promised lower premiums claimed two major reasons for the increase: unlimited coverage and a high rate of uninsured motorists.
Under no-fault insurance, an injured driver simply files a claim and the other driver’s insurance company covers the appraised damages, regardless of who caused the crash. With unlimited coverage, insurance companies found this arrangement difficult and raised premiums to compensate. However, these high premiums edged many drivers out of being able to afford car insurance altogether.
As a result of having the highest premiums in the country, about 1-in-4 Michigan drivers stopped paying for car insurance. As recently as 2019, 26% of Michigan drivers were unlawfully driving around without insurance. As more insurance companies found themselves paying their own policyholders' bills, premiums went up again.
This created a years-long feedback loop where high premiums made Michigan residents unable to afford car insurance, which increased the number of uninsured drivers on the road, which further increased insurance premiums and so on. Something had to be done to stop this cycle.
A Big Shift
The good news (and you may have noticed this for yourself) is that Michigan insurance premiums have fallen by about 25% over the past two years. This is the result of Senate Bill 1, which went into effect in July 2020. The new law guarantees lower premiums and replaced the requirement to buy unlimited coverage with six kinds of Personal Injury Protection (PIP) coverage.
Additionally, insurance companies can no longer base your premiums on gender, credit score, ZIP code, or other non-driving factors. The law also puts limits on how much hospitals can charge for auto accident injuries, reducing both how much victims pay out of pocket and reducing how much insurance companies are charged.
Despite these changes, insurance premiums are still very high. The average Michigan driver is still paying $2,250 per year when the national average is closer to $1400. Not only that, but the protections in the new law only guarantee lower insurance premiums for the next 8 years. That means insurance premiums could go back up again before 2028.
What This Means For Your Next Crash
Although Michigan remains a no-fault state, it is important that drivers take steps to secure the full insurance coverage they are entitled to after a serious accident. One of the best ways to do that is by hiring an experienced car accident attorney who can advise you through the process, help you properly appraise your injuries, and give you a much better chance at earning the full damages you need to recover and move forward.
If you’ve been injured in a car crash, we can help. To discuss your case with an experienced Auburn Hills personal injury attorney from Bashore Green Law Group, please call us at (248) 487-1887 or send us an email.
