Why Are Car Insurance Rates in Michigan so Expensive?

Why Are Car Insurance Rates in Michigan so Expensive?

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If you’ve ever noticed or wondered why auto insurance premiums in Michigan are so expensive then you are not alone. For several years the state of Michigan has consistently ranked as by far one of the top states in America for having the priciest car insurance rates. If you’ve ever asked yourself why is car insurance so expensive in Michigan then read below to find out.

In some years the annual premium rates for car insurance in Michigan can actually be double that of the country’s average. In 2017 most states had an average annual premium of just over $1,000. In Michigan of that same year it was $2,394. The general consensus about this state’s car insurance is more than just speculation or guesswork – it’s a fact.

Michigan is considered to be in the top 3 most expensive states in the USA for car insurance rates by Insure.com. In an average year, Michigan car owners are paying around 80% more than the average state, and over 100% more, or twice as much, in a year like 2017.

The Reasons Why Car Insurance is so Expensive in Michigan

So we know for a fact that it isn’t just the gut feeling of residents of Michigan – it is undoubtedly one of the most, if not the most, expensive state to live in for auto insurance. So now that we now this is indeed true, why is car insurance so expensive in Michigan?

There are, unsurprisingly, several factors to consider when explaining why car insurance is so expensive in Michigan. It isn’t as simple as saying that their rates are just flat out higher. Many reasons contribute to the $2,000 a year premium.

Personal Injury Protection – Rates and Limits

For one thing, Michigan has PIP (Personal Injury Protection) insurance as a mandatory requirement. All Michigan drivers must pay for this coverage plan, something that is typically optional in most other states of America. However, out of the 50 states in the country, 15 of them have PIP insurance considered mandatory, and Michigan is still more expensive than all of them. So clearly we are still not yet done answering why is car insurance so expensive in Michigan.

PIP insurance on Michigan actually works differently than in other states. Normally there are limits placed on how much this extra insurance costs in order to offset the fact that it is mandatory. However no such limits or rules are really in place in Michigan. This makes the state unique in how it manages the economics of automobile insurance, and as a consequence it answers the question why is car insurance so expensive in Michigan.

Higher Rates of Uninsured Drivers and Insurance Fraud

Michigan actually experiences two problems that are relatively unique to this state: higher rates of insurance fraud and higher rates of uninsured drivers.

High rates of insurance fraud can easily explain why car insurance is so expensive in Michigan. Some studies suggest that roughly 10% of no-fault insurance claims made in the state are fake. There is much debate as to how and why exactly this occurs. All we need to know is that this is a big reason why insurance rates are higher. With more fraud comes more push back from the insurance companies to counter the higher prevalence of fraudulent cases.

If one out of ten false auto insurance claims sounds like a lot, then just wait until you read this: roughly one in five car owners in Michigan are uninsured drivers. Much like with the high rates of fraud, the high rates of uninsured drivers is a complex scenario. But as you can expect, this means that insured automobile owners have to make up for this through their higher annual premiums or monthly rates.

Since Michigan experiences both higher rates of drivers lacking insurance and higher rates of fraudulent insurance claims, this has resulted in auto insurance reaching the prices it has.

Some people have argued that part of the reason why car insurance is so expensive in Michigan is due to a cycle. Because rates are so high and many can’t afford it, they decide to drive uninsured. This causes the amount of uninsured drivers to rise, which causes car insurance rates to rise. It’s an unfortunate reality but the state of Michigan may be currently stuck in a vicious cycle of escalating prices that helps no one.

What Can Be Done About Michigan’s Car Insurance Rates?

Unfortunately, for the time being there has been little that Michigan residents can do to take some of the stress off of their wallets and bank accounts. Even when switching over to one of the cheapest coverage plans the state offers, it will still be much more expensive than the cheaper options in virtually any other state.

That isn’t to say that Michigan drivers shouldn’t bother trying to reduce their insurance costs, even if only by a little. It is always important to look into the options available to you. Searching for cheaper PIP or other full coverage insurance plans can help you save a bit of cash at a time. It’s an unfortunate fact that Michigan’s situation doesn’t seem like it will improve anytime soon.