Jill Overmyer

Michigan auto insurance premiums are some of the highest in the country. According to a 2010 RAND Corp. study, average premiums in the United States were $795 in 2007. Yet Michigan residents paid an average of $928 -- a 17 percent difference).

The consequences of costly insurance affect everyone. When premiums are too high, drivers are less likely to renew their auto insurance, resulting in an increased number of uninsured or underinsured drivers. A 2007 Insurance Research Council report found that Michigan had the ninth highest rate of uninsured drivers in the country -- an estimated 17 percent.

The high cost of Michigan auto insurance has caught the attention of economists and government officials, who have been conducting studies to determine why insurance premiums in Michigan have been higher. The RAND study found that property damage claims were equal to or lower than in other states, and fatal crashes in Michigan were lower than in many other states.

After taking a range of factors into consideration, the study attributes high auto insurance premiums in Michigan to:

  • Higher claim payments. The RAND study found that in Michigan, average claim settlements per accident were 57 percent higher compared with similar accidents in other states.
  • More claims and medical treatments. Michigan residents are more likely to seek reimbursement for a wider range of medical treatments, including hospital and emergency room visits. Additionally, Michigan residents are more likely to use expensive procedures, including X-rays or CT scans, and to claim reimbursement for lost work hours.
  • No-fault insurance system. Michigan is one of 12 no-fault auto insurance states that require that each driver's insurance to pay for damages and medical bills to a customer, regardless of who's at fault. This limits a driver's ability to sue the at-fault driver for pain and suffering. The RAND study found that no-fault states tend to have higher premiums than other states.
  • Generous benefits. Drivers in Michigan are required to purchase personal injury protection (PIP), which offers unlimited coverage -- and drives up premiums as the insured rack up bills. Insurance Information Institute President Robert Hartwig has said the average 2007 PIP claim in Michigan exceeded $30,000.

Officials are concerned with their state's costly auto insurance and have proposed a tort system (which compensates victims for accidental injuries) and a specified rather than unlimited amount of PIP coverage, both of which they say will help lower auto insurance premiums in Michigan.