The average cost of auto insurance slightly increased over the past year as more drivers parked at home during the early months of COVID-19 returned to the roads — but Michigan no longer has the highest average rates in the nation.
The Zebra, a national auto insurance comparison site, calculated average costs of purchasing car insurance in zip codes around the country using publicly available rate data for its 2022 State of Auto Insurance report.
Statewide, average annual premiums in 2021 clocked in at $2,639, up from the average rate of $2,535 in 2020, according to the analysis. Michigan was one of 38 states that saw increased car insurance rates in 2021, the report found.
In the Detroit metro area, where drivers have paid far higher costs for auto insurance, the average premium was $3,148, a 2% increase from 2020. Comparatively, West Michigan drivers in Grand Rapids, Kalamazoo and Battle Creek paid an average of $2,462 for car insurance in 2021.
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Historically, 2021 rates are still lower than what drivers were previously paying. In 2020, Michigan’s car insurance rates dropped 18% statewide and 19% in Detroit from the previous year. But compared to the rest of the U.S., Michigan drivers still pay a lot more to insure their cars.
The nationwide average annual premium in 2021 was $1,529. The national average is up 3% from last year, and in Louisiana, a 42% increase in average rates due to extreme weather meant it surpassed Michigan as the most expensive state for auto insurance with an average rate of $3,265.
See how 2021 average auto insurance premiums compare by zip code across the state:
(Can’t see the map? Click here)
Much of the increase can be attributed to drivers spending more time on the roads than they did during the initial months of the COVID-19 pandemic, when far fewer people were traveling, going in-person to work or school and using their cars frequently, said Nicole Beck, head of communications at The Zebra.
Sweeping changes made to Michigan’s auto insurance law in 2019 “did probably help” keep rates from increasing more than they did, Beck said.
“The fact that it’s up doesn’t surprise us, because it was so down” due to COVID-19, Beck said. “Michigan is lagging behind, so I think that’s a good sign that that something is working over there.”
It’s unlikely Michigan drivers will ever have among the lowest rates in the country, as drivers in some states are currently paying less than $1,000 a year, Beck said. But over time, she said it’s possible Michigan could boast similar rates to other Midwest states.
“There’s really no other insurance reason why they couldn’t get to a similar rate as neighboring states,” she said.
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Although rates have dropped considerably in Michigan since the 2019 law went into effect, experts have found drivers in Detroit and other areas of the state with high populations of Black residents and other minority groups are not seeing the same benefits other regions are.
Patrick Cooney, the assistant director of policy impact at Poverty Solutions at the University of Michigan and co-author of a recent analysis of Michigan’s auto insurance laws, said while rates have dropped across the board, Detroit-area residents are still paying a lot more to insure their vehicles.
“We still see this disparity in rates between Detroit and the rest of the state, and really between any zip code with a high share of Black residents,” Cooney said.
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The 2019 law eliminated a number of non-driving factors insurance companies could use when determining rates, but Cooney found the law leaves “more than enough room” for companies to use different non-driving factors, including allowing territories instead of zip codes to be used when setting rates for certain locations, he said.
One option Cooney said lawmakers could consider to make rates more equitable across the board is requiring insurance providers to calculate the majority of their rates on three driving-related factors: miles driven, driving record and years of driving experience.
“If you keep trying to bar all these factors they can’t use, it can turn a little into a game of whack-a-mole,” he said.
Can’t see the database? Click here)
Michigan drivers are slated to see additional savings in 2022 in the form of a $400 per-vehicle refund from the Michigan Catastrophic Claims Association, a statutorily-established nonprofit that all auto insurers pay into for personal injury protection under the state’s auto no-fault system.
The refunds will apply to all cars and motorcycles insured as of Oct. 31, 2021 and are expected to be in the hands of motorists via check or ACH deposit by May 9, 2022.
The fees collected by the MCCA are built into premiums Michigan motorists pay. Under Michigan’s old auto insurance law, each driver had to purchase unlimited personal injury protection medical coverage and pay the MCCA assessment, which reimburses insurers for catastrophic medical claims.
Related: Crash victims, health providers cry foul over impending change to auto injury medical fees
Since 2020, Michigan drivers can still choose unlimited PIP coverage, but now also have the option to choose a lower level of coverage. Now, only drivers who choose unlimited PIP medical coverage pay the MCCA assessment, as long as the fund does not have a deficit.
The most recent MCCA fee was $86 per vehicle, down from $220 in 2019 before changes to the state’s auto no-fault policies were signed into law.
A driver’s PIP coverage election will not have an impact on the refund amount. Owners of insured historic vehicles will be issued an $80 refund, as historic vehicles are only charged 20% of the annual MCCA fee.
Beck said refunds can help “restore a little bit of faith in the process” for consumers frustrated with paying a lot of money for auto insurance.
“How insurance is supposed to work is that it’s there at your worst time,” she said. “It does restore faith when they’re saying, ‘Hey, listen, so many people paid in and not enough people took out, let’s get back to that equilibrium.’”
The 2019 legislation also included changes to how much health care providers are reimbursed when treating auto-related injuries, which went into effect last year.
Insurance companies have argued those changes are a critical part of ensuring insurance costs keep going down, and have helped more Michigan drivers afford car insurance.
The Insurance Alliance of Michigan, which represents a majority of insurance providers in the state, announced in December that more than 150,000 drivers previously driving without car insurance have signed up since changes to Michigan’s no-fault system went into effect.
Healthcare providers say the changes have decimated their industry and put patients who sustained catastrophic injuries in jeopardy. An MPHI study commissioned by the Brain Injury Association of Michigan found that since reimbursements for auto-related injuries were reduced, 1,548 patients have been discharged, 3,049 jobs have been eliminated and 21 organizations that previously cared for brain injury survivors have shut down.
Cooney said the University of Michigan analysis concluded the rate caps included in the 2019 law might have been unnecessarily low, noting there are “more nuanced ways of dealing with this” that could allow providers to continue to provide care without driving up rates.
In a December interview with reporters, House Speaker Jason Wentworth, R-Farwell, said he’s open to tweaks, pointing to a $25 million pot of money approved by lawmakers for post-acute brain and spinal injury facilities and attendant care providers seeing structural losses as a result of the new law. But he added that any major changes could result in rates creeping back up.
“Any change to the law will create a reduction in that check that drivers will see,” said Wentworth, who played a key role in shepherding the auto insurance changes through the Legislature. “Anything that we do will have that cause and effect on that check.”
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