Here are the details on why the average cost of auto insurance is so expensive for a Michigan driver:
In 1972, Michigan transitioned to a no-fault system, meaning that insurance providers had to cover accidents even if they were the insured person’s fault. While the state hoped that this transition would lower both the auto insurance rates and the number of fraudulent claims, neither happened.
||Minimum bodily injury per person
||Minimum bodily injury for everyone involved in the accident
||Minimum property damage per accident
||Minimum medical payments or personal injury protection (PIP) coverage per person
||$1 million within the state or
$10,000 outside of the state
|Either not required if named insured is enrolled in Medicare Parts A and B, $50,000 for Medicaid enrollees, or $250,000 for non-Medicare health coverage (excludes named insured)
Michigan’s bodily injury liability minimums are twice the amount of the national averages. Michigan also has the highest property damage liability minimum of any state — $1 million for in-state accidents.
The state of Michigan (the Michigan Catastrophic Claims Association, specifically) handles all medical or personal injury coverage after the first $600,000, which is by far the most generous policy in the U.S.2 Unfortunately, this extensive coverage causes auto insurance premiums to rise.
Cost of Medical Bills in Detroit
Although Michigan has a low cost of living and healthcare compared to the rest of the U.S., in Detroit in particular, medical bills are exorbitant. For example, as of 2017, Detroit medical providers charged as much as $5,300 for an MRI that would cost under $500 with Medicare or under $1,000 at other facilities.
Since MRI centers appear frequently in no-fault auto insurance lawsuits, insurance providers take these costs into account, leading to especially high auto insurance rates in the city of Detroit.
Although Michigan’s minimum wage is $9.65 per hour, higher than the federal minimum wage of $7.25, it’s not enough to cover the cost of living, even for a single person.
||1 income, 1 adult
||1 income, 4-person family
||2 incomes, 4-person family
People with low incomes may pay higher rates for auto insurance, unfortunately. Learn more about the best auto insurance for low-income people.
In 2020, auto insurance fraud made up 81 percent of all insurance coverage fraud in Michigan.3 The state of Michigan doesn’t have a watchdog group that looks out for no-fault insurance fraud, which contributes to the high number of lawsuits. Other no-fault states, like Florida, benefit from watchdog groups pursuing fraud in urban areas.
Uninsured drivers cause insurance costs to rise, especially if you have to add on uninsured motorist coverage, which Michigan actually doesn’t require. In Michigan, an estimated 26 percent of all drivers are uninsured, which is the second-highest percentage next to Missouri at 29 percent.4
From 2019 to 2020, the number of personal injury and product liability filings increased by 97 percent across the U.S.5 We don’t have great data on the number of personal injury lawsuits in the entire state of Michigan, but data from 2015 and 2016 shows that, while the number of car accidents has decreased since 2003, the number of first-party and negligence lawsuits have increased by 73 percent and 26 percent, respectively.
|Number of car crashes in Wayne County
|Number of negligence lawsuits
|Number of first-party lawsuits
In Wayne County, where Detroit is located, the number of lawsuits that involved motorists and passengers quadrupled from 2004 to 2017. In 2017, these lawsuits made up over two-thirds of the state’s total lawsuits.6 Realizing that they may have to pay legal fees, auto insurance providers preemptively increase rates, passing the potential costs on to their customers.