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Why are Michigan’s auto insurance rates so high?

wrecked car
Robbie Howell
/
Flickr - http://j.mp/1SPGCl0
If you're hurt in an auto accident, the personal injury protection part of Michigan's mandatory no-fault insurance will pay all of your medical costs. It's lifetime, unlimited coverage.

Why does Michigan have some of the highest auto insurance premiums in the nation?

Crain’s Detroit Business and Bridge Magazine dug into the heart of the question that affects every single driver in our state by analyzing insurance data over a 14 year span. They found that repairing people costs a whole lot more than repairing cars. Most of your auto insurance now goes to PIP, or Personal Injury Protection.

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Chad Livengood of Crain’s Detroit Business sat down with Stateside’s Cynthia Canty to discuss the study’s findings, and what it means for the future of auto insurance in Michigan.

You can listen to the full interview above, or read highlights below:

On the research process

“We looked at data that the insurance industry hands over every year to the National Association of Insurance Commissioners, from 2000 to 2014. That’s the most recent year -- this data lags behind by four years because claims for broken cars and broken bones kind of lag behind and the payouts are not always precise year-to-year.”

On how your auto insurance is spent

“We looked at just how much of … your premium is wrapped up in PIP versus collision or comprehensive or bodily injury. Those are the four main, large areas of every driver’s auto insurance bill.”

On what the research revealed

"The cost of these per-driver accidents has really escalated severely. And the amount of premium being collected to pay for these bills has increase 278% over that 14 year period." - Chad Livengood

“And what we found was that in 2000, PIP was 22% of all the premiums collected in Michigan on auto insurance and collision was 46% of all premiums. Fourteen years later, the entire equation has flipped. PIP is now 52% of the premiums and collision 27%. There are fewer accidents, there are fewer injured drivers, but the actual premiums collected and the payouts and losses on treating those drivers ... per driver cost has tripled in a 25-year period. From less than $25,000 to more than $75,600.”

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On the cause of higher rates despite fewer injuries

“The biggest driver is that Michigan has an unlimited medical benefit for injured drivers under the no-fault auto insurance law. And it’s unlimited in two fashions: One, the total amount that you can have paid out by your insurer for your lifetime medical costs, and that ranges from the broken bone to someone who is paralyzed and bedridden ... those are the most catastrophic injuries. But then, the person who’s going through hospital for whiplash or a back injury, and then goes to a post-hospitalization clinic, an outpatient clinic. For those providers there is no limit on what they can charge. It is simply what the insurance company will pay.

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