Why Is Michigan Auto Insurance So Expensive?

Many drivers in the Great Lakes State pay far more for car insurance than they expect. Full coverage now averages about $4067 a year in Michigan which is almost double the national average ($2,100). Even the state-mandated minimum coverage which includes Personal Injury Protection, Bodily Injury and Property Damage Liability, and Property Protection Insurance costs around $1360 per year. These high costs leave many policyholders asking why Michigan auto insurance is so expensive. Here’s a clear look at the factors that push these premiums up.

10 Reasons Michigan Auto Insurance Is So Expensive

The primary reason behind pricey car insurance in Michigan is their unique no-fault insurance system. Under this system, your own insurer pays for medical bills and lost wages after a crash, regardless of fault. Michigan drivers now choose from several PIP coverage options, including higher limits like $500,000 or even unlimited medical benefits, but those higher limits add to premiums. On top of that, Michigan’s Catastrophic Claims Association (MCCA) fee is added to every policy which further inflates the premiums. 
 

Here are some key reasons why car insurance in Michigan is costly: 

1. Michigan’s No-Fault Automobile Insurance System
2. Michigan’s Catastrophic Claims Association (MCCA) Fee
3. High Rate of Uninsured Drivers
4. Urban Areas with High Traffic Density and Accident Rates
5. High Amount of Deer-Car Accidents
6. Weather Conditions Leading to More Accidents and Claims
7. High Repair Costs for Vehicles
8. Increased Rates of Insurance Fraud
9. High Legal Fees Related to Car Accidents
10. Quick Processing Time for Claims 

1. Michigan’s No-Fault Automobile Insurance System 

Michigan’s no-fault auto insurance law is both unique and complex. In this system, drivers file claims with their own insurance company after an accident, even when they didn’t cause the crash. The goal is to deliver fast payment for medical care, lost wages, and other essential benefits so people can recover without waiting for fault investigations.

Drivers can now choose from different levels of Personal Injury Protection instead of being forced into unlimited medical benefits. However, many still select higher limits, such as $500,000 even unlimited coverage. These larger medical benefits increase premiums because insurers carry far more long-term risk when severe injuries happen.

Medical care in Michigan is also expensive. U.S. Bureau of Economic Analysis (BEA) reports that per-capita personal consumption expenditures on healthcare in Michigan were $9,023 in 2024. So, when treatment costs run high, insurers pay more for every PIP claim, which raises overall premiums for drivers across the state.

The no-fault system has also struggled with inflated billing and unnecessary medical procedures. Some providers overcharge because they know PIP policies pay regardless of fault. These patterns create more claims and larger payouts, which directly affect what Michigan drivers pay for coverage.

Besides, the no-fault insurance system requires other necessary coverages, including bodily injury liability, property damage liability, and unique property protection insurance (PPI) as well, which also contribute to higher costs.

Together, high medical costs, generous PIP options, BI and PD, PPI and fraud issues make the no-fault structure a major reason Michigan auto insurance remains so expensive.

2. Michigan’s Catastrophic Claims Association (MCCA) Fee 

The Michigan Catastrophic Claims Association fee is another major factor behind the state’s high auto insurance costs. This fee is unique to Michigan and helps pay for extremely severe crash injuries that require long-term medical care.

When a driver with PIP medical coverage suffers catastrophic injuries and their medical bills exceed $600,000, the MCCA steps in. It reimburses insurers for costs beyond that threshold and provides lifetime benefits for qualifying injuries. Because these cases can involve decades of treatment, rehabilitation, and attendant care, the expenses are significant.

To fund this system, every insured vehicle in Michigan is charged an annual MCCA fee. For 2024, that fee is $122 per vehicle when the driver chooses unlimited PIP medical coverage. Although the amount may seem manageable on its own, it adds up quickly for households with multiple cars. The fee also changes from year to year based on the MCCA’s projected costs. For example, it reached $220 in 2019. This fluctuation makes it harder for drivers to predict their future insurance expenses.

Overall, the MCCA fee ensures catastrophic injury claims are fully covered, but it also contributes to Michigan’s noticeably higher premiums.

3. High Rate of Uninsured Drivers 

Another major factor behind Michigan’s high auto insurance costs is the large number of uninsured drivers on the road. A significant share of Michigan drivers still do not carry insurance, which increases the financial risk for everyone. According to the Insurance Information Institute, about 22.3 percent of Michigan drivers are uninsured, far higher than the national average of roughly 13 percent.

When an uninsured driver causes a crash, the costs can be substantial. If they cannot pay for the damage they caused, insured drivers and their insurance companies absorb the loss. To offset this risk, insurers raise premiums across the board. In practice, insured drivers end up paying more because so many others choose to drive without coverage.

A high uninsured driver rate also leads to more claims filed under coverages like uninsured and underinsured motorist protection. These additional claims increase the overall cost of doing business for insurers, which again shows up in higher premiums for Michigan drivers.

Learn more about the different types of car insurance coverage, and make sure to carry the necessary protection to remain legally compliant with state law and avoid driving uninsured.

4. Urban Areas with High Traffic Density and Accident Rates 

Urban areas in Michigan experience heavier traffic and higher accident rates, and both play a major role in driving up auto insurance costs. Cities like Detroit and Grand Rapids see dense daily traffic, which naturally increases the chance of collisions.

State crash data reflects this trend. Michigan reported 245,432 crashes in 2020 and 293,341 crashes in 2022, showing a steady rise over recent years.

More accidents lead to more insurance claims, and insurers must cover the costs of these frequent payouts. To manage that financial pressure, they raise premiums for drivers in high-risk areas. Congested roads, aggressive driving patterns, and complex intersections make cities especially prone to collisions, adding even more strain to the system.

Repair and medical expenses also tend to be higher in urban regions. Many city repair shops charge more for labor, parts, and diagnostics. Medical facilities in larger metro areas often have higher treatment costs as well. When claims cost more to settle, insurers adjust premiums upward to keep up with those expenses.

Together, heavy traffic, rising accident rates, and costly urban repairs make Michigan’s city drivers pay some of the highest premiums in the state.

5. High Amount of Deer-Car Accidents 

Michigan drivers encountered over 58,000 deer-car accidents in 2024. This ranks Michigan among the top 4 states in the nation for such collision. Deer-car accidents are most common in the fall, mostly in October and November and Oakland County, in particular, has the highest number of these incidents in the state.

Although most deer-car accidents aren’t deadly, they do cause extensive damage to vehicles. Repairing or replacing damaged cars, trucks, vans, and RVs can be very expensive. Insurance companies cover these costs, which then leads to higher premiums for policyholders. Based on your location and regular driving routes, they may try to estimate the potential frequency and costs of these deer-related accidents. As a result, this can make your auto insurance more expensive.

Learn More: What to do if you hit a deer?

6. Weather Conditions Leading to More Accidents and Claims 

Michigan’s winter weather plays a major role in driving up auto insurance costs. Heavy snowfall, freezing rain, and icy roads make driving unpredictable, and these conditions lead to more accidents and claims every year.

Slippery and poorly maintained roads increase the risk of skidding, rear-end crashes, and multi-vehicle pile-ups. Even a thin layer of black ice can turn a normal commute into a dangerous situation. Michigan consistently ranks among the top states for winter-weather crashes.

Michigan State Police crash statistics and Michigan Traffic Crash Facts (MTCF) data show that weather-related accidents account for well over 15% of all crashes each year. Property damage from winter collisions also adds up. These losses directly affect insurance payouts and ultimately increase premiums.

Cold temperatures also create mechanical issues. Dead batteries, frozen engines, cracked tires, and stalled vehicles often lead to additional claims or roadside assistance requests. Severe storms add further strain. Heavy snow can collapse trees onto cars, and freezing rain increases the chances of falling branches and property damage.

Insurers factor all of these risks into the cost of auto insurance. When accidents, repairs, and weather-related claims rise, premiums rise with them. This is why Michigan drivers often see higher rates during and after harsh winter seasons.

7. High Repair Costs for Vehicles

High repair costs also play a major role in Michigan’s expensive auto insurance rates. Drivers in the state often pay more to repair their vehicles after an accident compared to many other parts of the country. This comes from a mix of higher prices for parts, rising labor rates, and the advanced technology built into modern cars, which makes repairs more complex and time-consuming.

Recent industry data shows that collision repair costs in Michigan are higher than the national average, often exceeding $3,500 compared to roughly $3,000–$3,400 nationally, depending on the severity of car damage and labor rates. Costs climb even further for newer vehicles equipped with sensors, cameras, and ADAS safety systems that require specialized calibration. In these cases, repairs can easily surpass $5,000 or more, even for moderate damage.

When repairs get more expensive, insurers absorb those costs through claim payouts. These higher claim amounts then get factored into premiums for all policyholders. As repair expenses continue to rise each year due to parts shortages, supply chain issues, and increased labor rates, insurers adjust their pricing to keep up. Because of this steady increase in repair costs, Michigan drivers naturally face higher auto insurance premiums.

8. Increased Rates of Insurance Fraud

One of the reasons why Michigan car insurance is so high is the increased rates of insurance fraud. In fact, one out of every ten no-fault insurance cases in Michigan is thought to be fraudulent. Insurance fraud actually occurs when someone makes false claims to receive compensation they aren’t entitled to, which drives up the total cost for insurance companies. These fraudulent activities include staged accidents, exaggerated injury claims, and filing claims for damages that never occurred.

Michigan has seen a significant rise in such fraudulent claims, which has led to substantial financial losses for insurers. To compensate for these, insurance companies raise premiums for all policyholders. According to the Insurance Information Institute, insurance fraud costs the industry $308.6 billion annually with a notable amount attributed to auto insurance fraud.

The state’s no-fault insurance system requires insurers to pay for medical bills regardless of fault. This may also encourage fraudulent claims. Besides, the extensive benefits offered under Personal Injury Protection (PIP) can be tempting targets for fraudsters seeking to exploit the system.

For example, staged accidents, where individuals intentionally cause collisions to file claims are common. Multiple parties including dishonest medical providers who inflate medical bills or perform unnecessary treatments to maximize payouts can be involved. To sum up, the high rate of insurance fraud makes Michigan auto insurance one of the most expensive in the nation.

9. High Legal Fees Related to Car Accidents 

Legal costs are another reason auto insurance is so expensive in Michigan. After a car accident, disputes often arise over fault, injuries, and compensation. These disagreements can lead to lawsuits, which require attorneys, court time, and extensive documentation. All of this adds to the overall cost of settling a claim.

Michigan’s no-fault system allows drivers to sue for pain and suffering when their injuries meet certain thresholds. These lawsuits can become lengthy and expensive, especially in serious injury cases. Attorney fees, court costs, expert witness expenses, and settlement payouts all contribute to higher claim totals.

Legal costs in Michigan are also higher than in many other states. Insurers must set aside significant reserves to prepare for these legal outcomes, which adds another layer of financial pressure. Although insurance companies cover legal expenses at first, those costs eventually show up in the premiums charged to policyholders. As courtroom disputes grow more common and more costly, Michigan drivers see higher rates as a result.

10. Quick Processing Time for Claim 

According to the Michigan Department of Insurance and Financial Services (DIFS), Consumer Rights, Personal Injury Protection (PIP) claims, including medical costs, are considered overdue if not paid within 30 days of the insurer receiving proper documentation. Overdue claims accrue 12% simple interest annually until settled.

However, to process claims quickly, they face higher administrative costs. These costs may include hiring more staff to handle claims and implementing advanced technology for quicker processing. Besides, the short processing can lead to higher payout rates, because there is less time to thoroughly investigate claims for potential fraud. While this benefits policyholders, it also contributes to higher auto insurance rates in Michigan.

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Effective Ways to Save Money on Auto Insurance in Michigan 

Here are some ways to save money on car insurance in Michigan:

• Maintain a Clean Driving Record: Avoid accidents and traffic violations. Because the car insurance rate goes up after an accident. In Michigan, on average, car insurance rates can go up by 20% to 50% following a single at-fault accident.
• Bundle Policies: Combining your car insurance with other types of insurance, like home, renters, motorcycle, or RV, can lead to discounts from your insurance provider.
• Check Available Discounts: Look for available auto discounts, such as those for good students, safe drivers, and those who install anti-theft devices in their vehicles.
• Choose a Higher Deductible: Opting for a higher deductible can lower your premium. Just make sure you can afford to pay the deductible in case of a claim.
• Shop Around: Different companies have different rates. Compare car insurance quotes from multiple insurers and find the best price.
• Review and Update Your Policy Regularly: Make sure your policy fits your present needs and remove coverage you don’t need anymore.
• Consider Usage-Based Insurance: Some insurance companies offer programs that track your driving habits. Safe driving can lower your premiums.
• Drive a Safe Vehicle: Vehicles with higher safety ratings often have lower insurance premiums.

Before we conclude, remember that accidents are a significant factor that can increase insurance rates. So, you should adopt safe driving habits and be aware of available discounts.

Looking for an affordable insurance agency in Michigan? L.A. Insurance has been serving clients for over 33 years. We offer the cheapest car insurance for Michigan drivers. Compare auto insurance quotes for affordable full-coverage auto insurance today.

The Bottom Line 

So far, we’ve discussed the possible reasons why Michigan auto insurance is so expensive. The high costs of Michigan car insurance stem from several factors: the state’s no-fault insurance system, expensive medical care under PIP, fees from MCCA, high rates of uninsured drivers, urban areas with heavy traffic, frequent deer-car collisions, harsh weather conditions, insurance fraud, and quick claim processing time. All these factors contribute to notably higher premiums for Michigan drivers. As a policyholder, you need to understand these factors to purchase the most suitable car insurance policy. Also, it’d be helpful for you if you just go through the ways to save on auto insurance.

Frequently Asked Questions 

What Is the Minimum Car Insurance Requirement in Michigan? 

In Michigan, the minimum car insurance requirements are: 

• $50,000 for bodily injury liability per person
• $100,000 for bodily injury per accident
• $10,000 for property damage liability
• Personal Injury Protection (PIP)
• Property Protection Insurance (PPI) provides up to $1 million in coverage for damage to others’ property. 

These are mandatory for all drivers. Learn more about Michigan auto insurance requirements.

Why Does Michigan Have the Most Expensive Car Insurance? 

Michigan has the most expensive car insurance due to its no-fault insurance system, high medical costs under PIP, high rates of uninsured drivers, high legal costs, MCCA fees, high repair costs, and so on.

Whether you're a renter, motorcyclist, or driver, you can find cheap insurance in Michigan whenever you need it. Call us at (800) 893‑9393 for a quick quote.

How to Lower Car Insurance in Michigan?

To lower car insurance in Michigan, increase your deductibles and ask about discounts. Also, maintain a good grade for student discounts through employers or associations. Shop around for the best rates and attend driving schools to improve your driving record. These steps can help reduce your auto insurance premiums. Learn more: How to find cheap car insurance in Michigan

Sources: 
 
1. Robinson, D. (2024, August 8). Car Insurance Rates by State (2024). MarketWatch - Guides; MarketWatch. https://www.marketwatch.com/guides/insurance-services/car-insurance-rates-by-state/ 

2. Robinson, D. (2024a, August 8). Average Cost of Car Insurance in Michigan in 2024. MarketWatch - Guides; MarketWatch. https://www.marketwatch.com/guides/insurance-services/average-cost-of-car-insurance-in-michigan/ 

3. Choosing PIP Medical Coverage. (2020). Michigan.gov. https://www.michigan.gov/autoinsurance/choosing-coverage/choosing-pip-med-coverage 

4. Facts + Statistics: Uninsured motorists | III. (2015). Iii.org; Insurance Information Institute. https://www.iii.org/fact-statistic/facts-statistics-uninsured-motorists 

5. Gursten, S. M. (2023, June 29). Michigan Traffic Fatalities 2023: Statistics, Laws & Prevention. Michigan Auto Law; Michigan Auto Law. https://www.michiganautolaw.com/blog/2023/06/29/michigan-traffic-fatalities/ 

6. Reindl, J. (2018, November 23). Michigan woman’s insurance claim upended by amusement park video. Detroit Free Press; Detroit Free Press. https://www.freep.com/story/money/2018/11/23/no-fault-insurance-law-michigan/1923054002/ 

7. Consumer Rights. (2024). Michigan.gov. https://www.michigan.gov/autoinsurance/choosing-coverage/consumer-rights