Why Is Michigan Auto Insurance So Expensive?

Many drivers in the Great Lakes State have to pay a notoriously high amount to insure their car. A full coverage car insurance costs around $4067 per year in Michigan which is nearly double the national average. However, to register your vehicle under state-mandated minimum coverage which includes Personal Injury Protection (PIP), Bodily Injury and Property Damage Liability Protection, and Property Protection Insurance (PPI), you will have to pay around $1360 per year. These excessive car insurance costs in Michigan leave policyholders wondering why is Michigan auto insurance so expensive. Let’s find out the reasons why Michigan car insurance premiums are so costly.

10 Reasons Why Is Michigan Auto Insurance So Expensive?

The primary culprit behind pricey car insurance in Michigan is their unique no-fault insurance system. This scheme mandates unlimited Personal Injury Protection (PIP) coverage. Though this makes sure the insured party receives comprehensive medical coverage, it comes at a higher price. Besides, 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 unique and complex. Under this system, drivers turn to their own insurance companies after an accident. This applies regardless of who is at fault. The aim is to make sure quick payment for medical expenses, wage loss, and other costs. 
 
One major feature is the unlimited Personal Injury Protection (PIP) coverage. This means how high the medical bills go, the insurance will cover them for life. While this offers you comprehensive protection, it also significantly raises premiums. Michigan is the only state with such unlimited benefits. 

Besides, PIP medical coverage costs in Michigan are exceptionally high. Higher medical costs mean that insurance companies have to pay out more for each claim which drives up the cost of insurance for everyone. Also, the system has issues with overcharging and fraud. Some medical providers inflate their charges because they know the insurance will pay. There are also cases where unnecessary treatments are given just to bill the insurance. The high levels of fraud and overcharging substantially increase the entire car insurance cost. 
 

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

The Michigan’s Catastrophic Claims Association (MCCA) fee is another reason car insurance is so expensive in Michigan. This fee is unique to Michigan. It’s designed to cover the costs of very severe car accident injuries. 
 
Unfortunately, if you get severely injured in a car accident, medical costs can be extremely high. For these cases, the MCCA aids in covering the expenses once they go over a certain amount. Presently, this threshold is set at $600,000. The MCCA covers the costs beyond this limit which provide unlimited lifetime benefits for catastrophic injuries. 
 
To fund this, all insured drivers in Michigan pay an annual MCCA fee. This fee is added to their auto insurance premium. As of 2024, the fee is $122 per vehicle. While this might not seem like a lot, it adds up, especially for families with multiple vehicles. However, the MCCA fee has fluctuated over the years. For example, it was as high as $220 in 2019. This fluctuation can make it hard for drivers to budget their insurance costs.

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3. High Rate of Uninsured Drivers 

Another reason Michigan’s auto insurance is expensive is the high rate of uninsured drivers. Many drivers in Michigan do not carry insurance.  This creates a significant risk for everyone on the road. According to the Insurance Information Institute, in Michigan, nearly 20% of drivers are uninsured. This is much soaring than the national average of 13%.

When an uninsured driver causes an accident, the costs can be huge. If the driver cannot pay for damages, the insured drivers often have to cover these costs themselves. To protect drivers, auto insurance companies charge higher premiums. These higher rates help cover the potential costs of accidents involving uninsured drivers. It means insured drivers are essentially paying more to cover the risk of accidents caused by those without insurance.  
 
Besides, the high rate of uninsured drivers also means more claims are made against insured drivers. This also increases the cost of car insurance for everyone. It adds an extra layer of financial risks, which is reflected in higher premiums. 

4. Urban Areas with High Traffic Density and Accident Rates 

Urban areas in Michigan have higher traffic density and accident rates. This notably contributes to the state’s expensive auto insurance. Cities like Detroit and Grand Rapids see heavy traffic daily. More vehicles on the road means a higher chance of accidents.

Accidents are more frequent in these urban settings. In the past three years, the number of car accidents in Michigan has gone up from 245,432 in 2020 to 293,341 in 2022. Higher accident rates lead to more insurance claims. Insurance companies must cover the costs of these claims. To manage this, they raise insurance premiums for drivers in these areas.
 
Urban areas also face issues like road congestion and aggressive driving. These factors increase the likelihood of collisions. More accidents result in more damage and injury claims. So, auto insurance companies compensate for these by charging higher car insurance rates. Besides, in cities, vehicle repairs and medical costs can be higher. Urban areas often have more expensive repair shops and medical facilities. This increases the costs of claims which eventually leads to higher insurance premiums.

5. High Amount of Deer-Car Accidents 

Michigan drivers encounter over 50,000 deer-car accidents each year. 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.

6. Weather Conditions Leading to More Accidents and Claims 

When it comes to driving in winter months, Michigan's harsh weather with heavy snowfall and icy roads doesn’t allow smooth trips. These conditions lead to more accidents and claims. Besides, the slippery and poorly maintained road can increase the risks of skidding and collisions. Snow and ice can cause pile-ups and fender benders which result in extensive damage to vehicles.  In addition, cold weather can lead to mechanical failures such as dead batteries and frozen engines. This can also increase insurance claims. In short, car insurance companies, in fact, consider all these risk factors while deciding auto insurance quote for you.

7. High Repair Costs for Vehicles

High repair costs for cars make Michigan’s auto insurance rate costlier. Because Michiganders have to pay a high amount for repairing vehicles after an accident which is often higher compared to other states. This is due to several factors, including higher prices of automobile parts, labor, and advanced technology in modern cars.

This means, if your car is damaged, the insurance companies cover the costs of repairs. These costs are then factored into the insurance premiums paid by all policyholders. With repair expenses on the rise, insurers adjust their rates to make sure they can cover these claims. Therefore, due to this factor, Michigan drivers face higher car 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 Insurance Information Institute, insurance fraud costs the industry billions of dollars 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 some of the most expensive in the nation.

9. High Legal Fees Related to Car Accidents 

When a car accident happens, legal disputes can arise over who is at fault and the amount of compensation due. To solve these legal issues, you require the involvement of auto insurance lawyers, which leads to high legal fees. The no-fault insurance system in Michigan allows you to sue for pain and suffering if they meet certain injury thresholds. So, this can sometimes result in lengthy and costly legal battles. The costs associated with lawsuits, including attorney fees, court costs, and settlement amounts, are often significant.

Your car insurance companies initially cover these legal expenses. However, they pass these costs on to you in the form of higher premiums. Besides, the legal costs in Michigan are among the highest in the nation. Also, the frequency of lawsuits and the complex legal environment in Michigan means that insurers have to set aside more money to cover potential legal fees.

10. Quick Processing Time for Claim 

Unpaid Personal Injury Protection (PIP) claims, including medical costs, are considered overdue 30 days after the auto insurance company receives adequate supporting paperwork. So, the insurance company will be fined at a rate of 12% interest, if they don't settle claims within 30 days.

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 rate can go up by 48% 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. L.A. Insurance is the most affordable insurance agency, serving clients across different states. We offer the cheapest car insurance for Michigan drivers. You can compare auto insurance quotes and get back to us to learn more about our affordable full-coverage auto insurance costs in Michigan.

The Bottom Line 

So far, we’ve discussed the possible reasons why Michigan auto insurance is so expensive. The high costs 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 per person
• $100,000 for bodily injury per accident
• $10,000 for property damage
• 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. 

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. 

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. 

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