Why Did My Car Insurance Go Up in Michigan?

Car insurance premiums frequently fluctuate. Understanding the factors influencing these changes is important for managing costs. Premiums can shift due to individual circumstances, regulatory adjustments, or broader economic and industry trends. These elements combine to determine coverage cost, reflecting an insurer’s risk assessment and claims environment.

Individualized Factors

Your driving habits and policy choices influence car insurance premiums. A clean driving record generally leads to lower rates, while infractions like speeding tickets or driving under the influence (DUI) significantly increase risk.

A DUI conviction can substantially increase premiums, remaining on your record for several years. At-fault accidents also result in higher premiums, with the increase depending on crash severity and damage cost.

Your claims history, even if not at fault, affects rates as insurers assess future risk. Companies track claims through databases like the Comprehensive Loss Underwriting Exchange (CLUE).

Changes to your vehicle, such as a newer, more expensive model or one with higher performance, can increase premiums due to higher repair costs or theft risk. Vehicles with advanced technology, like sensors and cameras, have more expensive parts and complex repair processes, raising insurance costs.

Adjusting policy coverage, such as increasing liability limits or adding comprehensive and collision coverage, will raise your premium. Conversely, choosing higher deductibles can lower your monthly premium by increasing your out-of-pocket responsibility in a claim.

Changes within your household, such as adding a new, inexperienced driver, can also increase rates due to higher risk. Moving to a new location with higher traffic density, increased crime rates, or more accidents, can also lead to higher premiums. Michigan law prohibits insurers from using credit scores to determine auto insurance rates, though they may consider them for payment options.

Statewide Regulatory Changes

Michigan’s auto insurance landscape transformed with Public Act 21 of 2019, the 2020 Michigan No-Fault auto insurance reform. This legislation, effective July 1, 2020, aimed to provide drivers more choices and potentially lower premiums. Historically, Michigan mandated unlimited Personal Injury Protection (PIP) medical coverage, contributing to some of the nation’s highest premiums.

The reform introduced new options for PIP medical coverage, allowing drivers to choose limits that suit their needs. These options include:
Unlimited coverage
$500,000
$250,000
$50,000

Qualified individuals with health coverage, such as Medicaid or Medicare, can select lower PIP limits or opt out entirely. Choosing lower PIP limits can result in premium reductions for the PIP portion of a policy, with average reductions of 10% for unlimited, 20% for $500,000, and 35% for $250,000. These reductions are not guaranteed for every policyholder and apply only to the PIP portion of the premium.

The reform also introduced fee schedules for medical services related to auto accident injuries. This aimed to control costs paid by insurers for medical care, a significant driver of high premiums. By capping amounts medical providers can charge, the reform sought to reduce overall claims costs for insurers, influencing premiums. The new law also increased minimum bodily injury liability coverage amounts. While the reform provided choices and aimed to lower rates, factors like high medical costs and Michigan’s large number of uninsured drivers continue to contribute to elevated premiums.

Broader Market Dynamics

Beyond individual factors and regulatory changes, economic and industry trends significantly impact car insurance premiums across Michigan. Inflation directly affects the cost of vehicle parts and labor for repairs, leading to higher claims costs for insurers. Car part prices can increase by 10% or more annually, translating to increased expenses for insurance companies when processing claims. The rising complexity of modern vehicles, with advanced safety features and intricate computer systems, also makes repairs more costly and time-consuming.

Supply chain disruptions can cause parts shortages, driving up repair costs and prolonging repair times. Longer repair times can lead to additional costs for rental cars covered by insurance, contributing to overall claim expenses. The frequency and severity of accidents also play a role in statewide premium adjustments. An overall increase in accidents, or a rise in crash severity, contributes to a higher collective risk for insurers, leading to broader rate increases. Michigan has seen an increase in fatal car crashes in recent years.

Medical cost inflation, even separate from PIP reform, continues to influence bodily injury liability claims. Healthcare spending, including prescription drugs and rehabilitation services, generally increases each year, impacting amounts insurers must pay for accident-related injuries. Severe weather events, such as harsh winters, can lead to an increase in accident claims and vehicle damage, adding to the overall claims burden for insurance companies. Insurers also adjust rates based on their overall profitability and underwriting results across the state, ensuring they can cover payouts and operational costs. These broad market dynamics collectively contribute to the changing landscape of car insurance premiums for all drivers in Michigan.