Tuesday, 14 December 2021 08:45

Report Finds Michigan Auto Insurance Rates Remain High Despite Reform Law

Written by Mark Rosanes, Insurance Business Magazine


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Despite Michigan’s auto insurance reform law pushing down premiums by an average of 18% since its implementation---the steepest drop in the U.S.---the state still has the most expensive auto policies in the country, a new analysis by University of Michigan’s Poverty Solutions initiative revealed.

Moreover, the analysts have found the legislation has failed to reduce disparities in cost by race and geography.


According to the new report, the average car insurance rate in the state went down from $3,106 in 2019 to $2,535 last year. During the period, auto premiums in Detroit dropped from $6,314 to $5,146, registering the same rate of decline (18%).


However, average rates in the city still accounted for 18% of its residents’ median income, which was significantly above the 2% threshold the U.S. Department of Transportation has set for auto insurance to be considered affordable.


The 2019 law also bars insurance companies from basing premiums on ZIP codes and other non-driving factors, including race, gender, marital status and credit score. Despite this, the analysts found insurance rates were still “highly correlated with race, more so than geography.”


According to the report, the average premiums for the 37 ZIP codes across Michigan where the majority of residents are Black was $5,500 before the law was implemented. The amount was significantly higher than the state-wide average of $3,106.


“The 2019 reform law was a first step, but lawmakers should not be content,” said Amanda Nothaft, senior data and evaluation manager at Poverty Solutions and co-author of the report. “More must be done to eliminate discriminatory rate-setting practices and further reduce premiums.”


“We also need to consider the impact on people who have been catastrophically injured in auto accidents and ensure medical providers are appropriately reimbursed for long-term care,” she added.


The reform law also eliminated mandatory unlimited personal injury protection (PIP) coverage and...

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