Drivers in all but seven states in the U.S. have seen their average car insurance rates increase since 2021. One state that didn’t, however, is Michigan, where rates have decreased nearly 18%. As a result, Michigan drivers are saving an average of $787 per year on full coverage insurance. However, new legal changes and other factors could mean rates may not continue to drop in the state.

In 2019, Michigan governor Gretchen Whitmer signed Public Acts 21 and 22 into law. These laws made changes to Michigan’s no-fault insurance rules to eliminate the requirement for drivers to sign up for unlimited personal injury protection (PIP) coverage. Under the new law, drivers are now given the option to choose from four PIP coverage levels, ranging from $50,000 for Medicaid recipients to unlimited coverage.

While drivers still have the option to select unlimited PIP coverage, these changes reduced the overall claims liability for insurers, as drivers could now select lower coverage limits. This allowed insurers to offer less expensive policies with less PIP coverage, bringing down the average cost in the state. In reducing overall risk for insurers, it also meant that companies could afford to offer cheaper premiums in general.

Public Acts 21 and 22 have brought the average full coverage premium down in Michigan since they were enacted. However, medical claims payouts are not the only risk associated with insuring drivers. Despite the benefits that these reforms delivered to the Michigan insurance market, several other insurance-related risk factors have increased — which could potentially keep rates from continuing to fall, or even cause them to go back up.

Car Thefts in Michigan Have Increased Significantly

Auto theft often results in damage to vehicles, and in many cases, can create a “total loss” if a car is severely damaged or never found. When a driver has a full coverage policy, the comprehensive coverage portion of that policy covers damage from car theft. This means that theft is a significant risk for insurers.

In Michigan, car theft is a major problem. One study in 2022 ranked Michigan first in the country for automobile theft. That problem may also be getting more severe. According to Detroit police, auto theft increased by 24% from 2021 to 2022. 

Higher rates of automobile theft mean cars are more likely to be stolen and damaged, meaning insurers are at a higher risk of claims payouts. If the theft rate continues to climb, it could translate into Michigan insurance companies charging higher premiums to help mitigate that risk.

Automobile Repair Costs Continue To Climb

Over the last several years, inflation has led to higher costs for many goods and services. One of those is the cost of automobile repairs. According to data from the U.S. Bureau of Labor Statistics (BLS), the consumer price index (CPI) of automotive repair and maintenance increased by 12% in the year between August 2022 and August 2023 alone.

Even if the number of claims in Michigan remains flat over the same period of time, the increase means that insurance companies must pay out more for each individual property damage claim. As with any other risk factor, insurers tend to adjust premiums upward to cover their increased financial risk as repair costs go up. When auto insurance companies in Michigan set rates for new policies, this increased risk will likely translate into more expensive policies.

Insurance premiums in most parts of the country have gone up due to increased risk from national trends, such as the growing cost of auto repairs and other factors. The 2019 signing of Public Acts 21 and 22 is likely the single biggest factor in the decreased rates Michigan drivers have paid over the last few years. These Acts are also likely the primary reason why rates have gone down in the state while going up in most other states.

Those insurance reforms may be going away soon, however. In October, legislators in the Michigan state senate passed a bill that would increase reimbursement rates for medical care following auto insurance claims. 

Proponents of the bill say that the increased payouts for medical providers would help ensure that people receive the care they need in the wake of an accident. Opponents, including Governor Whitmer, say that if the bill becomes law, it would lead to higher auto premiums for drivers across the state of Michigan.

Even after a 17.8% decline in the average full coverage auto premium, Michigan drivers still face the highest average rates in the country. If legislators decide to increase medical reimbursements by passing the reform bill, Michigan could join most other states in the country as drivers there start to see ever-increasing insurance premiums.