The cost of car insurance has been a problem in Michigan for years. In the heart of America’s auto industry, premiums soar over those in neighboring states. Michiganders pay 63 percent more for car insurance than Wisconsinites, 82 percent more than Hoosiers and 96 percent more than Ohioans as of January 2025. 

Five years ago, the state’s legislature set its sights on fixing the problem with the passage of Senate Bill No. 1, a sweeping reform of Michigan’s auto insurance laws. The bill was signed into law as Public Act No. 21 in May 2019. Among other things, the act removed the requirement that all Michiganders pay for unlimited no-fault auto insurance and banned insurers from using certain factors unrelated to driving — gender, marital status, ZIP code and credit score — to set rates. 

But far from producing widespread relief from high rates, Michigan’s auto insurance reform led to a brief reduction in car insurance prices, followed by rising rates that put the state back where it started: one of the most expensive for car insurance.

What went wrong with Michigan’s auto insurance reform? 

Democrat Jeff Irwin was one of four senators to vote “no” on SB 1 in 2019. “I voted against it,” he says, “because it didn’t really address the main issues that are causing insurance to be more expensive in Michigan.” 

Those issues include territorial rating — the practice of charging higher or lower premiums based on a policyholder’s address — along with the use of credit information to set prices. While the Department of Insurance and Financial Services (DIFS) presented SB 1 as an end to these practices, the law actually extended insurers’ ability to employ both rating factors in Michigan. 

Territorial redlining is still legal in Michigan 

“The #1 thing that the bill didn’t address,” Irwin says, “was the system of geographic rating and redlining” that insurers employ in Michigan to keep costs low in certain areas and high in others. 

It’s no secret in Michigan that drivers in Detroit pay the highest premiums for auto insurance. Bankrate’s 2025 True Cost of Auto Insurance report found that the Detroit-Warren-Dearborn metropolitan statistical area (MSA) has the third-highest true cost of car insurance of the 25 MSAs analyzed, with only Tampa and Miami edging out its sky-high costs. Residents of Detroit and its surrounding areas pay an average of $3,696 per year for full coverage auto insurance — 5.09 percent of the MSA’s median annual household income. 

SB 1 made a gesture toward outlawing rating practices that penalize residents of urban areas. These areas, like Detroit, are usually home to large communities of color and a high number of low-income residents. The bill banned insurance companies in Michigan from basing the cost of car insurance on an applicant’s ZIP code. 

“But, of course,” Irwin points out, “there are a million ways to cut a map.” 

In a recent study of Michigan’s rating loopholes, The Markup and Outlier Media identified the methods Michigan’s top auto insurance carriers used to get around the new ZIP code prohibition: 

• Census tracts: Auto Club, Michigan’s third-largest provider of auto insurance, switched to using census tracts — areas of roughly 2,500 to 8,000 residents delineated by the U.S. Census Bureau.
• Census block groups: Similar to census tracts, these small areas enable insurance companies to price coverage in increasingly granular ways. Citizens Insurance uses this method of cutting up Michigan’s map.
• Counties: At least one insurer — Liberty Mutual — switched to using counties as rating territories.
• Custom maps: Allstate, State Farm, Auto-Owners and Progressive all use custom-drawn maps that divide Michigan into sections significantly smaller than a standard ZIP code.

The result is that carriers still use various territorial rating methods to charge car insurance customers higher rates in urban areas like the Detroit-Warren-Dearborn MSA. Based on rate data from Quadrant Information Services, the priciest carriers charge Detroit drivers average annual rates as much as $5,700 above the statewide average premium. 

The bill created a credit loophole

Section 2108.(4) of SB 1 bans insurance companies from basing auto insurance rates on a driver’s credit score. 

To many drivers, this may sound like a good thing. After all, it’s possible to be an excellent driver with poor credit, or vice versa. But there’s just one issue: insurers don’t use credit scores to set car insurance rates. Instead, they use a similar rating called a credit-based insurance score, and SB 1 does nothing to restrict insurers’ use of insurance scores. 

Insurance scores share a lot of DNA with credit scores — in fact, they’re calculated from the same credit information and often by the same third parties, like the Fair Isaac Corporation (FICO). The primary difference is that insurance scores put less emphasis on a consumer’s credit mix and more on their history of on-time payments. 

But insurance scores aren’t used to predict how likely a customer is to pay their bill on time. Instead, actuarial studies point to a predictive link between poor credit history and a higher likelihood of filing claims. The mismatch between how insurance scores are calculated and what they’re used to measure makes them controversial — which makes the wording of the bill so important. 

SB 1 defines the term “insurance score,” but only bans the use of “credit scores.” However, “there is virtually no difference, and sometimes absolutely no difference,” between the two, says Doug Heller, director of insurance for the Consumer Federation of America. The bill, he says, created a widespread myth that Michigan’s government eliminated credit as a rating factor — “even though the myth is dispelled the moment anybody with a fair or moderate or poor credit score goes to get their insurance quote.”

The DIFS auto insurance reform FAQ page still lists the elimination of credit scores as a rating factor as one of the consumer protections the bill secured. When we asked DIFS why the website doesn’t mention the difference between credit scores and insurance scores, DIFS director Anita Fox included the following in her statement: 

“Auto insurers use of credit-based insurance scoring and its application to auto insurance rates is complex. DIFS encourages consumers who have questions about rates or the use of insurance scoring to first speak with their insurance agent or insurance company. If they are unable to resolve their concerns by speaking with their agent or insurance company, they should call DIFS.” 

The statement fails to address the root of the question — why hasn’t the Michigan government taken steps to proactively educate consumers on the difference between credit scores and insurance scores? Credit-based insurance scores are a crucial pricing tool for auto insurers, and their use in the industry is nearly universal. But outside of the industry, most drivers aren’t familiar with the difference— which leaves many Michiganders with the false impression that SB 1 introduced reforms that it simply didn’t. 

Cutting no-fault coverage didn’t cut costs

The primary focus of SB 1 was eliminating the steep no-fault insurance requirements that have made Michigan’s car insurance prices so expensive for years. Until the bill took effect in 2020, Michigan was the only state in the country to require all drivers to purchase unlimited personal injury protection (PIP) coverage. Now, drivers can choose from a number of PIP coverage levels, ranging from $50,000 to unlimited. In some cases, drivers can even opt out of PIP coverage. 

In theory, giving drivers an option to buy less PIP coverage should have led to lower costs. In practice, however, analysts found that the no-fault insurance overhaul decreased coverage for some Michiganders without bringing a significant decrease in price. Amanda Nothaft, director of data and analysis for Poverty Solutions at the University of Michigan, says that while PIP reforms cut costs for some drivers, SB 1 failed to deliver the lasting relief that she and others hoped for.    

“In the very first year, we saw drops in the cost,” she says. In a 2021 policy brief, Nothaft and her colleagues estimated that the reforms had led to a nearly 20 percent decrease in auto insurance premiums across the state. But it’s climbed ever since,” she says, noting that Michigan’s minimum PIP coverage is still higher than any other state’s requirement, meaning that insurance companies still carry a significant financial responsibility for healthcare costs stemming from car accidents. “The minimum is set so high that they’re still exposed, a lot more than they would be in other states.” 

Why SB 1 failed to deliver fairer premiums

Senate Bill No. 1’s failure to deliver lower and more equitable rates for Michiganders isn’t an accident. While Michigan’s continuing high rates are due in part to shifts in the national insurance market driven by the COVID-19 pandemic and the ongoing financial fallout, the law’s provisions around ratemaking ensured freedom for the insurance industry to continue charging steep prices in Michigan. 

Diving into the bill’s record in the Michigan House and Senate, along with the campaign finances of its sponsors, reveals the collaboration of lawmakers and insurers to preserve the mechanisms that make auto coverage less affordable for Michigan than for most of the country. 

Lawmakers voted down amendments that eliminated loopholes

While the final text of SB 1 affirms the right of insurance companies to use customers’ geographical location and credit information when setting prices, some lawmakers pushed back against these practices, attempting to introduce revisions that would deliver meaningful consumer protection. According to voting records compiled by the Mackinac Center for Public Policy, lawmakers voted against the following proposed amendments to SB 1: 

• Force auto insurers to cut rates by 50 percent: Sen. Erika Geiss (D-1) proposed this amendment, along with language to eliminate the state’s “file and use” regulatory system, which allows insurers to raise rates without waiting for approval from state regulators. 
• Base auto insurance rates only on driving record: Sen. Marshall Bullock (D-4) proposed an amendment to tie-bar the bill with Senate Bill No. 88, which would have prohibited insurance companies from basing auto rates on anything other than an insured’s driving safety record, years of driving experience and annual mileage. 
• Limit impact of insurance score and territory to 10 percent of premium: An amendment proposed by Rep. Isaac Robinson (D-4) would have forced insurers to limit the use of rating factors including credit information and location such that only 10 percent of a customer’s bill could be impacted by these factors. 
• Eliminate use of territory, “insurance scores” and “credit information” for PIP premiums: A second amendment by Robinson would have prohibited territory and all forms of credit information as rating factors for personal injury protection (PIP) coverage. 

While the record doesn’t reveal who voted for and against Robinson’s proposed amendments in the House, both amendments proposed in the Senate failed 16 to 22, with 16 Senate Democrats voting in favor of the amendments and 22 Republicans — including the bill’s sponsors — voting against the proposed changes. 

The bill’s sponsors took money from insurance companies

Insurance companies represented some of the biggest donors to the campaigns of the eight Republican sponsors of SB 1. Between them, the bill’s sponsors accepted a total of $121,250 in campaign donations from the insurance industry in 2018 and 2019 — the two years in which all eight senators were up for election or reelection. Among the industry’s top donors to these legislators was the American Automobile Association (AAA), which makes up 14 percent of the auto insurance market in Michigan as Auto Club, an AAA insurer. AAA donated a total of $14,600 to the bill’s sponsors in 2018 alone. 

Other key industry donors include Allstate, which donated to the campaigns of Aric Nesbitt and Kenneth Horn; Auto-Owners, which donated $5,450 to Tom Barrett; and smaller regional carrier Pioneer State Mutual, which donated a total of $2,500 to the campaigns of Horn, Barrett and Daniel Lauwers. 

According to Irwin, “the insurance companies had been asking the legislature for many years to make it more palatable for them” to do business in Michigan. Michigan’s unlimited no-fault system, paired with significant environmental risks, such as severe winter weather, have long made the Great Lakes State a significant financial challenge for insurance companies. By eliminating the requirement for all drivers to purchase unlimited PIP while retaining pricing and regulatory mechanisms that permit insurers to charge higher premiums, the law met the needs of the insurers who helped to sponsor the campaigns of the senators who introduced it. 

At the same time, the law “appeared to be a reform that would protect financially vulnerable consumers,” Heller notes — a gesture to the needs of the voters whom Nesbitt, Theis and the bill’s other sponsors represent. “It’s an absolute game of deception that is an embarrassment to the lawmakers who didn’t realize that they were being played, and it’s an ugly mark on the lawmakers who knew exactly what was going on.” 

What you can do about high insurance costs in Michigan

Michigan’s auto insurance reform may not have delivered the pricing relief some consumers hoped for, but it’s still possible to find affordable car insurance in Michigan. 

Compare quotes from multiple insurers

First, shop around. Heller notes that there’s often “more variability in pricing” for drivers with poor or fair credit history, compared to those with excellent credit. “If you have really excellent credit,” he says, “all of the companies are already working for your business because your high credit suggests to them that you’ll buy other products.” Drivers struggling with poor credit, on the other hand, stand to save more by comparing quotes from different insurers. 

Bankrate analyzed average premiums for customers across the credit spectrum from insurers in Michigan. Among the full coverage premiums charged for drivers with poor credit, we saw a spread of over $16,000 per year between the cheapest and most expensive carriers. 

For drivers with excellent credit, by contrast, the maximum potential savings came out to just $2,321. Savings opportunities exist for drivers in all credit tiers, but the potential impact of comparison shopping may be greatest for drivers with poor credit. 

Read policy documents carefully — and build your insurance vocabulary

When you receive documents from your car insurance company, such as a declarations page or an insurance bill, take the time to read through the fine print. Doing so can help you understand what you’re paying for and how your exact costs break down. 

Learning some basic insurance jargon can make reading policy documents easier. To understand what’s going on with your car insurance in Michigan, it’s worth knowing: 

• The difference between all the types of coverage on your policy: If you’re not familiar with the difference between personal injury protection, collision and comprehensive insurance, read up on the different types of coverage. 
• What an insurance score is: Insurers and lawmakers relied on the opacity of insurance scores to spin SB 1 as a win for pricing equity. Understanding the difference between your insurance score and your credit score can help you speak with your insurance provider or lawmakers about this issue. 
• How insurance companies price coverage: Territory, credit and coverage are just a few of the factors that impact the cost of auto insurance for Michiganders. Learning about the personal rating factors that auto insurers use to price your policy can help you make informed decisions.