If you’re a driver in Michigan, you’ve likely asked this question while looking at your insurance bill: “Why is car insurance so expensive here?” For years, Michigan has consistently ranked as one of the most, if not the most, expensive states for auto insurance.
The answer is complex, but it boils down to our state’s unique (and recently changed) no-fault insurance system. As attorneys who handle car accident claims every day, we see firsthand how this system works and why it costs so much. Let’s break down the main reasons.
1. The Legacy of Unlimited, Lifetime Medical Benefits (PIP)
The single biggest reason for Michigan’s high costs is its historic no-fault law. For decades, Michigan was the only state that required drivers to purchase auto insurance that provided unlimited, lifetime Personal Injury Protection (PIP) medical benefits.
What does this mean? If you were catastrophically injured in a car accident, your auto insurance—not your health insurance—was responsible for paying 100% of your medical bills for the rest of your life. This included surgeries, long-term rehabilitation, 24/7 attendant care, and home modifications. While this provided incredible protection for accident victims, covering these potentially multi-million dollar claims for life made the entire system incredibly expensive for everyone.
2. The Role of the Michigan Catastrophic Claims Association (MCCA)
To manage these massive, lifelong claims, the Michigan Catastrophic Claims Association (MCCA) was created. The MCCA is a private, non-profit association that reimburses auto insurance companies for PIP medical claims that exceed a certain amount (currently over $600,000).
Every insured driver in Michigan paid a per-vehicle assessment fee into this fund each year. This fee, which at times was over $200 per car, was a significant part of your total premium and a direct reflection of the cost of those unlimited lifetime benefits.
3. The 2020 Auto Insurance Reform
In an effort to lower costs, the state passed a major Michigan auto insurance reform law that took effect in July 2020. This law got rid of the mandate for unlimited PIP coverage and gave drivers a choice:
- Unlimited lifetime coverage (the old system)
- Coverage up to $500,000
- Coverage up to $250,000
- Lower limits for those on Medicaid or Medicare.
While this reform has given many people the option to lower their premiums by choosing less coverage, it hasn’t solved the entire cost problem. The system still has to pay for all the catastrophic claims that occurred before the reform. Furthermore, it introduced new complexities that can lead to expensive lawsuits.
4. High Litigation and Medical Costs
Michigan’s system has historically involved a high level of litigation. Insurance companies often dispute the necessity or cost of medical treatments, forcing accident victims and medical providers to hire lawyers to fight for the benefits they are owed. This constant legal friction adds administrative and legal costs that are passed on to all drivers through their premiums.
Additionally, the rates charged by medical providers for services under auto insurance have often been higher than for services under health insurance, further driving up the cost of claims.
The Hidden Risk of “Cheaper” Insurance Today
While the 2020 reform allows you to pay less for insurance, it comes with a critical new risk. If you choose a lower PIP limit (e.g., $250,000) and are seriously injured, your own medical bills could quickly exceed your coverage.
More importantly, if you cause an accident, you can now be sued personally for the other driver’s medical bills that exceed their PIP limit. This was not the case under the old system. This means that saving a few hundred dollars on your premium could expose your personal assets—your house, your savings, your future wages—to a massive lawsuit if you are at fault in a serious crash.
How This Affects You After an Accident
Understanding why insurance is so expensive is one thing, but knowing your rights after a crash in this new system is another. The complexities of PIP limits, fault, and liability mean that getting fair compensation is more challenging than ever.
An experienced Michigan personal injury lawyer can help you:
- Understand your own insurance policy and the benefits you are entitled to.
- File a claim to get your medical bills and lost wages paid.
- Fight back if your insurance company unfairly denies or cuts off your benefits.
- Pursue a lawsuit against an at-fault driver to recover medical costs that exceed your PIP coverage.
Have Questions After a Michigan Car Accident?
The Michigan auto insurance system is confusing, and the stakes are high. If you or a loved one has been injured in a car accident, don’t try to navigate it alone.
Contact The Joseph Dedvukaj Firm, P.C. today for a free consultation. We can answer your questions and help you understand your rights. Call us at 866-HIRE-JOE or reach out online.