Michigan's Auto Insurance Reforms: A Step Towards Affordability

Michigan's personal auto insurance affordability has seen a significant improvement following the substantial auto insurance reforms enacted in 2019, according to a recent report by the Insurance Research Council (IRC). The study, titled 'Personal Auto Insurance Affordability in Michigan,' found that personal auto insurance expenditures accounted for 1.9 percent of the median household income in Michigan in 2022, a decline of half a percent from the pre-reform peak. Despite this improvement, Michigan's expenditure share remains higher than the national average and that of 44 other states.

Key Findings of the Report

Before the reforms, Michigan drivers were required to purchase unlimited personal injury protection (PIP) coverage, which was a primary cost driver in the state due to extremely high average auto injury claim severity. In 2022, Michigan households spent $1,319 to insure each vehicle, nearly 20 percent above the national average. However, since the reform, expenditures have fallen in Michigan while increasing in almost every other state. From 2019 to 2022, the average expenditure for auto insurance in Michigan fell 12 percent compared with an increase of five percent in the U.S. overall.

Impact of Reforms on Uninsured Motorists

Uninsured and underinsured motorists are both a symptom and cause of affordability issues. In 2019, Michigan had the highest rate of uninsured drivers in the country, with more than one in four motorists lacking the required liability coverage. The uninsured motorist rate in Michigan dropped by 5 percent between 2020 and 2022. Dale Porfilio, FCAS, MAAA, president of the IRC, emphasized that efforts to improve auto insurance affordability in Michigan must focus on the underlying cost drivers: injury claim severity and litigation.