Residents of the motor city will have to pay an astounding $5,894 in average auto insurance premiums to keep motoring in 2006. That is well over $1,000 more than nationwide runner up Philadelphia at $4,440 per year.
The figures were compiled in February by Runzheimer International, a management-consulting firm based in Wisconsin that specializes in transportation reimbursement for businesses.
“Of course I’ve noticed the high premiums,” said Matt from the Ann Arbor area, who is 33 with a credit score of over 800. “I really don’t have any other comments that would be suitable for a family friendly article.”
Detroit no doubt contributes to Michigan’s overall rank of 11th highest national average of $931 in 2003, the most recent data available, according to the Insurance Information Institute (III). This is up from a rank of 15 in 1999.
Eleodoro Pacheco, from the Detroit area, said he doesn’t see rates nearly that high, but feels they are high for his age. “I cover a 2004 GMC Yukon and a 1986 Olds Cutlass with liability only, both for $1,636 per year. It’s nowhere close to the $5,894 per year, but my wife and I are over 30 years of age without any tickets or accidents or claims of any sort in more than five years,” he said.
Michigan is also one of nine states that use no-fault auto insurance, which is designed to keep premiums low, although critics and many customers disagree.
“No-fault is great in theory, it cuts out the lawyers. In real life it is less than perfect. I'd rather see something where the insurance is shared with your annual plate fees,” said Brian from Ada.
In no-fault states, insured drivers need only prove that they were injured in an automobile accident to recover damages under their policy. This is designed to reduce litigation and therefore cost, as there is no need to prove that the driver was not at fault in the accident.
Critics say this system actually raises premiums, and many no-fault jurisdictions, including Michigan, actually do have among the highest car insurance premiums in the country.
Michigan consumers also echo sentiments of confusion and frustration when they get their insurance bill. “I find the no-fault laws confusing,” said Matt from Washtenaw County in Southeast Michigan. “Every state with no-fault insurance that I've lived in appears to have higher rates. How can that be good?”
Rod from Washtenaw County said he isn’t satisfied with the coverage Michigan mandates. “This state’s coverage is pricey compared to just about everyone else except New York, and other hugely populated cities. No matter what, the most you can usually get from an accident is something like $500 for a mini tort.” Proponents say that auto accidents are inevitable and that liability insurance prevents at fault drivers in tort, or fault, systems.
Brian said he sees a lot of fees tacked onto his bill, which he is unhappy with: “On the bill I have $72 per car ‘other programs required by state laws’ each for 3 cars, $39 personal injury protection, although I'm covered 100% through my work policy, and $150 PIP for son (who's also covered) on his car, $43 for work loss for son (who's a student with no job), and $13 each car for ‘uninsured motorists.’”
Pacheco said he’s not really satisfied with the no-fault law.
“I like the fact that no-fault reduces law suits by having each party cover their own damage, but the prices are not justified,” he said. “Second, when it comes to vehicles that only have liability coverage, I feel like I'm throwing money out of the window. I pay for the coverage to cover others in a no-fault state, meaning I never would get to see benefits paid from the policy that I pay for, either way.”
Of 16 states that that have originally enacted no-fault systems since the 1970s, seven have repealed them, with Florida set to repeal on Oct. 1, 2007.
Despite this, the state of Michigan sticks by its no-fault system, and not all consumers are displeased with the service.
“What it means is that your insurance covers you, and the other party’s insurance covers them. It took effect in 1973 and has been a model program that other states have looked to in designing their own,” according to the Michigan DMV Web Site. “The key to no-fault insurance is that it compensates all victims quickly and completely. Your medical expenses and lost wages will be paid, and damage caused to other people’s parked vehicles and property will be covered-without worrying about who caused the accident.”
“My insurance has actually been going down, it’s gone down $100 in the past year and a half,” said Andrew Foley of Holland, who is 23 with a clean driving record. He said he doesn’t fully understand Michigan’s no-fault policy but believes he pays more because of it. Foley pays about $110 per month on car insurance, which is above the Michigan state average.
Miles from Boyne City said he is pleased with the insurance services he pays for. “From personal experience, I’m happy. I’ve made two claims that were taken care of quickly.”
Shopping for better rates does work
Michigan.gov has six tips to getting a better rate in the state of Michigan and why shopping for better rates works:
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If you are eligible for coverage, every company must be able to insure you by law.
Consumer choice can bring pressure on companies to lower their rates. Take advantage of this.
Shopping for insurance is not as hard as it seems. Several companies offer online comparison shopping, notably Insure.com. Many companies offer insurance. Sometimes the best rates and best service may come from a company you are not familiar with today. Taking the time to review the interactive buyer’s guide to auto insurance in Michigan and the listing of agents and companies will allow you to find and contact the companies. In almost every instance, every company must cover your automobile, wherever it is. Whether you live in Ionia, Inkster, or Iron Mountain, every company writing auto insurance has a rate for you, and must provide coverage. You do not have to live in the area in which the insurance agent is located to get a policy from the company he or she represents.
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Factors that influence the rates of premiums in Michigan are as widely varied as in any other state.
According to the state Web Site, www.michigan.gov, rates are regulated by state law on a competitive basis. Rates cannot be considered excessively high as long as there is competition between companies, and insurers are prohibited from communicating with each other about the rates they are setting.
This pro consumer way of thinking is positive for the owners of the 6,338,128 private passenger cars insured in the state as of 2004. Carrying insurance on your vehicle is also mandatory.
State law also mandates what criteria insurance companies use when setting their auto rates. Some of the factors include the type of vehicle you own, your driving record, your age or length of driving experience, where you live, and whether you have multiple policies with the insurer.
Major factors for Michigan that fall under the category of where you live are:
- Detroit, Michigan’s largest city, ranks 16th in auto thefts among cities in 2005, with 35,574 thefts reported.
- Morgan Quitno ranked the Detroit metropolitan area most dangerous in the country in 2006.
- Morgan Quitno also ranked it second most dangerous city in 2006 and most dangerous city in 1999, 2000, 2001, and 2003.
- Runzheimer International ranked Detroit costliest city in the United States to own a car in 2005, at $11,844 per year.
- Michigan ranks second in deer related crashes for 2005.
- Michigan also suffers from moderate to large amounts of inclement weather, with significant lake effect snow throughout the state, over 30 days of thunderstorms per year, 17 tornadoes per year, 30-40 inches of precipitation per year, and high temperatures below freezing for much of the winter. (www.noaa.gov)
In setting premiums, companies estimate how much money they will have to pay out for injuries related to accidents and for the repair or replacement of vehicles. If large numbers of claims are filed, companies will have to pay more money than expected to pay, further increasing costs that increase annually regardless.
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