Mich. Auto Rates Slower Than National Average

Auto insurance rates for Michigan policyholders rose slower than the national average in 2003, according to the Insurance Institute of Michigan (IIM). Michigan’s auto insurance rates increased an average of 7 percent last year, below the expected national average of 8.5 percent.

The rising cost of medical care, vehicle repair and jury awards continue to fuel auto insurance rate increases here and nationally, said Doug Cruce, IIM’s executive director. Fraud also pushes up the cost of insurance for policyholders, he said.

The cost of the average claim for auto accident injuries rose a staggering 50 percent from 1999 through 2003 in Michigan. The average personal injury protection (PIP) claim in this state during 2003 was $18,871.

“The same factors that are pushing up health insurance costs are contributing to the increase in the cost of people treated in auto accidents,” Cruce said.

Sharply higher jury awards in auto liability cases also caused auto insurance rates to rise. The average jury award in auto liability cases rose from $187,000 in 1994 to $323,000 in 2001—an increase of 73 percent, according to the most recent available data from Jury Verdict Research, a nationwide database of more than 202,000 plaintiff and defense verdicts and settlements resulting from personal injury claims.

Michigan motorists also experienced an increase in auto insurance costs due to the 2003-2004 assessment from the Michigan Catastrophic Claims Association (MCCA). The MCCA was created by the state legislature in 1978 to reimburse auto no-fault insurance companies for PIP claims paid in excess of $325,000. That means the insured’s insurance company pays the first $325,000 of medical expenses and the MCCA pays for costs above that amount.

Costs incurred by the MCCA are distributed to Michigan auto insurance companies through an annual assessment, which drives up the cost of policyholders’ auto insurance bills. The assessment increased from $69 per policy in 2002 to $100.20 in 2003.

Other factors impacting rates include higher auto repair costs, which have increased two to three times the overall rate of inflation, and insurance fraud, which occurs every day. Insurance fraud costs American policyholders at least $27 billion a year, or nearly $200 to $300 for each family, according to the National Insurance Crime Bureau.

IIM represents more than 80 property/casualty insurance companies and related organizations in Michigan.