Experts say removing the unlimited medical benefits from auto insurance might only save Michiganders $192 annually in premiums. Courtesy Thinkstockphotos
During a seemingly endless legislative battle over how to rein in the nation’s highest auto insurance premiums, some experts worry about rural Michiganders fleeing the state for cheaper rates.
Premiums in urban centers like Detroit are disproportionately high due to nondriving factors, said Wayne Miller, an adjunct professor with the Wayne State University Law School and chairman of Miller and Tischler, a law firm specializing in no-fault insurance. Some of these factors disproportionately affect residents based on race or gender, he said.
But that’s not to say more sparsely populated areas aren’t burdened with steep costs. An average of premiums in rural and suburban areas across Michigan would still equate to the “eighth- to 10th-highest” in the nation, Miller estimated.
The state’s poor quality roads create plenty of pothole damage, and rural residents must drive longer distances on “country roads” for their employment and other needs. Both factors drive up premiums in sparsely populated areas, Miller said.
Michigan’s uncompetitive rates are a particular problem for Sen. Dale Zorn, R-Ida, whose district borders Ohio. Combined with Ohio’s looser business regulations, drastically cheaper insurance means population loss to his district’s southern neighbor is a serious concern, he said.
Moving from Blissfield to the border town of Metamora, Ohio, for example — a 20-minute drive — could mean paying nearly two-and-a-half times less for auto insurance, according to the independent consumer insurance website Insure.com.
Ohioans paid an average of $944 annually, the second-lowest premiums in the nation. Michiganders spent more than $2,200, topping Insure.com’s list for the fifth year in a row with premiums nearly $900 above the national average.
It’s not a straightforward comparison. Michigan’s comprehensive no-fault coverage is “probably the best insurance in the country,” Zorn said. Miller called it the “best insurance on the planet.”
Accident victims are guaranteed lifetime medical benefits, of which insurers are on the hook for the first $555,000. The private, nonprofit Michigan Catastrophic Claims Association then reimburses insurers for any further medical costs, funded by a $192 annual assessment per vehicle — an additional cost to insurers that the organization says is typically passed on to policyholders.
Ohio’s tort-based system requires motorists responsible for an accident to carry only enough coverage to provide a maximum of $25,000 for one injured person, $50,000 for all injuries stemming from the accident and $25,000 for property damage. The at-fault driver may then be responsible for additional costs if the victim sues.
But for some, Michigan’s high premiums are unjustified by the benefits, Miller said, pushing a few residents close to state borders to commit fraud and apply for insurance in Ohio, Indiana or Wisconsin, all of which rank in the top 10 of Insure’s cheapest rates.
Residents often seriously consider moving across the border to save money on auto insurance, Miller said. He cautioned against that because of the state’s unique insurance benefits.
No-fault coverage, which is mandatory, covers medical bills and lost wages. Collision and comprehensive coverage, which handles areas like vehicle damage and theft, is optional. The latter is typically the main driver of high costs, Miller said.
The common narrative is that it’s the no-fault system alone that causes Michigan to have the nation’s highest rates, he said. But take away the unlimited medical benefits and you’d likely only save on the $192 catastrophic claims assessment.
Outside of Detroit and its unreasonably high rates driven by non-driving factors, Michiganders receive “tremendous coverage” that justifies paying a higher premium than others nationwide, Miller said.
“Every one of us can become a catastrophic loss victim at any time, and you want to have insurance that covers you,” Miller said.
The state could decide to return to a tort-based system, which hasn’t been in place since 1973, as a potential solution to out-of-control premiums, Zorn said. But he also said the lifetime medical benefits under the current no-fault system are popular, high rates notwithstanding.
The new Legislature has taken the first step to address high premiums. Sen. Aric Nesbitt, R-Lawton, recently introduced a bill with no specifics, stating that the Legislature intends to address topics like seniors opting out of unlimited personal injury protection, fraud prevention and reduction of auto insurance-driven medical cost inflation.
Until some comprehensive premium-lowering solution is reached, Miller said smaller steps can be taken to reduce costs for rural residents.
He supports legislative efforts to combat insurance fraud and believes insurers should be required to offer no-fault personal injury protection with deductibles of up to $50,000 rather than the now-common $300 deductible.
For individuals, Miller said there’s perhaps one answer to maintaining lower rates — shop around regularly.
“Insurance companies do not reward long-term loyalty, they punish it — they’ll jack up rates after initially offering good rates,” he said. “Shop frequently and you’ll be truly amazed at the savings you get.”