Michigan Personal Auto Insurance Affordability Improved After No-Fault Reforms, According to New IRC Study
31 Julio 2024 - 9:59AM
Business Wire
Michigan personal auto insurance affordability has improved
markedly since the state enacted significant auto insurance reform
in 2019, according to a new report, Personal Auto Insurance
Affordability in Michigan, published by the Insurance Research
Council (IRC), a division of The Institutes.
In 2022 (the latest year for which expenditure data is
available), personal auto insurance expenditures accounted for 1.9%
of the median household income in Michigan, a decline of 0.5
percentage points from the pre-reform peak. However, Michigan’s
expenditure share remains higher than the percentage in the overall
U.S. and 44 other states, due largely to its unique no-fault system
and generous medical benefits.
Key findings:
- Before the reforms, Michigan drivers were required to purchase
unlimited personal injury protection (PIP) coverage; in comparison,
the second highest mandated amount of PIP coverage was $50,000 in
New York. The unlimited medical benefits and other features, such
as attendant care benefits and no medical fee schedule, led to
Michigan’s extremely high average auto injury claim severity, which
has been the primary cost driver in the state.
- In 2022, the most recent year for which information is
currently available, Michigan households spent $1,319 to insure
each vehicle, nearly 20% above the national average. However, in
the years since 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%
compared with an increase of 5% in the U.S. overall.
- 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 five percentage points
between 2020 and 2022.
“Efforts to improve auto insurance affordability in Michigan
must begin with the underlying cost drivers: injury claim severity
and litigation,” said Dale Porfilio, FCAS, MAAA, president of the
IRC. “The average amount paid per auto claim for auto injury
insurance is dramatically higher in Michigan, more than double the
U.S. average and one and a half times the second highest
state.”
Porfilio, who is also chief insurance officer at the Insurance
Information Institute (Triple-I), noted that the 2022 affordability
data does not fully reflect many recent countrywide challenges to
affordability, such as economic inflation, higher replacement
costs, legal system abuse, and deteriorating driving behavior.
“However, the movement of several key indicators illustrate the
positive effect of the Michigan policymakers’ efforts to improve
affordability in their state,” Porfilio said.
About Insurance Research Council
The Insurance Research Council (IRC), affiliated with The
Institutes, is an independent, nonprofit research organization
supported by leading property and casualty insurance companies and
associations. IRC provides timely and reliable research to all
parties involved in public policy issues affecting insurance
companies and their customers. IRC does not lobby or advocate
legislative positions.
About The Institutes | Risk and Insurance Knowledge
Group
The Institutes, a leading provider of risk management and
insurance knowledge solutions, offer innovative education,
research, networking, and career resources, including professional
designations such as the CPCU® program, leadership programs,
continuing education courses, events and conferences, associations,
custom solutions, publications, and assessment tools.
CPCU is a registered trademark of The Institutes. All rights
reserved.
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Loretta Worters New York Press Office 917-208-8842
lorettaw@iii.org