Mich. Auto Rates Up 7% This Year

Auto insurance rates in Michigan have increased an average of 7 percent so far in 2003, according to the Insurance Institute of Michigan (IIM). Nationally, auto insurance costs are expected to rise 8.5 percent this year.

Despite the rising costs, competition will help keep a lid on the price of auto insurance. More than 660 companies have authority to write auto insurance in Michigan.

The increased auto insurance costs during 2003 are due to rising costs of medical care, vehicle repair and jury awards, according to IIM. Fraud also pushed up the cost of auto insurance.

The cost of the average claim for auto accident injuries rose a staggering 62 percent from 1998 through 2002 in Michigan. The average Personal Injury Protection (PIP) claim in this state during 2002 was $15,069.

“The same factors that are pushing up employer health care costs are contributing to the increase in the cost of people treated in auto accidents,” said Doug Cruce, IIM executive director.

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. The average liability claim in Michigan increased 26 percent during the past five years, from $24,485 in 1998 to $30,325 in 2002.

Motorists here also experienced an increase in auto insurance costs due to the 2003-2004 assessment for the Michigan Catastrophic Claims Association (MCCA). The MCCA was created by the state Legislature in 1978. It reimburses auto no-fault insurance companies for Personal Injury Protection 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 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 policyholder’s auto insurance bill. The assessment increased from $69.00 in 2002 to $100.20 in 2003.

Higher auto repair costs are another significant cost driver today — rising two to three times the overall rate of inflation.

Insurance fraud occurs every day and all policyholders pay for it. Insurance fraud costs Americans at least $30 billion a year, or nearly $200-300 for each family, according to the National Insurance Crime Bureau.