New Michigan auto insurance: savings for most, but Detroit still pays more

auto crash

For most Michigan drivers, how much they save under the new law will come down to how much personal risk they are willing to assume. (Shutterstock image)

LANSING—Many Michigan drivers are poised to save money on auto insurance because of new reforms set to take effect July 2, especially those who choose to accept new risk by purchasing policies with limited or no medical coverage.

But insurer filings reviewed by Bridge Magazine show some motorists may end up paying more to keep their current coverage levels, undermining predictions of universal savings. And the new law won’t stop territorial rating schemes that have long saddled Detroit with the highest rates in the nation. 

“If you do nothing, don't complain about, ‘Why didn't my rates go down,’” Mayor Mike Duggan told Detroiters Thursday in a televised town hall, urging them to consider policy changes he had pushed for years.  

“This law doesn't cut your rates; It gives you choices.”

That’s the central promise of the law negotiated by the Republican-led Legislature and Democratic Gov. Gretchen Whitmer: Michigan motorists will no longer be required to purchase expensive unlimited medical benefits through auto insurance, and they can opt out altogether if every member of their household has health insurance that will cover car crashes.

The law also promises to prohibit insurers from setting rates based on a customer’s ZIP code, an attempt to stop them from penalizing motorists —  most egregiously in Detroit — because of where they live.


But critics say that consumer protection is toothless because insurers are still permitted to set rates based on even smaller geographic areas like census tracts or street blocks. 

For motorists in Detroit, that means that even after the new law takes effect, insurance rates can still be six times higher than nearby car owners, at least according to the Bridge review of new state filings. 

The ZIP code ban was a “farce to begin with,” said state Rep. Sherry Gay-Dagnogo, a Detroit Democrat who opposed the reform legislation and is exploring a mayoral run against Duggan.

“There was no real attempt to address the redlining aspect that many African-American communities, and more specifically the city of Detroit, suffer from,” Gay-Dagnogo said.

Keep your current coverage? Costs could go up

Several top insurers including AAA, State Farm and Progressive are keeping their new rates confidential until they take effect July 2, which the state allows, but those that have been made public so far show that not all policyholders will save money.

The law requires insurers to cut the personal injury protection (PIP) portion of customer premiums by at least 10 percent on average for customers who keep unlimited medical coverage. But state filings show many are only reaching that mark by counting an already-announced $120 reduction in an annual fee they assess to cover the state’s most expensive injury bills.

Citizens Insurance will actually increase the underlying cost of personal injury protection for customers who choose to maintain unlimited coverage, raising the average from $337.16 to $355.53. But the insurer is still able to claim nearly a 15 percent reduction because of the cut to the Michigan Catastrophic Claims Association fee.

Drivers who choose to purchase lesser medical coverage won’t have to pay that fee at all, a savings insurers can build into other state mandated rate reductions.

Insurers must cut personal injury protection premiums by an average of at least 20 percent for policies with $500,000 in medical coverage, 35 percent for policies with $250,000 in medical coverage and 45 percent for policies with $50,000 in medical coverage, an option available only to drivers with Medicaid health insurance.  

But those savings are partially offset by another provision of the new law requiring motorists to purchase additional bodily injury liability insurance to protect against the increased risk of lawsuits. And the statute does not prohibit insurers from increasing other portions of a customer bill, such as required liability insurance or optional collision coverage. 

Citizens calculated that 90 percent of its customers will see savings of some kind if they maintain their current coverage, including unlimited medical, with total costs falling by 10 percent or less on most policies. The other 10 percent of customers, however, could see premiums rise.

“Our rate filing encompassed a variety of factors, including increased bodily injury liability costs that are required by statute as well as PIP options,” spokesperson Abby Clark told Bridge Magazine. 

“PIP choice is a key mechanism for Michigan drivers to realize premium savings,” she said, noting Citizens has already started selling policies that will take effect July 2. “Our early results show many customers electing a choice other than unlimited PIP.” 

Farmers Insurance told the state its total premium would drop by an average of 2 percent but indicated that 8,889 of its 18,040 policy holders could see no savings or a rate increase if they maintain current coverage.

But Farmers will be “offering additional significant discounts to Michigan drivers who choose lower PIP limits,” spokesman Luis Sahagun said. 

“The Michigan auto reform law also changed some rating variables used by insurers, including changes in the types of discounts drivers may be eligible for,” he said. “As a result, some drivers may see their rates adjusted downward or upward, depending on their individual situation.”

Auto-Owners insurance, meanwhile, told the state 67,705 of its 114,487 policy holders would see a rate reduction of more than 10 percent if they maintained current coverage levels. However, a small fraction – 862 – would see a rate increase of 10 percent or more. 

Many of the new increases are due to new “territory definitions” the insurer is using to set rates based on geography, Auto-Owners said in a required state filing.

Where you live still matters

Duggan estimates motorists who opt out of medical coverage entirely could save 30 percent to 50 percent on their total auto insurance bill, which could mean hundreds or thousands of dollars in annual savings. 

But that would still leave Detroiters with some of the highest rates in the nation, according to estimates he cited showing average yearly premiums of $4,400 in his city and $1,434 in nearby Illinois. 

The new law stops insurers from using ZIP codes to set rates, but left intact the ability of insurers to charge people on either side of a street vastly different amounts. 

They just have to use a geographic metric other than ZIP codes and many, including AAA of Michigan and others, were already using census tracts or even smaller census block groups.

Both are smaller than ZIP codes and the practice continues. Recent filings with state insurance officials show Detroit residents continue to face huge premiums not seen elsewhere in the state.

For instance, Citizens uses block groups — typically areas of 1,500 people or so — to set rates in Michigan.

New choices for Michigan motorists

Unlimited, $500,000 or $250,000 in personal injury protection: 

These options will be available to every motorist in the state and determine how much your auto insurer would be required to pay for medical care if you are injured in a car crash. Your private or public health insurance plan would likely cover additional costs but may not pay for the same type of long-term care or rehabilitation as an auto insurance policy. 

$50,000 in personal injury protection: 

This option will be available only for Michigan drivers enrolled in Medicaid, a government-run health insurance program for low-income residents. If you are injured in a crash, Medicaid would pay your hospital bills and cover a basic level of long-term care.

$0 in personal injury protection

Motorists enrolled in Medicare Part A and B – primarily seniors – will have the choice to forgo personal injury protection altogether and instead rely on the government-run health insurance program to pay medical bills in the event of a crash. 

It’s an option also available to motorists who have employer-sponsored or individual health insurance that covers car crashes with a deductible of $6,000 or less — but only if every member of your household also has a form of qualified health insurance, which you’ll have to prove.

In Detroit, most notably east of Woodward Avenue and north of the cities of Hamtramck and Highland Park, Citizens set multiplier “factors” for PIP, bodily injury and property damage at anywhere from 4 to nearly 7. Even if someone drops PIP coverage, these motorists there would still face bills that are quadruple or higher than most of the state outside metro Detroit.

Meanwhile, most suburban and outstate motorists get a discount — paying substantially lower — because of where they live.

In parts of suburban Grand Rapids, for instance, that can result in savings of 40 percent or more. A few other places, including Southfield and parts of Pontiac, Flint, Saginaw and southern Macomb County — communities, critics note, with high proportions of African-American residents — face elevated rates like those in Detroit.

Insurers have said the high number and cost of claims for PIP in Detroit and near-in suburbs has driven the higher “factors” for PIP, easily the biggest part of every auto insurance bill.

The new law bans insurers from using a driver’s FICO credit score, gender, marital status, occupation, education attainment or homeownership status to set rates. But insurers can still manipulate rates using other credit rating systems and factors like age or driving record.

Under Citizens’ filing, if the starting point for a premium— after driving record, age and gender were applied – was $1,000, that would mean a Detroiter would pay $6,690 and the person in suburban Grand Rapids would pay $520 for PIP coverage, based on Citizens’ insurance filings.

And they’d pay triple or quadruple for bodily injury and property damage while someone in the Detroit suburb of Farmington Hills would get an 8 percent to 10 percent discount for those coverages.

Citizens writes policies in Detroit but “did not previously use ZIP codes as a rating factor, and therefore did not need to change its procedures in response to the new law,” Clark said. 

“There are many factors, in addition to territory factors, that influence premiums and they cannot be viewed in isolation. Thus, an increase in one specific factor doesn’t directly correspond to an increase in premium.”

A review of Auto-Owners territorial ratings showed similar differences: Detroiters still face far higher rates, often triple what is charged outside the city. 

AAA has not made its new rates public.

The new law allows insurers "to pinpoint their discriminatory pricing even more precisely” than zip code, said Doug Heller, a national insurance expert who studies Michigan filings for the Coalition Protecting No-Fault Auto, a group that opposed the reform law. 

"That will eventually be revealed when people start finding out what they and their neighbors are paying."

Not every insurer has gone with smaller geographies, however. Farmers Insurance, for instance, has taken a different approach: It had used ZIP codes to set rates but will start using municipal boundaries next month.

In Detroit, that means some will see a distinct savings — and others a big increase. Before, Farmers’ highest PIP multiplier factor in five Detroit ZIP codes was nearly 4 and the lowest, in far northwest Detroit, was 1.1. Now the entire city is set at 3.2.

Reform advocates say coverage choices allowed under the new law will allow more Detroiters to afford some form of auto insurance and reduce the number of drivers who risk criminal penalties for driving without coverage or claim false addresses outside the city to secure lower rates. 

Statewide, only about one-third of the Citizens customers who have already signed up for new policies that take effect July 2 have chosen to stick with unlimited medical coverage, according to Clark. 

The "vast majority" are buying policies with $500,000 or $250,000 in personal injury protection, she said. 

Risk and reward

For most Michigan drivers, how much they save under the new law will come down to how much personal risk they are willing to assume. 

Drivers who buy policies with $500,000 in personal injury protection will see the medical coverage portion of their bill drop by 22 percent on average, even when factoring in the new "default" increases for bodily injury liability coverage, according to an analysis of both public and confidential filings by the state Department of Insurance and Financial Services.  

The savings could be even larger for households in which all family members have Medicare or private health insurance policies that cover auto accidents with an individual deductible of $6,000 or less. Drivers who provide their auto insurers with proof of that health coverage can opt out of personal injury protection altogether.  

Motorists who choose lesser coverage are “playing Russian roulette, and they're betting that if they get in a car crash, they will not be seriously injured,” said Steven Gursten, a personal injury attorney with Michigan Auto Law in Farmington Hills and a critic of the new law. 

While health insurance may cover some direct medical bills arising from car crashes, injured drivers that choose cheaper auto policies will receive inferior long-term care, said Margaret Browning, an attorney who serves as a legal guardian for catastrophic crash victims.

One of her wards, 23-year-old Patricia Ward of Fenton, was severely injured in a 2016 crash and is unable to speak, eat any food by mouth or walk. With more than $2 million in costs covered through her auto policy so far, she lives in a residential rehabilitation home that specializes in brain injury recoveries and is in speech therapy, with the hope of some day being able to talk again, Browning said. 

Another, 32-year-old Cristina McVeigh of Riverdale, did not have auto insurance when she was severely injured in a 2017 motorcycle crash. Medicaid has not covered continued speech therapy and other possible treatments, Browning said of McVeigh, who lives in a nursing home and spends most of her days "in bed watching television."

"Both of these girls are trapped in their own bodies,” Browning said, “but Patricia may get the key. She may be let out."

Cristina McVeigh of Riverdale, seen here before and after a 2017 motorcycle crash. (Courtesy photos by Margaret Browning, legal guardian)

Duggan has sent all Detroit city employees a health insurance letter they can use to opt out of personal injury protection in their auto policies. But he also acknowledged that drivers who choose to retain unlimited coverage “will get more service because you’re paying the most,” calling that a value proposition each motorist will need to consider.

“I think that’s a real American concept of having a little bit of choice and a little bit of responsibility,” said Sen. Aric Nesbitt, R-Lawton, who sponsored the reform law and predicted additional savings next year when a new “fee schedule” for medical providers kicks in.

Michigan medical providers have long billed auto insurers more than health insurers, who generally negotiate lower rates for similar treatment and care.

“With enhanced choices, you accept enhanced responsibilities, and with that, you can acquire enhanced savings,” Nesbitt said. 

The Michigan Health and Hospital Association, an advocacy group for medical providers, is encouraging drivers to keep unlimited medical benefits as they consider new auto insurance options. 

“We want people to buy as much coverage as they can afford,” said senior vice president Ruthanne Sudderth. “We’ve seen what happens to people when they’re severely injured, especially, and how much care they need, sometimes for a lifetime.  

“We want people to carefully weigh the savings versus risk.”

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Mon, 06/22/2020 - 8:02am

Once again an article that never contemplates the existence of starkly different loss ratios between different groups and localities might explain and drive disparities in insurance rates. Why is this? Are your writers afraid of what they'd find? Is it easier to just to play dumb and bitch and whine? Very disappointing that Bridge can't do an in depth study showing what the loss experience for various areas actually is. Seems the ultimate objective being served is to push the cost of one area's poor driving off onto the rest of the state and everyone else.
Likewise with the PIP, where we see certain driver groups getting a disproportionately large chunk of the medical fund, (MOTORCYCLISTS!!! as your example. for just one)!! If these risks were evenly distributed there would be no complaint. They clearly are not! Now in this case, we all get to pay for their decision and choice to ride an extremely dangerous vehicle. Just another angle that Bridge refuses to explore - where and to who both victims and providers, does the fund's money in fact go? Again very disappointed in the lack of depth, curiosity and courage at Bridge.

Mon, 06/22/2020 - 9:50am

Perfectly said. I lived in Detroit for the better part of my life. During that time, I experienced the theft of one vehicle, theft of tires and wheels from another, and theft of objects from inside a third vehicle. Safe drivers and those who don't live in higher risk areas are rightfully paying less.

Mon, 06/22/2020 - 10:51am

I live in Branch County where rates are low EXCEPT for one VERY SMALL portion of the county where we are lumped in with Detroit rates. I live in that small portion and I wonder just why this is happening, I think it is very unfair.

Joe Z
Mon, 06/22/2020 - 9:43am

Duggan, like any good liberal politician, offers a proposal that doesn’t pay any attention to waste, cost, efficiency or optimization!!!!
It offers the typical leftist solution “You asked me to lower price, so I’ve told insurance companies to offer worse coverage for less price”!!!
That’s the solution? I kinda thought maybe, that the majority were looking for ‘as good, if not better’ coverage for a lower price! This article only presents the ‘scam’ solution by democrats! It does nothing for Michiganders that the insurance companies aren’t already shoving up our behinds!!!
THIS ISNT GOOD NEWS!!! It’s lazy action by politicians!

John Chastain
Mon, 06/22/2020 - 12:54pm

You do know that the law was written by republican politicians in Lansing with the assistance of the insurance industry and negotiated with the Governor right? So by ignoring the contribution of your tribal leaders and redirecting blame to the "democrats" you're giving the politicians most responsible for this "scam" a pass. We all know the insurance industry is exploitative so it does little good to ignore the bipartisan complacency in that "scam". By buying into the "tribal" view of this and other matters you are essentially a party to your own victimization. Sad

Dyan Shane
Sun, 07/05/2020 - 2:37pm

Where do you get your information? This bill was written by both parties, Democrat and Republican. There is 110 house members in Mi, 37 Democrats approved the bill, only 15 were against it. I am a independent. It serves no use to just spew non facts. So we got screwed by BOTH parties. But the worst was Whitmer, for she could have vetoed it. Also, remember, she "Approved" a rate hike just before she even approved this fiasco. So any tiny savings we may even see they already got it back last year ahead of time. Remember the $250 dollar hike you just got?
She did that. The only way to end this robbery is to END no fault completely. Start over. There is NO good side. They ALL have there finger in the pie.

Mon, 06/22/2020 - 7:13pm

Joe, this "reform" was by no means a "leftist" initiative. To the contrary, it was heavily pushed by the Republican legislature, Dan Gilbert and Mayor Duggan (a Democrat in name only). Most Democrats opposed this legislation. Gov. Whitmer signed on because the voter initiative that Gilbert was set to put on the ballot was even worse.

Mon, 06/22/2020 - 10:02am

Unless the insurance company is government run, as is the Federal Flood INsurance Program, government should play no part in setting the rates or requiring certain coverages. Government can demand that all customers are equally treated, but if the loss ratio in certain zip codes or regions can be shown to be different than other zip codes or regions, then the private company should have every right to charge different rates for these zip codes or regions.

Chuck Jordan
Mon, 06/22/2020 - 10:03am

When my rates went up due to the new law, I had to prove to my auto insurance company that I had medical coverage from my employer. From what I understand, people without medical insurance including people with Medicare will have to pay higher rates. This is setting up a conflict between medical insurance and auto insurance over who will pay or pay the most or least. My educated guess is that we, the people in Michigan, will be the losers and insurance companies will be the winners. Any bets?

Mary K. Freel
Mon, 06/22/2020 - 11:02am

I live in Bay City, supposedly in a no change area. We chose not to change our policy because I, as an RN, have seen what happens when you get into a bad accident, have a closed head injury and need long term care. You could blow past the cheaper amounts in a month or two in the ICU. We saw no relief in our amount--as a matter of fact it went up a bit. Meanwhile the insurance companies pay their upper level executives obscene amounts. So much for insurance relief.

Mon, 06/22/2020 - 12:48pm

Why is no one talking about the fact that with insurance reform, as passed, medical rate schedules don't take effect for another 2 years. Currently, providers can charge anything that they want for auto insurance claims. In some cases $5,000 for an MRI that might be $250 any where else in the world, it looks like that continues for another 2 years. Can we find out who pout in the 2 year delay? Can we find out how big the pay off was?

Mon, 06/22/2020 - 7:16pm

It is urban legend that medical providers are paid $5,000.00 for an MRI. Yes, some have *charged* that amount, but that is NOT what the insurers wind up paying. They pay far, far less, and more in line with private healthcare insurers. You watch. Everyone will get less (drivers, healthcare providers, hospitals), but the insurance companies will BANK. Insurance companies ALWAYS win when "reform" legislation is passed.

Jeffrey Kless
Mon, 06/22/2020 - 12:49pm

If I am not wrong I believe your article did not address the fact that you can now be sued if you caused an accident. Per my insurance agent it would be in my best interest to increase my residual bodily injury unless I could afford to possibly lose my house and property.
It appears the party in power has now provided you with a choice of either to save a few hundred dollars a year or possibly losing a substantial part of your wealth

james roberts
Mon, 06/22/2020 - 4:49pm

Unfortunately appears the hoped for reductions were just a bait and switch. Like many I was looking forward to reducing or eliminating my PIP due to recent Medicare eligibility. Thought I could save a bunch, but given my recent 25% increase from AAA, due to the loss of coordinated benefits from my previous primary provider, Blue Cross, I'm pretty sure those savings will not even make up for this recent increase. Of course i could rely entirely on Medicare in the case of an accident, but I bet it would be interesting trying to mediate the Doctors and Hospitals negotiating what services Medicare is willing to provide.

Mon, 06/22/2020 - 7:09pm

The No-Fault "reform" is a complete fraud upon the people of Michigan. The insurance companies are trying to sucker people into opting for lower PIP coverage in order to limit their own liability, all under the ruse of "choice." Do NOT fall for it. Choose unlimited coverage. Shop around if necessary to make it happen.

Tue, 06/23/2020 - 10:55am

Both parties have been in the pockets of the insurance industry for the last 50 years. Michigan reeks of political corruption with no end in sight during my lifetime.

Tue, 06/23/2020 - 11:25am

One of the factors that I would be interested to learn more about is loss experience in high rate areas. Do drivers who reside in Detroit file a larger number of PIP claims (or more expensive claims) than drivers in other parts of the state? Or do insurers just charge Detroiters more without any actuarial basis?

Insurance companies are in business to make a profit. One would think that if an insurance company was overcharging black drivers on the basis of race (rather than actuarial data), another insurance company would swoop in and take their business with lower (but still profitable) rates. The only plausible explanation is that, on the whole, it is more expensive to provide PIP coverage to Detroit drivers.

Why is it more costly to insure Detroiters? Fraud? Bad driving? Safety equipment? I haven't seen a satisfactory explanation for this. One of the keys to equitable no-fault reform is to identify the latent variables that make Detroiters more costly to insure and allow insurance companies to factor them into rates.

A good first step would be to open up insurers actuarial data to public scrutiny.

middle of the mit
Wed, 06/24/2020 - 1:18am

I would like to thank Bridge for the excellent in depth reporting and I look forward to seeing more on this issue.

I am wondering why the insurance companies aren't releasing the new rates until the day consumers and agents are supposed to be able to start making informed decisions on choosing a new plan.

It is funny seeing the conservatives complain about the leftist bill though.

It's almost like they don't remember them and republican politicians being up in arms the last 2or3 years about how doctors were charging insurance companies too much and $145/year fee and republicans proceeded forward with insurance reform.

Remember in November

A. Bellows
Fri, 06/26/2020 - 7:20pm

This is a travesty! It's time that everyone in the U.P. donate money to subsidize all the vehicle thefts in Detroit. Oh wait......... the new law already does that! Never mind.

middle of the mit
Mon, 06/29/2020 - 11:53pm

The new law is about Personal injury protection, NOT theft.

So how do you think that your rates are worse than Detroits when I will bet you don't pay $6,000 per year to insure your car to go to work.

And are you telling me that you don't have car accidents or property damage or hospitalization UP there?

Dyan Shane
Sun, 07/05/2020 - 2:18pm

Good article. They did forget to mention that last year right before whitmer signed this fiasco in 2019 she allowed a HUGE rate hike to cover any savings we would get this year if any. Lets not forget that. So that told me last year, that she is very tied into the insurance companies. This SCAM will NEVER end. What we must do as people is fight no fault period in this state. We must fight to get rid of it. Start over. Or this insurance scam will never end. We need real laws to protect us!

Carol Dufour
Sun, 07/05/2020 - 3:48pm

I was in a bad car accident, i actually won lifetime medical from my insurer in a court of law. Both parties agreed for me to have it. This was after having to go to the insurers doctors already (IME'S), What they didn't tell me is that within 2 months after winning benefits, your insurer can STILL send you to one of THERE doctors, where THAT doctor WILL say you are fine to go back to work, then they WILL cut your benefits off. I then asked my lawyer "how do i get my benefits back"? He stated that I would have to do a jury trial, and that i would have to pay Thousands of dollars to do so. I said why didn't you tell me this before? That even if i win, i lose! He stated he didn't think they would do this. So, what the people DONT tell you is that you will NEVER get these benefits if your less than a vegetable like the 2 people above. I seen them cut off PIP for people who lost limbs even. Saying they could work. The PIP is a SCAM. I know it, i lived it. I am going to tell my story everywhere now. No one needs PIP unless you think your going to be severely handicapped. You will never win them.

Ian M
Wed, 07/08/2020 - 12:00am

Well, Progressive increased my auto insurance by $40 more per month. They also told me there was literally nothing they could do to make it any cheaper "due to changes in Michigan laws".
Mind you, this is the same industry that told us our insurance would get cheaper once we got rid of PIP. We might as well go back to the old model if this is what they are going to do to us.

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