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No-fault reform was meant to lower Michigan car insurance rates, but they're up more than 7 percent

Car Lot
Lester Graham
Michigan Radio
Car Lot

Michigan drivers are seeing an average 7.2% increase in their insurance rates in 2022, according to an analysis by the Consumer Federation of America of rate increases approved for 35 car insurance companies in the state.

The total increase so far is $498,977,294, with additional increases of about $68 million awaiting approval by the Department of Insurance and Financial Services, the insurance industry's regulatory agency.

Doug Heller, who compiled the data, is Insurance Director for the consumer federation. He says the increases show that any rate reduction stemming from the 2019 auto no-fault law was temporary.

"It is staggering the amount of rate increases that Michigan drivers will be seeing on their bills over the next several months," he said.

Heller said the increases are due to sleight-of-hand calculations under the 2019 auto no-fault law, which requires car insurance companies to reduce the personal injury protection (PIP) component of insurance policies by a certain amount. But rates on other parts of policies can go up.

Two companies did raise the PIP portion of their rates in 2022, although the rest kept it about the same, said Heller. But most companies also raised rates for two other portions of driver policies: bodily injury and comprehensive. Collision coverage rates also went up at most companies.

The result was total rate increases for most drivers.

"It's meaningless for most of us to be told that a portion of our insurance bill went down, but overall we know are paying a higher rate," he said. "We don't pay six bills — we pay one, and that bill is going up."

Heller said the 2019 auto no-fault law failed to look at the role of insurance company practices in driving up rates, so it's no surprise, he said, to see drivers not realizing significant rate relief. He also criticized the Department of Insurance and Financial Services for approving the rates, after insurance companies saw record profits during the pandemic, when driving was down and so were accidents.

"When the insurers feel a touch of inflation, they are so quick to come to the regulator, and the regulator seems very quick to approve these rate hikes. So for the insurance companies, it's heads we win, tails you lose. The Department of Insurance and Financial Services should be more aggressively stepping in on behalf of Michigan consumers."

The department has not yet responded to a request for comment about the criticism.

Erin McDonough, executive director of the industry group Insurance Alliance of Michigan, said in a statement that insurance companies are exceeding the rate reductions for personal injury protection coverage required by the 2019 no-fault reforms.

She said price hikes in other coverage areas could be attributed to inflation.

"Inflation may hit auto insurance rates, just like all other aspects of life, as the cost to repair damaged vehicles and the cost of new and used vehicles to replace totaled vehicles grows," McDonough said. "As a result, drivers may see increases brought on by inflation in their comprehensive and collision coverages."

Copyright 2022 Michigan Radio. To see more, visit Michigan Radio.

Tracy Samilton covers the auto beat for Michigan Radio. She has worked for the station for 12 years, and started out as an intern before becoming a part-time and, later, a full-time reporter. Tracy's reports on the auto industry can frequently be heard on Morning Edition and All Things Considered, as well as on Michigan Radio. She considers her coverage of the landmark lawsuit against the University of Michigan for its use of affirmative action a highlight of her reporting career.