Michigan average car insurance rates drop significantly, but still among highest in U.S.

Months after Michigan’s new auto insurance laws went into effect, average car insurance rates have decreased substantially — but it’s still one of the most expensive places to insure a car, a new analysis found.

The Zebra, a national auto insurance comparison site, calculated average costs of purchasing car insurance in zip codes around the country using publicly available rate data between September and December 2020 for its 2021 State of Auto Insurance report.

The analysis found Michigan’s car insurance rates dropped 18% statewide and 19% in Detroit, where drivers have historically paid some of the highest auto insurance costs in the country. Michigan’s statewide average — $2,535 per year — still clocked in far higher than the national average of $1,483 per year, and with an average of $5,072 per year, Detroit still posted the highest average car insurance rates in the U.S.

The average annual rate for drivers in the Grand Rapids metro area was $2,349, The Zebra analysis found.

Car insurance rates fell by an average of 4% nationwide over that period, primarily due to how driving habits changed during the COVID-19 pandemic, said Nicole Beck, a licensed insurance agent and head of communications at The Zebra.

Pandemic-related savings will likely dissipate as more drivers return to work commutes and leisure travel, Beck said, but noted Michigan’s much larger decrease in overall rates indicate the state’s overhaul of auto insurance laws had a significant impact.

“It’s about 3.9% nationally, but in Detroit, it’s 19%. So that has got to be correlated to all of the legislation changes,” Beck said. “The bad news is that rates in Detroit are still double the national average.”

Beck predicted Michigan drivers can be “a little bit optimistic” about additional savings in the future, as the bulk of the changes went into effect in July some aspects of the new law have not yet taken effect.

Prior to July 2020, all Michigan drivers had to have unlimited personal injury protection (PIP) coverage on their insurance. But on all policies issued or renewed after that, drivers have had the option to choose a different level of coverage or opt-out entirely if their health insurance covers auto-related injuries.

People with health insurance that covers auto-related injuries and senior citizens with eligible Medicare plans are now allowed to fully opt-out of PIP coverage. Other drivers can choose to maintain unlimited PIP coverage or choose coverage plans capping out at $500,000, $250,000 or $50,000 for Medicaid recipients.

One immediate saving for drivers came from a reduction in the cost of the Michigan Catastrophic Claims Association fee. If drivers don’t opt for unlimited PIP coverage, they don’t have to pay a fee at all.

Auto insurance costs vary widely from driver to driver. A person’s choice of coverage level, costs of liability coverage, driving record and other criteria insurance companies are allowed to use when setting rates all factor into how much it costs to insure a vehicle.

More auto insurance coverage on MLive:

Michigan’s auto insurance law completely changes after July 1. Here’s what to consider when picking your new plan

Why it’s hard to predict individual savings under new auto insurance law

Will Michigan drivers change their policies once new auto insurance law takes effect? Many still don’t know

Roughly half of insured Michigan drivers wouldn’t choose to opt out of no-fault coverage, survey finds

Gov. Whitmer signs bill overhauling Michigan auto insurance

Michigan orders auto insurance refunds due to ‘extreme reductions in driving’

Michigan auto insurers see ‘coronavirus windfall’ as driving, crashes decrease