Michigan Motorists to Receive Automatic Savings

Michigan is one of the most unique states for car insurance. Not only does it have the purest “no-fault” insurance laws, but it also has the second most deer-related crashes of any state in the country. Combine these two factors with the heavily concentrated population centers of Detroit, Lansing, and Ann Arbor, and it is easy to see why Michiganders pay the second highest car insurance rates in the nation - only New Jersey residents pay higher rates. But the good news is that every Michigan motorist is about to receive a $14.18 reduction on his or her policy.

Monthly Savings: $2.36 - No Big Deal?

Let’s be clear here: The savings will be $14.18 will be per six-month policy, not per month. $14.18 in monthly savings would be pretty significant, but $14.18 per six months is just $2.36 per month. That’s hardly a big deal; or is it?

The $2.36 won’t even let you buy an extra latte each month, but when you consider that car insurance rates have generally been going up every year, the $2.36 monthly drop is pretty significant. After all, it wasn’t long ago that an increase of only $2.36 per month would have been heralded as a great deal.

Why have car insurance rates generally been going up? First and foremost, there is the issue of inflation. As most prices generally go up over time, one could expect car insurance rates to go up with the general price level. But historically, car insurance rates have grown at a much faster pace than inflation’s 2-3%. Why? Well, the major reason has been increased healthcare costs. Don’t forget that car insurance companies have to pay medical claims, so as healthcare costs go up, car insurance rates generally go up too.

So What Has Made Car Insurance Rates Go Down?

In this specific case, car insurance rates in Michigan are being mandatorily dropped because drivers are becoming safer, and thus, claims are falling. With Michigan’s nearly-pure no-fault system, The Michigan Catastrophic Claims Association (MCCA) assesses a per-vehicle surcharge to cover catastrophic damages. Last year, that charge was $137.33 per six months ($22.88 per month), but the MCCA has reduced that figure by $14.18 to just $123.15 per six months ($20.53 per month.)

This is the second straight year that the MCCA has reduced its surcharge, citing fewer severe injuries than expected and higher investment returns in the stock market as the primary reasons for the rate cut. (Yes, insurance companies and even government agencies invest premiums in the stock market and other financial instruments, so Wall Street’s performance can have an impact on your rates!) In addition, the threshold at which the MCCA kicks in goes up every year - currently it is $420,000 in care, but it will gradually rise to $500,000 over the next several years.

And That’s Only Half of the Story

Now, as Paul Harvey says, for the rest of the story:  Car insurance rates are going down in Michigan and elsewhere in the country because customers are demanding lower rates by comparison shopping. When you make car insurance agents compete for your business, they have to give you the best deals they possibly can. So if a mere $2.36 per month in savings isn’t good enough for you - and it shouldn’t be! - simply shop for car insurance quotes. You might just be able to afford an extra latte every day with your savings!