III: Mich. Car Insurance Market Impacts Economy Positively, But Needs Reform

A new report from the Insurance Information Institute (III) documents the large, positive impacts that the property and casualty coverage industry has on the state economy but also notes that the Michigan no fault auto insurance system has led to “rampant fraud and abuse” and requires reform.

The III’s president, Robert Hartwig, noted in a presentation of the report that the Michigan insurance industry in 2009 supplied the state economy with more than 72,000 jobs, paying a total of more than $4 billion in compensation.

“Insurers are increasingly important to Michigan’s economy, now accounting for nearly 4 percent of economic activity in the state,” the report says.

But one well-documented problem with the Michigan insurance structure has caused car coverage prices to increase to excessive levels.

Graph showing no-fault auto insurance claims averages by state

Click graph to enlarge

The state’s no-fault system has seen widespread abuse, which has amounted to a crisis.

According to the III, the state’s average no-fault claim comes in at more than twice the average amount for the next highest state.

The average for Michigan is $36,463. New Jersey, which has the second highest, has an average of $16,331. And the trend has only gotten worse in recent years.

Since 2004, the average no-fault claim for the Wolverine State has increased by 50 percent.

These costs have continued to push the average cost of coverage in the state skyward.

Although Michigan ranked as only the 11th most expensive state for average auto insurance expenditures in 2008, the city-by-city statistics tell a different story.

According to data from the National Association of Insurance Commissioners, the average Michiganian paid $907 for coverage that year.

But Detroit was ranked as the most expensive city in the nation for coverage. The average auto premium for Detroit residents in 2007 was estimated to be $5,948.

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

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