High Auto Insurance Rates in Michigan and How They’re Set

Everyone is talking about the high auto insurance rates in Michigan. In fact, we pay some of the highest premium prices in the country. What few people know and understand are the factors that go into setting those rates and why. Grand Rapids auto accident attorney, Tom Sinas, explained Michigan’s rate-setting practices in a recent Fox 17 Know the Law segment.

Fox 17 Know the Law – Auto Insurance Premiums

High auto insurance rates is a hot topic of debate right now and continues to build momentum heading into election season. With the no-fault system under scrutiny and proposed changes in front of legislation, it’s important to understand how these premiums are set to determine if no-fault is really at fault.

No Regulatory Oversight of High Auto Insurance Rates in Michigan

First, it’s important to mention that Michigan has very loose regulatory oversight of premium setting practices with regard to auto insurance. Michigan defers to what is known as a file and use system. Under this system, the auto insurance provider determines the premiums and presents it before the insurance commissioner. The insurance commissioner then either accepts it or rejects it. In the forty plus years since the enactment of Michigan’s no-fault system, to the best of our knowledge, the insurance commissioner has never once rejected a rate.

No Definition of “Excessive”traffic

Part of the reason rate proposals are seldom if ever rejected is because we have a loose definition of what “excessive” is in Michigan. While Michigan statute states that premiums can, in fact, be excessive, it gives little definition of the term.

Michigan statute defines “excessive” as:

“A rate that is usually high for the insurance coverage that is provided and a reasonable degree of competition does not exist with respect to the classification, kind, and type of risks to which the rate is applicable.”

There’s very little meaning in this description and it’s very subjective. This means auto insurance companies in Michigan can assess any rate within this vague definition and Michigan drivers are stuck with high premium prices.

Non-Driving Rating Factors

These factors determine your premium but have nothing to do with your driving record. Such factors include marital status, type of employment, age, and gender, to name a few. A recent study by InsuranceQuotes.com that released staggering statistics based on their credit:

  • Fair credit: pays 90% more than someone with good credit
  • Poor credit: pays 229% than someone with good credit
  • Credit scoring disparity used for premium setting is worse in Michigan than any other state

So how do we lower these premium prices moving forward? Let’s start with:

  1. Better regulatory oversight of rate-setting practices
  2. Greater definition of what is “excessive”
  3. Banning the use of non-driving rating factors


If you’ve been injured in a car accident in Michigan, call a Sinas Dramis attorney for a free initial case review at (517) 394-7500.