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Why is MI car insurance so expensive? Thoughts from an insurance agent

March 25, 2015 by Steven M. Gursten

Some practical ways to lower the cost of auto insurance for all of us

auto insurance cost

Last week, I wrote about my plan to reduce the cost of auto insurance in Michigan. I believe my 14-step No Fault “Action Plan ” would preserve auto No Fault insurance for people who have been injured in car accidents and depend on it, while also lowering the price for all drivers.

In other words, I believe we can have our cake and eat it too: We can keep the critical legal protections like all reasonably necessary medical care for catastrophically injured automobile accident victims, and we can at the same time make No Fault insurance more affordable.

I received a lot of feedback on social media in response to this series of blogs.  Many people are just frustrated, and want to know why their car insurance is so high, and they want action taken to stop it now. You can read some of the great Facebook comments here.

Today, I wanted to share a particularly insightful comment I received from one of our readers, Nick Weatherhead, who is an insurance agent. Nick is sharing his thoughts on why auto insurance is so high for people who are uninsured and then seeking to obtain coverage:

“I find that when a prospective customer, whom is currently uninsured, comes into my office for an insurance quote, I cannot help them out in most cases. Simply put, they do not qualify for standard rates because of the lapse in coverage. These people are trying to do the right thing and get insurance but “high-risk” rates are ridiculously expensive. One of the most common responses I hear is “that’s more than I paid for the car.”

Here is a middle of the road example of a quote I can provide:

“PLPD for your ’95 Taurus is going to be $2,200 for six months, and because you have no prior insurance we need 41.61% down, so that will be $915.42 today then four payments of $321.14”

Not many people can afford to do that. There is no wiggle room for people trying to get insurance again or for the first time. The biggest problem is the lack of knowledge. I myself knew nothing about auto insurance until I got into the industry, even though I had been driving for 10 years. The basics or importance of always maintaining insurance should be taught or at least addressed in drivers training.

If there was some way to advocate for a temporary and one-time only enrollment period for uninsured drivers that forgave their lapse so they could get a reasonable rate, we would be able to insure a good portion of the state’s 1 million uninsured drivers.

Just like in my MCCA idea the same principle applies; the more people contributing to the pot, the less each person has to contribute. If consumers knew they would save a lot of money by maintaining coverage and that for this one time only, a company could forgive a lapse, good money says they would stay insured because they know the struggle of getting insurance when you haven’t had it.

Aside from a fee schedule and reducing auto insurance fraud, insuring every driver would help lower rates for everybody.

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