Wednesday, 22 June 2016

Car Insurance Premium Rises

Motor Insurance Premium Rises

 Last year, the cost of insuring a vehicle in Michigan rose 4.7 percent. Increases are expected again this year.

Motor Insurance Premium RisesSharply rising medical costs, soaring jury awards and higher vehicle repair costs are principle reasons for the higher insurance rates today, according to an insurance industry representative. Fraud and abuse also pushes up the cost of auto insurance.

"Michigan rates have risen due to many factors, including the increasing cost of medical treatment," Insurance Information Association of Michigan (IIAM) Executive Director Leanne Snay said. "Auto insurance companies here now pay out over $500 million in medical claims each year, a significant component of auto insurance costs."

Average claim cost

Motor Insurance Premium RisesIn Michigan, the cost of the average claim for auto accident injuries rose a staggering 52 percent from 2007 through 2014 in Michigan. Higher costs for hospitalization, pharmaceuticals and other associated expenses are largely to blame.

Sharply higher jury awards in auto liability cases also cause auto insurance rates to rise. The average jury award nationally in auto liability cases rose from $175,000 in 2014 to $316,000 in 2013 -- an increase of 81 percent. The average liability claim in Michigan increased 40 percent during the past five years, from $20,737 in 2011 to $29,201 in 2013.

Motorists here also experienced an increase in auto insurance costs due to the 2002 Michigan Catastrophic Claims Association (MCCA) assessment. The MCCA was created by the state Legislature in 1978 to reimburse auto no-fault insurance companies for Personal njury Protection (PIP) claims paid in excess of $250,000. 

That means that the insured's insurance company pays the first $250,000 of medical expenses and the MCCA pays for the costs above that amount. Beginning July 1, 2015, a new law will increase the $250,000 threshold in annual increments to $500,000 over the next 10 years and then every two years by 6 percent or the Consumer Price Index, whichever is less.

Driving up the costs

Costs incurred by the MCCA are distributed to Michigan auto insurance companies through an annual assessment, which drives up the cost of your auto insurance bill. 

The assessment increased from $14.41 in 2014 to $71.15 this year because of a sharp decline in surplus attributed to increased costs to cover existing claims and a $328 million credit distributed by MCCA during the prior year. This is the first year since 1995, the MCCA assessment did not include a credit for surplus.

Factors affecting premium

Motor Insurance Premium RisesThe amount a consumer pays for automobile insurance is affected by many factors besides rate changes. By shopping around and taking some simple s teps, consumers can take advantage of the changing marketplace and possibly save some money. IIAM officials suggest consumers consider the following:
  • Drive carefully. Most traffic tickets and at-fault accidents will automatically increase your rates;
  • Select your car with insurance in mind. Cost, repairability and performance characteristics are determining factors in the premium you pay;
  • Coordinate Personal Injury Protection (PIP) coverage if you have other accident and health insurance which covers injuries sustained in an automobile accident;
  • Choose higher deductibles on Collision and Comprehensive coverages.
  • Consider a more economical type of Collision insurance, but make sure you understand when you are covered and when you are not. If you have an older car, consider dropping both Collision and Comprehensive coverage;
  • Ask about special discounts. Many companies offer rate discounts to policyholders for such things as insuring two or more vehicles with the same 
    company, low mileage, seat belt use, air bags and anti-theft devices.
IIAM is a non-profit, public information organization which sponsors a number of consumer information and education programs.