Auto insurance costs have been an issue in Michigan for years. At the heart of the American automotive industry, premiums are rising sharply than people in neighboring states. As of January 2025, Michigan states have 63% more auto insurance than Wisconsinite, 82% more, and 96% more than Ohioans.
Five years ago, the state legislature turned to fixing the issue with the passage of Senate Bill 1, a drastic reform of Michigan’s automobile insurance law. The bill was signed into law in May 2019 as public law number 21. Among other things, the law removed the requirement that all Michigan pay unlimited non-disabled motor vehicle insurance, prohibiting insurers from setting certain factors that are unrelated to driving (gender, marriage status, zip code, credit score).
But Michigan’s auto insurance reforms are far from high rates and widespread easing, with short cuts to car insurance prices followed by an interest rate rise that returned to where the state began.
What’s the problem with Michigan auto insurance reform?
Democrat Jeff Irwin was one of four senators who voted “No” on SB 1 in 2019. “I voted against it,” he says.
These issues include the use of territorial valuation (the practice of charging higher or lower premiums based on the policyholder’s address) and credit information to set prices. The Department of Insurance and Financial Services (DIFS) presented SB 1 as the end of these practices, but the law actually expanded the ability of insurers to adopt both rating factors in Michigan.
Territory red lining is still legal in Michigan
“The #1 thing the bill didn’t address was “a geographical assessment and redlining system” to help insurers adopt in Michigan to keep costs low in certain regions and high in other regions.
In Michigan, it’s no secret that Detroit drivers pay the best premiums for car insurance. The true cost of Bankrate’s 2025 auto insurance report has the third highest true cost of the 25 MSA auto insurance, where Detroit Warrenbone’s metropolis statistics area (MSA) was analyzed, and only Tampa and Miami are ousting Sky High Cost. Residents in Detroit and the surrounding area pay an average of $3,696 per year for fully covered car insurance. This is 5.09% of MSA’s median annual household income.
SB 1 made a gesture to outlaw assessment practices that punish urban residents. These areas, like Detroit, are usually home to large communities of color and numerous low-income residents. The bill banned Michigan insurance companies from base their car insurance costs in the applicant’s zip code.
“But of course,” Irwin points out.
In a recent study of Michigan rating loopholes, markup and outliers media identified the methods Michigan’s top auto insurers used to avoid a new zip code ban.
- Census Region: Auto Club, Michigan’s third largest auto insurance provider, has switched to using the census region. This is about 2,500-8,000 residents drawn by the US Census Bureau.
- Census Block Group: Like census regions, these small areas allow insurers to acquire prices in an increasingly detailed way. Citizen Insurance uses this method of reducing the state of Michigan map.
- county: At least one insurance company (Liberty Mutual) has switched to using the county as an assessment area.
- Custom Map: Allstate, State Farm, car owners and progressive all use custom drawing maps that divide Michigan into sections that are significantly smaller than the standard postal code.
As a result, carriers still use a variety of territorial assessment methods to charge car insurance customers higher rates in urban areas like the Detroit Warren Dareborn MSA. Based on Quadrant Information Services rate data, the most expensive carriers charge the average annual rate for Detroit drivers at $5,700 above the average statewide premium.
The bill created a credit loophole
Section 2108 of SB 1. (4) prohibits insurance companies from based on car insurance rates on driver credit scores.
For many drivers, this may sound like a good thing. After all, being a good driver for bad credit and vice versa. But there’s only one problem. Insurance companies do not use credit scores to set car insurance rates. Instead, they use a similar rating called a credit-based insurance score, and SB 1 does nothing to limit the use of insurance companies’ insurance scores.
Insurance scores share a lot of DNA with your credit score. In fact, they are often calculated from the same credit information by the same third party, such as Fair Isaac Corporation (FICO). The main difference is that insurance scores focus less on consumer credit mixes, but more on the history of time payments.
However, insurance scores are not used to predict the likelihood that customers will pay their bills on time. Instead, actuarial studies point to a poor history of credit history and predictive links that are likely to file claims. The discrepancy between the way insurance scores are calculated and what they are used to measure makes them controversial. This makes the bill’s language very important.
SB 1 defines the term “insurance score,” but it only prohibits the use of “credit score.” However, “there are no practical differences, sometimes absolutely no differences,” says Doug Heller, insurance director at the American Consumer Federation. He said the bill created a broad myth that Michigan government eliminated credit as a rating factor. “Though the myth was dispelled to those with fair or moderate or inadequate credit scores to get insurance estimates.”
The DIFS Auto Insurance Reform FAQ Page still lists credit score elimination as a rating factor as one of the consumer protections that invoices secured. When asked DIF why the website wouldn’t mention the difference between credit and insurance scores, Difs director Anita Fox included the following in her statement:
“The use of credit-based insurance scoring and application for car insurance rates is complicated, and the variance encourages you to talk to your insurance agent or insurance company first about using interest or insurance scoring.
The statement cannot address the root of the question. Why has the Michigan government not taken steps to actively educate consumers about the differences between credit and insurance scores? Credit-based insurance scores are an important pricing tool for auto insurance companies and are almost universal for use in the industry. However, outside of the industry, most drivers are not familiar with the differences. This leaves many Michigans with the false impression that SB 1 simply introduced reforms.
Reducing no fault coverage did not reduce costs
The main focus of the SB 1 was to eliminate the sudden, unstoppable insurance requirements that have made Michigan car insurance prices extremely expensive over the years. Until the bill came into effect in 2020, Michigan was the only state in the country to require all drivers to purchase unlimited personal injury protection (PIP) coverage. Currently, drivers can choose from many PIP coverage levels ranging from $50,000 to unlimited. In some cases, the driver may opt out of PIP coverage.
In theory, providing drivers with the option to reduce PIP coverage should reduce costs. But in reality, analysts have found that overhauling non-disability insurance would reduce coverage in some Michigans without significantly lowering prices. Amanda Notaft, director of data and analysis for Poverty Solutions at the University of Michigan, says PIP reforms have reduced costs for some drivers, while SB 1 has failed to provide the lasting relief she and others have wanted.
“In the first year, costs fell,” she says. In a 2021 policy brief, Nothaft and her colleagues estimated that the reforms had resulted in nearly 20% reductions in auto insurance premiums across the state. Michigan says its minimum PIP coverage is still higher than other states’ requirements. In other words, insurance companies still have significant financial liability for medical costs caused by car accidents.
Why SB 1 couldn’t offer a fairer premium
It’s not an accident because Senate Bill 1 failed to provide a lower and fairer fee for Michigander. Michigan’s continued high prices are attributable to changes in the national insurance market driven by the COVID-19 pandemic and the ongoing financial fallout, but the provisions of the rate-making law have ensured the insurance industry has the freedom to charge Michigan’s steep prices.
Dive into the Michigan House and Senate bill records, along with sponsored campaign finance, the cooperation between lawmakers and insurance companies has been revealed, maintaining a mechanism that makes car coverage more affordable than most of the country.
Lawmakers have curbed amendments that eliminate loopholes
The final text in SB 1 confirms the insurers’ rights to use their customers’ geographic location and credit information when setting prices, but some lawmakers opposed these practices and sought to introduce revisions that provide meaningful consumer protection. According to voting records compiled by the Mackinac Public Policy Centre, lawmakers voted against the next proposed amendment of SB 1.
- Forces car insurance companies to cut 50%. Sen. Erica Geis (D-1) proposed this amendment along with language to eliminate the state’s “file and use” regulatory system. This allows insurers to raise their fees without waiting for state regulator approval.
- Only records of base car insurance premiums: Sen. Marshall Bullock (D-4) proposed an amendment linking the bill to Senate Bill 88 that would ban insurance companies from banning insurance companies from being based on car rates other than their driving safety records, years of driving experience, and annual mileage.
- Limit the insurance score and territorial impact to 10% of premiums. The amendments proposed by Rep. Isaac Robinson (D-4) forced insurers to limit the use of rating factors such as credit information and location so that these factors could affect only 10% of customer invoices.
- Eliminate the use of PIP Premium territory, “insurance score” and “credit information.” The second amendment by Robinson would have banned territories and all forms of credit information as a rating factor for personal injury protection (PIP).
The records do not say who voted for the proposed amendment in the House of Representatives, but the proposed amendments in the Senate ranged from 16 to 22, with 16 Senate Democrats voting in favor of the amendment and 22 Republicans, including sponsors of the bill, voted against the proposed change.
The bill sponsor received money from the insurance company
The insurance company represented some of the largest donors to the SB 1 Republican campaign. Between them, the bill’s sponsors accepted a total of $121,250 in 2018 and 2019 campaign contributions from the insurance industry. Among the industry’s top donors to these lawmakers was the American Automobile Association (AAA). It constitutes 14% of the Michigan auto insurance market as AAA insurance company, Auto Club. The AAA gave a total of $14,600 to sponsor the bill in 2018 alone.
Other major industry donors include Allstate, which was donated to Aric Nesbitt and Kenneth Horn’s campaigns. The car owner who donated $5,450 to Tom Barrett. Additionally, small regional airline Pioneer State Mutual has donated a total of $2,500 to Horn, Barrett and Daniel Lauwers campaigns.
“Insurers have been asking Congress for many years to make it more attractive to them,” says Irwin, to do business in Michigan. Michigan’s unlimited no-fault system is combined with significant environmental risks, such as severe winter weather, making Great Lakes State a major economic challenge for insurers. By eliminating the requirement for all drivers to purchase unlimited PIPs, the law met the needs of insurers who helped sponsor the senators’ campaign that introduced it, while maintaining pricing and regulatory mechanisms that allowed insurers to claim higher premiums.
At the same time, the law “appeared like a reform protecting financially vulnerable consumers,” Heller points out — a gesture to the needs of voters represented by Nesbitt, Tayce, and other sponsors of the bill. “It’s an absolute game of embarrassing deception for lawmakers who don’t realize they’re being played, and it’s an ugly mark for lawmakers who know exactly what’s going on.”
What you can do about high insurance costs in Michigan
Michigan’s auto insurance reform may not provide the price relief that some consumers have wanted, but it is still possible to find affordable car insurance in Michigan.
Compare quotes from multiple insurance companies
First, go shopping. Heller points out that drivers with a history of poor or fair credit often have “pricing volatility” compared to those with good credit. “If you really have good credit,” he says, “All companies are already working for your business because your high credit suggests you will buy other products.” Meanwhile, drivers suffering from poor credit will save more by comparing quotes from different insurance companies.
Bankrate analyzed the average premiums of customers across the credit spectrum from Michigan insurance companies. Among the full coverage premiums charged to undercredit drivers, there was an annual spread of over $16,000 between the cheapest carriers and the most expensive airlines.
In contrast, for a driver with good credit, the biggest potential savings came to just $2,321. While all credit tier drivers have saving opportunities, the potential impact of comparative shopping may be the biggest for poor credit drivers.
Read policy documents carefully – and build your insurance vocabulary
Once you receive documents from your car insurance company, such as declaration pages and premiums, take your time to read detailed prints. Doing so will help you understand what you are paying and how your exact costs will collapse.
Learning some basic insurance experts can make reading policy documents easier. To understand what’s going on with your car insurance in Michigan, it’s worth knowing:
- Differences in coverage for all types of policy: If you’re not used to the differences between personal injury protection, conflict and comprehensive insurance, read the different types of coverage.
- What is your insurance score: Insurance companies and lawmakers rely on insurance score opacity to spin SB 1 as a pricing stock win. Understanding the difference between insurance and credit scores can help you talk to your insurance provider or lawmaker about this issue.
- How to compensate your insurance company: Territories, credits, and coverage are just a few of the factors that affect the cost of car insurance in Michigan. Learning about the personal valuation factors that auto insurers use to price policies can help you make informed decisions.
