Ever wonder why your auto insurance goes up, even though your car is getting older?
It’s true – your car’s value drops each year. But most claims aren’t for replacing totaled vehicles. They’re for repairs – and the cost of parts and labor keeps rising.
That’s only part of the story. Insurance companies use most of the money we pay them – about 60% to 70% – to cover claims:
- 40% for vehicle damage (collision and comprehensive),
- 30% for medical costs (Personal Injury Protection or PIP),
- 30% for legal fees and lawsuit payouts (Liability).
In Michigan, the biggest increase lately has come from liability claims – especially since the state began allowing people to choose lower limits on PIP coverage. When people don’t have enough PIP, they need to sue to recover medical costs.
But that’s not the only reason costs are up. Legal system abuse is making things worse. This happens when the legal system is used to make money instead of serve justice. Examples include:
- Aggressive ads from attorneys pushing people to sue,
- Inflated medical and repair bills,
- Outside investors (even from overseas) funding lawsuits for a share of the payout.
These cases often lead to massive “nuclear verdicts” – jury awards over $10 million. Injury victims may borrow from lawsuit lenders who charge over 100% interest, and after legal fees and investor cuts, the victim may walk away with very little.
Meanwhile, policyholders are left paying the price – through higher premiums, higher deductibles, or reduced coverage options.
What can you do?
- Understand your coverage. Talk to your agent before a claim happens.
- Be cautious of lawyers or contractors pushing you to sue.
- Avoid lawsuit funding, it may cost you more than you realize.
- Support efforts to reduce legal abuse and protect consumers.
When the legal system gets misused, we all end up paying. But staying informed is the first step toward change. If you’d like to learn more about the factors pertaining to your specific auto policy price increases, contact your auto insurance agent for a good conversation!
