DETROIT, MI – Depending on who you ask, Detroit has the highest car insurance premiums in the nation either because of Michigan’s no-fault system or because of the state’s collision coverage rates.
Both sides of this argument are vehement that one of these is a true culprit for high auto premiums, emerging alongside high crime, poverty, a lack of insured drivers and other factors that come with living in an urban American area.
Meanwhile, no matter what way you slice it, Detroit tops every other city in the nation for its car insurance rates.
Michigan is the only state in the country to provide unlimited, lifetime benefits to injured drivers. The Insurance Institute of Michigan says a main concern for insurers in Michigan is the sustainability of the no-fault system itself. IIM notes that the industry has long sought reform. Last year, several pieces of legislation were introduced but failed to gain sufficient traction.
When one prominent piece of legislation, House Bill 4612, was making its way to the House floor, people in wheelchairs showed up at the Capitol to protest. HB 4612 would have capped Michigan's unlimited personal injury protection coverage at $1 million, limit what medical providers charge insurers for auto-related injuries and create an authority to combat insurance fraud.
“While others may argue that collision is the highest expense in an auto insurance premium we find that changing,” said Lori Conarton of IIM. “The average (personal injury protection) claim increased over 200 percent in the past 10 years, while the average collision claim only increased about 25% during that same time.”
Not so, says the Coalition Protecting Auto No-Fault, which defends Michigan's no-fault insurance system.
CPAN says that Michigan ranks “about average” in the cost its citizens pay for the injury portion of auto insurance. Instead, collision coverage is where Michigan ranks among the highest in the nation.
“As others have stated, the main cost of auto insurance in Detroit is fraud, theft, more collisions and a high number of uninsured,” Josh Hovey, of Truscott Rossman, representing CPAN, said in an email. “These are things that CPAN is working with state and local leaders to address.”
Somewhere in the middle of all this, there is also the Michigan Catastrophic Claims Association, a private, non-profit organization set up by the state legislature in 1978. Its purpose is to reimburse car insurance companies for PIP benefits that exceed $500,000 per claim. The MCCA sets the premiums consumers pay for catastrophic coverage, raising it to $186 per insured vehicle last July 1. It was previously at $175.
The group’s transparency has come under scrutiny, most notably from CPAN.
Last year, CPAN sued the MCCA for access to financial records after it was revealed that the MCCA’s executives were getting 19 percent pay raises from 2008 to 2010.
“First the insurance companies doled out pay increases to employees at a time when Michigan citizens were receiving pay cuts and layoffs, then it raised the assessment to historic levels while at the same time paying out millions for financial management advice – which must have been bad advice, if they are claiming to be broke,” CPAN President John Cornack said in a statement at the time.
CPAN won its lawsuit.
Meanwhile, the status quo continues to reign, and that means anyone trying to legitimately insure a car in Detroit is going to pay the highest rate in the nation, despite being in one of the poorest cities.
One reader tells MLive that his grandmother was forced to sell her car because of the rising rates. “She lives on the northwest side, her car was never stolen, her neighborhood is nice, yet her insurance was going to double,” Aaron White said.
While campaigning for mayor last fall, Mike Duggan said he wanted to create a municipal insurance company that would offer reduced rates. The mayor’s office said there is currently nothing to update on that effort.
Virgil Smith, a state senator from Detroit, likens getting car insurance in Detroit to buying a house in a hurricane zone off the Atlantic.
“In my opinion, you have certain insurance companies that just don’t want to write insurance in the city of Detroit,” Smith said. “They look at it as a bad risk zone.”
Smith, too, introduced legislation that would put a cap on lifetime medical benefits. One of his bills also sought to reduce premiums by using Georgia’s model of defining and then prohibiting excessive rates. Another piece of legislation he called “more controversial” sought to cap no-fault reimbursement at $50,000.
Smith said all the bills met a frosty reception in Lansing.
“I just wanted to get the conversation started, so I started with the most stringent laws I could, and I started catching bullets,” he said.
David Muller is the business reporter for MLive Media Group in Detroit. Email him at firstname.lastname@example.org or follow him on Twitter or Facebook.