New Dismay Over What We Pay to Insure Vehicles in Detroit and the Rest of Michigan

July 09, 2018, 11:34 AM by  Alan Stamm

A familiar lament by Michigan drivers is shared globally this week with readers of The Economist, a influentlial magazine based in London.

"Car insurance premiums in the state are so hugely regressive," it reports, "that those living in the poorest zip codes, where the typical family lives below the federal poverty line, can expect to pay twice as much to insure their cars."

The unbylined article focuses mainly on the state's biggest city under the headline "Why Detroit is the most expensive city in America to buy car insurance."  

As with past crime stats or Halloween Eve fires, this No. 1 ranking is unwelcome and unhelpful -- particularly for a city reshaping its image, the international publication notes:

Although downtown Detroit today is newly bustling with millennials and their accompanying creature comforts, the crazy price of car insurance acts as a brake on further revitalization. For those considering moving from New York, car-insurance costs alone amount to a $3,000 annual surcharge.

Detroit, of all places, cannot afford that.

The Economist delivers data points and context:

The average cost of insurance premiums in the city is $5,414 per year, more than twice the state average and nearly four times the national average. For the typical Detroit household, making $26,300 a year, this would represent 21% of pre-tax income. . . .

It is now estimated that up to 60% of Detroiters drive without insurance. . . .

Insurance companies may make for easy targets, but blame really lies with the state of Michigan, which has put bad policy in place and failed to fix it. The state mandates that all drivers buy no-fault insurance with unlimited medical insurance—meaning that the insurer will pay for unlimited lifetime medical expenses, rehabilitation services and lost wages after a car accident, no matter who is at fault. It is the only American state that mandates such generosity. . . .

Lawyers, drawn to the potentially unlimited stream of cash, have more than doubled the number of lawsuits, which can earn them 30% of the resulting damages.

Hospitals siphon off some of the cash sloshing around by billing procedures at three or four times the typical negotiated rates. Other states have reduced such costs by setting ceilings on what hospitals can charge. Michigan has not. Medical bills for those injured in car accidents have tripled since 2000. Ballooning medical costs are the chief cause of costly insurance.

Staged image from DepositPhotos

Our readers howl

These are among reactions this past weekend from our followers commenting on a retweet and Facebook sharing of The Economist's link:

  • The normal Detroit family doesn’t have car insurance. -- Frank Bonnette, Royal Oak
  • "New" Detroiters will drive change long denied to longtime locals in spite of decades of political posturing. -- Karen Dumas, Detroit
  • Removing the unlimited medical care mandate would go a long way to reducing cost. Michigan politicians of both parties refuse to do it. Bought and paid for by insurance lobby. -- Mike Findlay, Standish
  • Go out and vote. -- Charles C. Barnes, Detroit
  • I'm licensed to sell [insurance] in Michigan and it is absolutely uncomfortable to quote pricing in Detroit.  PIP [Personal Injury Protection] reform needs to happen if the city is going to attract future growth.
  • Just crazy. -- Paula Cole
  • When Engler tried to kill the unlimited medical benefit, voters decided to keep it in place. Maybe it's time for another vote. -- Elizabeth Ann

Read more:  The Economist

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Photo Of The Day 

Potd_img_9679_88 A brightly decorated track viaduct in Southwest Detroit near Michigan Central Station.

By: Michael Lucido