Why are auto insurance rates so high in Michigan?
Why is it that the poorest people in Michigan, the ones who face the biggest struggle to find jobs and get to those jobs, are paying the highest auto insurance rates in the country?
Insurance companies blame the high volume and high cost of claims, pointing to vehicle-theft rates in Detroit, for instance, that are almost seven times the national rate.
Steven Gursten is a Detroit-area attorney and he suggests one factor in these high rates is insurance companies’ lack of transparency.
"Michigan is one of the few states that doesn't require the insurance companies to let us know what they're making, their profit margins, on the auto line," Gursten says.
Michigan residents are legally required to purchase insurance, but Gursten says Michigan is one of the few states that doesn’t give the state's insurance commissioner the power to know what insurance companies are making and to determine whether or not it is excessive.
But Michigan also has had one of the best no-fault policies in the country according to Gursten, so he's apprehensive about some of the changes being proposed.
"When we talk about changing no-fault, the question I would always start with is: compared to what? What state do we want to model after? Because what most people don't understand is how lucky we really are in Michigan," he says.
Currently, Michigan's no-fault policy means insurance companies pay for all reasonably necessary medical care and treatment for as long as you need it along with up to three years' wage loss after you’re involved in an accident, according to Gursten.
But this level of care isn't affordable for everyone. Credit scoring for auto insurance is legal in the state, meaning people with lower credit scores have to pay more.
"Credit scoring is legalized discrimination against the poor. And because it’s against the poor, it’s adversely affecting minorities more," Gursten says, calling it "a civil-rights issue."
So the $300 more than the national average that Michiganders pay, Gursten says, fails to take into account regions like Detroit and Flint where prices are inflated because of credit scoring.
Detroit Mayor Mike Duggan recently released a plan for changes to Detroit's insurance policies. And while Gursten is a supporter of making changes, he doesn't believe Duggan's plan is right for the city.
According to Gursten, instead of receiving medical care for life, the plan would cap the cost of care at $25,000. In exchange, Detroiters' costs would only be cut by 25-30%, keeping insurance rates higher than many of the surrounding suburbs.
So what's the solution? And what can you do to make sure you're getting the best rate?
Gursten advises going to an independent insurance agent who will be able to compare many different company's policies. And he says many Michigan residents aren't aware they should purchase uninsured or underinsured motorists coverage, which protects victims of accidents if another driver doesn't have insurance.
It's estimated 21% of drivers in Michigan are uninsured.
As for statewide changes, Gursten would like to see more transparency for insurance companies by having to disclose their earnings to the state's insurance commissioner.