Study: Detroit insurance plan projects savings for drivers

By Corey Williams
Associated Press

DETROIT (AP) - Drivers in Detroit could save $600 to $2,300 annually on car insurance under a plan the city is hoping the Legislature will pass, according to a report.

The six-month study by Bloomington, Illinois-based Pinnacle Actuarial Resources shows D-Insurance would give residents a cheaper option when shopping for coverage.

Car insurance rates for Detroit residents are among the highest in the nation. In 2013, the average full-coverage policy in downtown Detroit was about $2,250 - double the average annual premium for some communities in one suburban county, the study said.

Half of the 322,000 registered vehicles in the city are not insured.

"While we can't specifically say that if this reform were to pass, then everyone would purchase insurance," said Roosevelt Mosley, a Pinnacle principal and consulting actuary, "but certainly one of the driving factors in the choice to not purchase insurance is the cost of that coverage."

Under the plan featured in Senate Bill 288, a Detroit resident paying $6,228 for full-coverage car insurance would save $2,288. Those with no-fault coverage and paying $4,792 per year would see their premiums reduced by 48 percent to $2,504.

Expenses associated with medical usage by policyholders are pushing Detroit's higher auto premiums.

Detroit drivers file 12 medical claims per 1,000 vehicles - twice the number filed by suburban drivers. Those medical claims average $59,000 in Detroit compared with $30,000 in the suburbs.

"For whatever reasons, Detroiters are going for far more of these treatments and at far more expense than suburbanites," said Mayor Mike Duggan.

Medical providers charge those costs to insurance companies, which pass them on in higher premiums.

The study found that 47 percent of premium cost is for personal injury protection health coverage required under Michigan law. Personal injury protection benefits are unlimited in the state.

Under D-Insurance, Detroit would seek bids from insurance companies to provide at least $25,000 in personal injury protection and cap catastrophic coverage at an additional $250,000. Costs beyond that level would be the responsibility of a driver's health insurer.

A senate insurance committee has passed the plan. D-Insurance could be rolled out by January if approved soon by lawmakers, Duggan said.

But Democrats in the Michigan House said Senate Bill 288 is a bad deal for Detroit drivers.

"This cheaper insurance policy targeting Detroit residents, and others who would qualify, limits needed medical care and compromises families' long-term financial security," House Democratic Leader Tim Greimel said Tuesday in a news release. "Limiting medical care coverage is not an acceptable way to address the high cost of no-fault insurance, particularly in Detroit."

Published: Thu, Jun 11, 2015