Car insurance in Detroit continues to be a racket.

[Wesley Mouch]

I hope Duggan will do something about it. I live in 48201 and just got a new ride. AAA [[the cheapest quote, oddly enough) wanted to charge me $480/month for insurance. I finally gave up and changed my address to my moms house [[ not in the city ). Went down to $90/month. Im all about paying my property and income taxes, but the insurance is outrageous. Fuck it, on paper I dont even live here any more.

The insurance rates are based on your residence. Not your driving habits. That is 'outrageous'. So I approve of your civil disobedience.

[sumas]

So many interesting comments. Mostly we've driven hoopties for years. The price of insurance was a big incentive for plpd. Years ago, we made a large loan to a very close friend. He chose to repay us by paying our car insurance monthly. We are the second car on his policy. Ours has standard coverage, his is plpd. The rate is 209 per month for both. His address is in Brightmore, arguably the worst section of the city. He bought the policy through AARP.

Recently my husband was hospitalized and I must have been feeling volnuable so I got our house and garage an invasion system. As an AARP member, I got 1/2 off install and 1/2 off the monthly fee. So I guess for old farts on this forum it's worth checking into.

[erikd]

I don't know... but the real solution isn't lawsuits.

We are assuming here that the insurance companies are evil entities that are sucking blood from Detroiters. No, they suck blood from everyone everywhere. Why do we think they target Detroiters? Answer: They don't.

There is a real problem here. But its not insurance companies.

The real problem is that the costs of Detroit insurance payouts is real. The insurance companies do their best to charge the customers what they pay out. That's how insurance works.

To solve this, you either limit compensation [[such as unlimited medical). You control costs. Reduce car theft. Or you socialize the cost and make the rest of the State join in and pay the costs for Detroiters. As you might guess they will resist.

Its not much different than healthcare. Reduce costs. Or bring in more people to pay.

But my main point is that blaming insurance companies is a mistake. They want to reduce costs almost as much as we do.

That is the theory of how insurance is supposed to work, but all of the data available doesn't support that claim.

The assertion that auto insurance is insanely expensive in Detroit because of auto theft is simply incorrect. I pay $211 per month for my car insurance in Detroit, but the theft [[comprehensive, with a $500 deductible) coverage is only $24 of that. To be sure, I pay more for auto theft coverage in the city [[$24 per month instead of $5 or $10 in the burbs), but that only accounts for just over 10% of my insurance cost.

Even if every single resident of Detroit dropped their auto theft coverage, and the insurance companies never had to pay a penny to any Detroit resident for a stolen car, our auto insurance would still be at least triple the price of the suburbs.

If auto theft is not the reason for the sky-high rates in Detroit, then it must be because auto accidents are much more common in Detroit than in the suburbs, right?

WRONG AGAIN!

SEMCOG compiled a list of intersections in SE Michigan with the most auto accidents from 2008-2012, and the TOP 82 most dangerous intersections in the region were ALL IN THE SUBURBS. Gratiot and Connor was the 83rd most dangerous intersection in the region, and the only one in the top 100 that was in the city of Detroit.

http://www.semcog.org/Data/Apps/high...rn=100&ftype=0

While the city of Detroit has 15% of the SE Michigan population [[according to the 2010 US census), but only 1% of the intersections with the most car crashes, the insurance premiums in Detroit are still at least 3x higher that what is charged in the much more dangerous suburbs, even after taking the higher auto theft rates and premiums out of the equation.

The other factor that people use to justify the insane cost of auto insurance in the city of Detroit is the assertion that many city residents drive illegally without the state required coverage. While this may be true, it is irrelevant because of Michigan's no-fault insurance law.

As the state governments website explains: "If you have an auto accident, no-fault insurance pays for your medical expenses, wage loss benefits, replacement services, and the damage you do to other people’s property. It does not matter who caused the accident."
http://www.michigan.gov/documents/cis_ofis_ip202_25083_7.pdf

In cases where there could be a claim against an uninsured driver, there is "uninsured motorist coverage" to cover these claims:

"The law requires minimum liability insurance coverage of $20,000 for one individual and $40,000 for more than one individual for bodily injury or death and $10,000 for property damage. However, some individuals get their license plates each year by paying the minimum insurance premium and then letting the coverage lapse for nonpayment. This is one reason why the risk of encountering an uninsured driver in Michigan is so high.
Uninsured motorist coverage [[UM) was designed to provide a source of recovery when a driver without insurance causes harm. With UM coverage, the insurer pays the insured the damages the insured would have recovered had the other driver been insured, subject of course to the UM policy limit.
Underinsured motorist coverage [[UIM) goes one step further, allowing the insured victim to recover from his or her insurer damages sustained in an accident with an underinsured driver, or, put another way, a driver who has inadequate coverage to compensate for the injuries that are caused."

http://www.michiganautolaw.com/nofau...orist-coverage

I have uninsured motorist coverage on my policy, and it only costs me a little over a dollar a month.

If it isn't auto theft, accidents, or uninsured drivers driving up our premiums in Detroit, then what is it? I would like to see a valid reason backed up by data to support the auto insurance premiums charged in the city.

[DetroitPlanner]

If it isn't auto theft, accidents, or uninsured drivers driving up our premiums in Detroit, then what is it? I would like to see a valid reason backed up by data to support the auto insurance premiums charged in the city.

I am pretty sure this is due to weak enforcement at the State agency that regulates insurance. http://michigan.gov/difs/0,5269,7-30...049---,00.html

We need to get Lansing to do a peer exchange with other States that know how to keep the insurance companies in line.

[mwilbert]

I'm not going to say that there is justification for the high rates in Detroit, but I'm pretty sure the biggest cost factor in Detroit is the fact that the insurance companies are paying for Joumana Kayrouz's advertising campaign, via the ridiculous injury claims in Detroit.

[Honky Tonk]

I'm not going to say that there is justification for the high rates in Detroit, but I'm pretty sure the biggest cost factor in Detroit is the fact that the insurance companies are paying for Joumana Kayrouz's advertising campaign, via the ridiculous injury claims in Detroit.

I'm sorry but this concept escape me. HOW is my State Farm paying for her advertising? As a side note, anyone else notice in her new campaign, she looks "hotter"? @ first glance, I thought it was an ad for "Deja Vue".

[Wesley Mouch]

I'm sorry but this concept escape me. HOW is my State Farm paying for her advertising? As a side note, anyone else notice in her new campaign, she looks "hotter"? @ first glance, I thought it was an ad for "Deja Vue".

Tonkie... State Farm pays for her advertising when a client wins a lawsuit -- and State Farm pays real money to a real client. She likely takes 35-60% of that settlement, and buys ads to get more clients.

State Farm [[and any insurance company) never takes payments from their bottom line -- they simply adjust the premiums upward to get the cash from.... YOU!

So in reality, insured drivers fund her 'hotter' ads.

[Dan Wesson]

If it isn't auto theft, accidents, or uninsured drivers driving up our premiums in Detroit, then what is it? I would like to see a valid reason backed up by data to support the auto insurance premiums charged in the city.

Just maybe it's credit scores. Possibly the issue is not on payouts, but instead, what's not paid in?

[erikd]

Just maybe it's credit scores. Possibly the issue is not on payouts, but instead, what's not paid in?

Credit scores are factored in, but as an individual risk. A person with a poor credit rating, a history of paying bills late, and letting their insurance lapse will be charged much higher premiums. The insurance companies do this across the board, so location should not matter. If you have bad credit, you pay more for your insurance, just like if you have bad credit, you pay higher interest rates on loans and credit cards.

Other industries that use credit score as a factor do not discriminate by the city you live in. If you have a certain credit score, the credit card companies will charge you the same interest rate, whether you live in Troy, Detroit, or Dallas. Just because Detroiters have lower credit scores on average doesn't mean anything when this is factored in on individual premiums.

If the insurance companies were not allowed to use credit as a factor in setting individual premiums, then this theory would be valid.

For example, if 20% of the people in Troy have bad credit, then they will be charged higher premiums than the other 80% with good credit. If 60% of Detroiters have bad credit, then they will be charged higher premiums than the other 40% with good credit.

IF the insurance companies were not allowed to use credit score as a factor, then everybody would have to pay more, and the entire pool of Detroiters would wind up with higher rates than the pool of people in Troy. However, that is not how it works.

The insurance companies are having it both ways with Detroiters. Not only to they charge us more for theft coverage [[which is fine because we have more theft), but they also charge us more for collision coverage, even though we have fewer collisions. Not only do they charge more for Detroiters with bad credit, they also charge more for Detroiters with good credit.

There simply is no valid reason for the insane PLPD and collision rates that the insurance companies charge in Detroit.

[Honky Tonk]

Tonkie... State Farm pays for her advertising when a client wins a lawsuit -- and State Farm pays real money to a real client. She likely takes 35-60% of that settlement, and buys ads to get more clients.

State Farm [[and any insurance company) never takes payments from their bottom line -- they simply adjust the premiums upward to get the cash from.... YOU!

So in reality, insured drivers fund her 'hotter' ads.

Good Morning Mr. Mouch, I understand that business expense gets added to the consumer's bottom line. The part I don't understand, is how she's doing anything out of the ordinary here? It isn't like she's creating or faking accidents, she's merely challenging claims in court. If the insurer, and the pay-out, are on solid ground, then the case gets dismissed. It's then up to the insurance company to ask for court costs. [[which they are likely to get) If the insurance company blows this off, with the intent of just slapping it onto the consumer's bottom line, then it's the insurance company's fault for not pursuing this, and taking the easy way out.

[mwilbert]

Good Morning Mr. Mouch, I understand that business expense gets added to the consumer's bottom line. The part I don't understand, is how she's doing anything out of the ordinary here? It isn't like she's creating or faking accidents, she's merely challenging claims in court. If the insurer, and the pay-out, are on solid ground, then the case gets dismissed. It's then up to the insurance company to ask for court costs. [[which they are likely to get) If the insurance company blows this off, with the intent of just slapping it onto the consumer's bottom line, then it's the insurance company's fault for not pursuing this, and taking the easy way out.

The point wasn't that she is doing anything wrong. The point was that I'm pretty sure the reason insurance costs in Detroit are so high is not theft or collision coverage, it is liability claims, especially the unlimited medical liability that is part of the Michigan system. A big part of that cost is the legal overhead. The visible manifestation of that is those advertisements.

[Smirnoff]

Insurance a racket? Is a Casino a racket? Are Interest rate swaps a racket?
Is the hardware store that sells snow blowers with the deal that if it don't snow during the season you get the blower free a racket.

Insurance is a bet. Your betting that something happens to your car and the Insurance company is taking the other side of that bet. Their actuarial departments got the odds on these bets down to a science.

Exactly - decrease crime & insurance rates will decrease......[[they are not telling you that). The CoD being in the insurance business, being bankrupt & lowering auto rates, I am waiting to see this profitable business model !!!

[softailrider]

Credit scores are factored in, but as an individual risk. A person with a poor credit rating, a history of paying bills late, and letting their insurance lapse will be charged much higher premiums. The insurance companies do this across the board, so location should not matter. If you have bad credit, you pay more for your insurance, just like if you have bad credit, you pay higher interest rates on loans and credit cards.

Other industries that use credit score as a factor do not discriminate by the city you live in. If you have a certain credit score, the credit card companies will charge you the same interest rate, whether you live in Troy, Detroit, or Dallas. Just because Detroiters have lower credit scores on average doesn't mean anything when this is factored in on individual premiums.

If the insurance companies were not allowed to use credit as a factor in setting individual premiums, then this theory would be valid.

For example, if 20% of the people in Troy have bad credit, then they will be charged higher premiums than the other 80% with good credit. If 60% of Detroiters have bad credit, then they will be charged higher premiums than the other 40% with good credit.

IF the insurance companies were not allowed to use credit score as a factor, then everybody would have to pay more, and the entire pool of Detroiters would wind up with higher rates than the pool of people in Troy. However, that is not how it works.

The insurance companies are having it both ways with Detroiters. Not only to they charge us more for theft coverage [[which is fine because we have more theft), but they also charge us more for collision coverage, even though we have fewer collisions. Not only do they charge more for Detroiters with bad credit, they also charge more for Detroiters with good credit.

There simply is no valid reason for the insane PLPD and collision rates that the insurance companies charge in Detroit.

I'll give you some valid reasons: Insurance company's have a captive audience, they want to get inside your wallet for everything they can grab. Folks living in the city have no choice if they want to drive a car. When you also add in the fact that insurance company's are the biggest whores around the picture starts to get into focus pretty fast.

[Hermod]

If the insurance companies are charging rates in Detroit which are "unrealistically high" there should be an avenue for other insurance companies to move in and undercut them. The fact that other companies are not rushing in to compete would indicate that the insurance companies are realistically pricing the risk of doing business in Detroit.

[mwilbert]

If the insurance companies are charging rates in Detroit which are "unrealistically high" there should be an avenue for other insurance companies to move in and undercut them. The fact that other companies are not rushing in to compete would indicate that the insurance companies are realistically pricing the risk of doing business in Detroit.

You said this before. I will try to explain why I think this might not be true.

In a classical market, a seller wanting to enter the market knows what is on the market, and what the price is, and what it would cost to produce something similar. So they can decide whether it would be worth entering the market or not by comparing the price they think they could get with the cost they think they would incur. If you see shoes selling wholesale for $30, and you think you can make them for $20, you have reason to think you might want to enter that market.

But the only people who know the actual cost of providing auto insurance in Detroit are the people running the companies that are already writing some volume of auto insurance in Detroit, because Michigan insurance regulation doesn't require the insurance companies to justify their rates by providing that type of information. The main cost of the insurance isn't the price of writing and selling the policy, which is under the company's control, it is the cost of the claims against it, which isn't. A new entrant to this market doesn't know what that claim cost will be, because the only way to know is to look at existing claim data, which they don't have. As a result, they don't know whether it would make sense for them to enter the market or not. In a market with relatively few players, there is also the possibility of collusion--you don't enter my market, and I won't enter yours.

It may be that the policies are in fact priced fairly, but assuming that the possibility of competition is automatically bringing prices into line with costs in an opaque market like auto insurance is a pretty strong assumption. Most [[all?) other states feel the need to have some kind of rate regulation for auto insurance. No doubt they could also have relied on competition to keep prices low, but they didn't. At the same time, Michigan has the highest auto rates of any state. People often blame that on the Michigan implementation of no-fault, and they may be right, but it is also possible that our regulatory system is partly to blame as well.

[Hermod]

You said this before. I will try to explain why I think this might not be true.

In a classical market, a seller wanting to enter the market knows what is on the market, and what the price is, and what it would cost to produce something similar. So they can decide whether it would be worth entering the market or not by comparing the price they think they could get with the cost they think they would incur. If you see shoes selling wholesale for $30, and you think you can make them for $20, you have reason to think you might want to enter that market.

But the only people who know the actual cost of providing auto insurance in Detroit are the people running the companies that are already writing some volume of auto insurance in Detroit, because Michigan insurance regulation doesn't require the insurance companies to justify their rates by providing that type of information. The main cost of the insurance isn't the price of writing and selling the policy, which is under the company's control, it is the cost of the claims against it, which isn't. A new entrant to this market doesn't know what that claim cost will be, because the only way to know is to look at existing claim data, which they don't have. As a result, they don't know whether it would make sense for them to enter the market or not. In a market with relatively few players, there is also the possibility of collusion--you don't enter my market, and I won't enter yours.

It may be that the policies are in fact priced fairly, but assuming that the possibility of competition is automatically bringing prices into line with costs in an opaque market like auto insurance is a pretty strong assumption. Most [[all?) other states feel the need to have some kind of rate regulation for auto insurance. No doubt they could also have relied on competition to keep prices low, but they didn't. At the same time, Michigan has the highest auto rates of any state. People often blame that on the Michigan implementation of no-fault, and they may be right, but it is also possible that our regulatory system is partly to blame as well.

By that rationale, no new insurance company will seek to do business in the entire state of Michigan.

[softailrider]

By that rationale, no new insurance company will seek to do business in the entire state of Michigan.

Nope, that isn't true. There are new companies entering the marketplace quite often in Michigan. Premiums are very high around here. Don't lose sight of one very important fact, just because they issue a policy and collect the premium doesn't mean they have to pay a claim.

[Islandman]

Yeah, my insurance from $60 a month to over $300 a month moving back to Detroit from NC for a 20 year old car. Add to that living in the Detroit quality of life.

Racket=Yes.

[mwilbert]

By that rationale, no new insurance company will seek to do business in the entire state of Michigan.

That isn't what I think, rather I think that there are fewer, higher-priced new entrants than there would be in a more transparent market. This is restricting competition, not eliminating it. Nor was I claiming that this was actually true, just that it was a reason not to assume competition would be effective. If in fact there are lots of new entrants to the Detroit insurance market [[and I mean ones willing to sell policies at something resembling the current prices or lower, not fake prices to meet the state requirement of offering insurance everywhere) then that would be evidence that the market is more competitive than my argument would suggest. That could be true, but I don't have the information to determine it, and that information would probably be hard to get.

[MizMotown]

The last two insurance companies I was with [[and who were extremely reasonable) stopped doing car insurance in Michigan.

Unitrin Direct and American Fellowship.

[Dan Wesson]

American Fellowship?? Unitrin Direct?? Where did you find them at??

http://www.freep.com/article/20130613/BUSINESS06/306130112/American-Fellowship-Mutual-Insurance-liquidate

[3d123]

Car hit U?

Kreiner v Fischer, 471 Mich 109 [[2004)
In this case, the Court departed from almost three decades of no-fault tort jurisprudence by redefining the threshold element of “serious impairment of body function” in such a way as to prohibit totally innocent victims with very serious and long term injuries from recovering noneconomic damages from the negligent and drunk drivers who caused those injuries. As a consequence of this decision, the Michigan no-fault system has lost that critically important “balance” which it had maintained for over 30 years and which is essential to its continued viability.
Liability and medical payouts have been going through the roof.

[MizMotown]

I used to do business with them. Unitrin changed name to Kemper Direct. They stopped doing business in Michigan because they couldn't give good rates and not lose money. Same with American Fellowship. American Fellowship was just over $100.00 per month for full coverage. They wanted to raise it to $150.00 which is still okay but ended up going out of business.

I'm an unlucky owner of a Colbalt and just called for rates for a 2011 Kia I was thinking of purchasing. I live in Westland. My companies quote is $199.00. Cost of a car payment. Ridiculous.

American Fellowship?? Unitrin Direct?? Where did you find them at??

http://www.freep.com/article/20130613/BUSINESS06/306130112/American-Fellowship-Mutual-Insurance-liquidate

[Zacha341]

Yes! I don't know how anyone with a luxury car or SUV is doing it anymore! I know someone who pays $400 a month for a luxury sedan.

I have a used car, paying no fault and it is still a fortune. I cannot imaging a car note on top of all that. Makes me want to leave the city.

Yeah, my insurance from $60 a month to over $300 a month moving back to Detroit from NC for a 20 year old car. Add to that living in the Detroit quality of life.

Racket=Yes.

[MizMotown]

$

325

PER MONTH

Down Payment:
$324
6 Month Total:
$1,946


Allstate Quote... lmao. $125.00 more then everyone else.

Yes! I don't know how anyone with a luxury car or SUV is doing it anymore! I know someone who pays $400 a month for a luxury sedan.

I have a used car, paying no fault and it is still a fortune. I cannot imaging a car note on top of all that. Makes me want to leave the city.