Critics: Expensive Insurance Costing Detroit


Outspoken critics of high car insurance premiums in the state of Michigan went on the offensive recently. Consumer advocates say that the expensive insurance coverage, particularly in the city of Detroit are forcing more and more people to resort to insurance fraud or drive without any form of insurance at all.

Critics: Expensive Insurance Costing DetroitSome analysts point out that Detroit, dubbed as one of the poorest big cities in the U.S., has the highest insurance rates across the nation. In fact, they argue that annual insurance premiums of $4,000 or more are common in the city. As a result, they say, more than half of Detroit’s motorists are not insured. The relatively expensive insurance average is also forcing many car owners to resort to insurance fraud just to collect insurance money.

Critics also allege that a car insurance provision, called territorial ratings, is to blame for the expensive insurance in Detroit. Using the state-approved practice, insurance providers would determine rates based on where policyholders live. Making use of the city’s ZIP codes, insurers would charge the same rates for car owners living in the pre-set areas, simply because these areas or neighborhoods are considered riskier.

Experts say that because the practice is allowed by state insurance authorities, insurers basically get away with justifying the costly insurance premiums. As a result, insurers would often disregard their policyholders’ driving records, and other factors that may lead to lower rates. Detractors of the policy are calling it unfair, unjust, and a costly mistake. If left unchanged, the practice can drive up the number of uninsured motorists and even result in more insurance fraud cases.

Politicians and insurance officials have so far stayed clear of the issue, and have instead focused on prohibiting insurers from making use of their policyholders’ credit records. Analysts say that while this may be a step in the right direction, most policyholders in the Detroit area would not benefit from it. They point out that most car owners in the city have good debt-to-credit ratios, which means that they were never in danger at all of getting higher rates because of credit problems.

Some specialists also say that there has been a startling increase in the number of motorists searching for fake insurance certificates. Priced between $50 and $60, these bogus documents can sometimes pass as the real deal but costs significantly less.

Across the state, the Insurance Research Council estimates that some 17 percent of the drivers on the road are not insured. This is a far cry from the 11 percent figure way back in 1989.