The Detroit-Warren-Ann Arbor metropolitan area has higher auto insurance rates than any other top 25 metro area in the United States. It wasn’t even close, according to the financial information provider (Bankrate Insurance) quoted in USA Today. With average rates more than 165 percent higher than the national average, Detroit makes the second-place New York-New Jersey-suburban Connecticut metro area’s rates, which were 36 percent higher than average, look like a real bargain.

Detroit can’t catch a break these days. The largest bankrupt city in America, which already has the highest income and property taxes in the state, also had the most cars and basements underwater following heavy rains a few weeks ago. Mayor Jim Fouts in nearby Warren publicly called out insurance companies to say they weren’t paying claims. But most of the people who lost cars in the flooding apparently weren’t insured for flood or water backup.

However much they like it when the Tigers or the Red Wings sit atop the standings, the title of highest auto insurance rates in America is not a crown folks in lower Michigan really wanted. They earned it fairly, though, building through steady effort over the years. The state government has a lot to do with winning this distinction. Decades ago, the Legislature passed an “essential insurance” act which allowed auto insurers to offer discounts to their government-approved rates, but not to increase them, which is not the kind of flexibility that allows insurers to develop their competitive instincts.

When no-fault auto insurance became a fad 40 years ago, Michigan went all in. The theory was that more benefits could be paid to injured drivers and victims by their own insurance companies if the money spent litigating over “pain and suffering” for less-severe personal injuries was eliminated. The idea that you didn’t have to go to court to prove somebody else caused your injury was very appealing, and a number of large states changed their laws to try one version or another of no-fault. But Michigan was one of only three states that decided the proper balance for saving some money on non-economic damages was unlimited medical benefits for auto accidents – unlimited both as to amount and to the time over which the benefits could be paid.

After extraordinarily high insurance rates led to public outcry, the two other unlimited medical benefit states, Pennsylvania and New Jersey, eventually put limits on their expensive coverage decades ago. Pennsylvania also instituted a medical fee schedule, and Michigan needs to do the same.

“The average claim for our medical coverage is increasing at a significant rate,” advises Lori Conarton, communications director for the Insurance Institute of Michigan.

Detroit’s high rates stem from many causes, but two of the biggest impacts are the system itself, and abuse of the system. Paying doctor, hospital and other provider rates which are routinely four or more times as much as for a patient in the next bed who is covered by Blue Cross or workers’ compensation is clearly an abuse. The amount paid for home attendant care by auto insurance is outrageous compared to other insurance coverage. This all needs to be fixed.

Featured Publications