Insurance industry reps: Detroit auto premiums high because of crime, state …
DETROIT, MI -- Car insurance in Detroit was the highest in the nation in 2011, according to a study by Runzheimer International.
Those in the industry say that premiums are high because of the city's high crime rate, as well as a situation that is unique to the Pleasant Peninsula.
The average annual auto premium in Detroit last year was $5,941 according to the Runzheimer study, which based its findings on the cost of insuring a 2012 Chevrolet Malibu with average liability limits, collision and comprehensive with $500 deductibles, and any mandatory insurance coverage.
Rounding out the top three cities were Philadelphia, with an annual premium of $4,076, and New Orleans, with a $3,599 yearly premium.
As with all insurance, there are a number of factors that drive rates. But for car insurance statewide, insurance industry representatives say premiums in Michigan are driven by a lack of a limit on personal injury protection. Detroit then gets boosted to the top spot because of the side effects that come with driving in an urban area with a high crime rate.
Michigan is the only state in the union that provides unlimited medical coverage as part of its auto premiums. The next closest state caps this limit at $50,000.
"If you're in an auto accident here there's no limit on the amount of money it might take to rehabilitate you," said Scott Hummel, vice president of government affairs for the Michigan Association of Insurance Agents. "We are the only state that has unlimited medical benefits."
Hummel said that to keep rates lower, the industry has in the past sought legislation that would reform the state's unlimited medical coverage. For example, he said the industry sought putting a cap on how much insurance carriers would pay in post-crash medical fees.
"So for instance, given that the closest other state is $50,000, we were asking at this point for a limit of $1 million, and we can't even get that through," he said.
The push back has come from rehabilitation services and hospitals, he said.
In March, the Michigan Catastrophic Claims Association, a non-profit that covers car accident medical liabilities above $500,000, raised its premium for member companies by 21 percent to $175 per vehicle, effective at the beginning of this month, through June 30, 2013.
All insurance companies writing auto coverage in the state are required to be members of MCCA, and pay the premiums as a form of reinsurance.
Last year the MCA paid out $927 million for claims resulting in injuries.
"Michigan's unique no-fault auto insurance law provides unlimited lifetime coverage for medical expenses resulting from auto accidents and is the only state in the nation that mandates these unlimited benefits," the MCCA said in a March release.
While the lack of a medical coverage limit may keep premiums up, the state still is not the highest in the country for auto premiums, according to Peter Kuhnmuench, executive director of the Insurance Institute of Michigan.
"It's still a pretty good system, if you compare to other states, we're 11th in the country," he said.
But where does that leave Detroit?
While Kuhnmuench doesn't deny that premiums are high in Detroit, he said that some of the rating systems may not portray an accurate picture. Several companies start their base premiums high, and then offer discounts to drivers based on their driving records and credit history.
"So it's deceiving," he said. "But is (car insurance) more expensive in urban areas? Absolutely. You see that in every state. I'm more likely to get in an accident running down the (John C.) Lodge in the morning than I am out here in small-town Lansing."
Obviously, the Motor City's high crime rate does not help.
Wayne County has 20 percent of the state's population, but is responsible for about 60 percent of its car thefts, according to Kuhnmuench.
According to the National Insurance Crime Bureau, the Detroit-Warren-Livonia area ranked 11th nationally in auto thefts last year, with 19,641 cars reported stolen. The next closest area in Michigan was Flint, which ranked 63rd nationwide with 1,283 cars stolen in 2011.
Julie Quinones, owner of independent agency Detroit Insurance and Services, estimates that auto premiums in Detroit over the last two or three years have gone up by about $200 per year. She said a typical six-month policy in Detroit now averages about $400 to $500.
"In Detroit you have your high crime, high theft, vandalism," she said. "That kind of stuff, which drives up rates here."