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D-Insurance’s Fatal Flaw: No Guaranteed Cost Savings

Over the past week, followers of this blog have read many of the problems with Detroit Mayor Mike Duggan’s proposed D-Insurance. But the biggest problem of all is that the bill does nothing to fulfill his promise to the people of Detroit.

Last year, Mayor Mike Duggan asked his city council to approve an investigation into a city-sponsored insurance option that would cut costs for Detroit residents. This “D-Insurance” proposal was a priority in the mayor’s campaign. He saw the high cost of auto insurance as a key reason for why residents were leaving the city.

But after a $75,000 study performed by Pinnacle Actuarial Resources, the resulting D-Insurance proposal was far from the game-changing vision Duggan had promised. The proposal would cut costs for insurance companies by severely limiting residents’ benefits. It would also make it harder for doctors to collect their fees and could potentially shift unpaid medical expenses onto the backs of at-fault drivers across the state. What it won’t do is actually save Detroit residents any money.

That’s because the bill contains no guarantees when it comes to rates. Just like in the GOP-led No Fault Reform Bills that sped through the Senate in April and now sit with the Michigan House of Representatives, D-Insurance fails to put limits on the insurance companies’ profits. It is completely silent as to the cost of insurance to Detroit residents. Instead it relies on the market to lower rates based on competition between insurance companies. Senator Coleman Young, of Detroit, doesn’t think that plan will work.

“That’s a hell of a lot of trust to put in insurance companies who haven’t been particularly forthcoming. . . . I’m not saying that this isn’t well intentioned because I think it is. But Duggan is coming at this in good faith with the insurance industry, which is operating in any way but that.”

Even Detroit’s own corporate counsel, Butch Hollowell, who presumably was involved in drafting the bill, doesn’t trust the insurance companies to treat Detroiters fairly.

“We don’t think there’s honest competition. We think it’s kind of like shooting fish in a barrel. We have a mandatory system and people don’t have options.”

D-Insurance is being touted as a proposal to lower the cost of auto insurance in Detroit and other cities where more than half the residents drive uninsured. But without strong language guaranteeing reduced premiums, the bill has become a money-grab for the insurance industry.

D-Insurance limits Detroiters’ benefits to levels that won’t cover any serious accident and cuts them off from the excellent care provided to all other Michigan drivers through the Michigan Catastrophic Claims Association, all in the name of lowering rates. But until a bill is proposed that actually guarantees those cut costs, the gamble simply won’t be worth the risk.

David Christensen is an auto accident attorney at Christensen Law in Southfield, Michigan. If you have been seriously injured in a car crash, contact Christensen Law today for a free consultation.