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Mayor Mike Duggan believes the cost of car insurance in Detroit, as compared to the surrounding suburbs, might be driving people away from the city. Now, the Detroit City Council has approved a feasibility study to create a city-sponsored insurance company to help its residents.
On November 18, 2014 , the Detroit City Council approved a study by Pinnacle Actuarial Resources to determine whether a city-sponsored insurance company will be financially feasible. The study will cost the city $75,000 and will give the Mayor and the Council the information it needs to decide whether to move forward with the project.
Duggan’s “D-Insurance” was a priority in his campaign. He related that his own insurance rates jumped $3,000 per year when he moved to the city. He said:
“The high cost of auto insurance has been one of the key reasons residents have been leaving the city for years. City Council’s unanimous vote today shows how committed we all are to offering Detroiters a more affordable alternative.”
Others have raised concerns too, questioning whether insurance companies were “redlining” Detroit car insurance policies.
“Redlining” is a discriminatory policy which denies or increases the cost of insurance to residents in “risky” ZIP codes. In the 1960s when this was prevalent, insurers used to outline those risky areas in red on their maps to identify where policies should not be sold, inspiring the name. While the maps have disappeared, “arbitrary underwriting guidelines” continued. These guidelines increase the cost of policies in primarily minority neighborhoods based on perceived risk.
Insurance companies promise that redlining is a thing of the past. They say the risks in low-income neighborhoods, including crime and claim rates, justify the increased cost of policies in those neighborhoods.
But if Detroit authorizes the creation of a city-sponsored insurance company, it could force the other auto insurers to price their policies more competitively, which Duggan believes could keep more Detroiters living inside the city limits and encourage city growth.
David Christensen is a no-fault accident attorney at Christensen Law in Southfield, Michigan. He and his team focus on getting the residents of Metro Detroit the recovery they need after they have been in an auto accident. If you or someone you know has suffered from a serious car crash, contact Christensen Law today for a free consultation.