As executive director for
, a voter-education nonprofit in Michigan, Vincent Keenan got well
acquainted with an odd phenomenon in his hometown of Detroit: A
troubling number of residents aren't registered to vote in the
The reason has nothing to do with citizen apathy.
Instead they are registered to vote in the suburbs, where car
insurance is cheaper. They use an address outside the city to renew
their driver's licenses and register, then report that address to
insurers. (See "
Where the insurance cheaters live
"It's an amazingly pervasive piece of information about living
in the city of Detroit that people pick up on incredibly quickly,"
Keenan says. "It is effectively a poll tax."
The impact on voter registration is just one of the consequences
of the city's sky-high car insurance rates. Another: Lots of folks
don't buy insurance.
Michigan has one of the highest uninsured driver rates, with an
estimated 19 percent of motorists going without insurance,
according to the latest Insurance Research Council study. But
estimates for the uninsured rate in Detroit are even higher.
for the Coalition Protecting Auto No-Fault, Melvin Butch Hollowell,
former Michigan insurance consumer advocate, put the number at 60
Good driver? $4,000 a year
While Michigan's car insurance rates are already high compared
with other states, Detroit's are in another league.
Keenan, who's now running for City Council, knows firsthand.
About 10 years ago he moved just one block from outside the city
limits to inside Detroit. His car insurance premiums tripled.
In the most expensive areas of Detroit, according to an analysis
of rates from six major car insurance carriers, the average rate
for a 40-year-old driver with full coverage on a 2012 Honda Accord
is about $4,500 a year. Move a ZIP code or two outside the city and
those rates drop by half or more.
And that's for a driver with a clean record. Poor credit or
violations would drive that number up considerably. Only some areas
of Brooklyn, N.Y., can rival Detroit for whopping car insurance
bills. (See "
The most and least expensive cities for car
No wonder some Detroiters fall for fake insurance scams or make
the decision to go without.
But getting caught means a fine of up to $500 -- and also much
higher rates when they finally do buy insurance. Failure to pay
means a suspended license, and in turn higher rates again because
of the suspension.
Why so high?
Michigan is the only state that guarantees unlimited, lifetime
personal injury protection (PIP) benefits for someone injured in a
Car owners have to buy personal injury protection as part of the
policy. The benefits pay the medical bills of the policyholder and
household members, and passengers who don't have PIP coverage. The
injured person's insurer pays out the first $500,000 for medical
treatment, and a state-created nonprofit called the Michigan
Catastrophic Claims Association reimburses for any amount above the
threshold. Premiums include an annual assessment from the
association, which is $175 per vehicle this year.
The average PIP claim in Michigan is $45,000, according to the
Insurance Institute of Michigan, much higher than any of the other
11 no-fault states.
Detroit's rates are higher still because the risks of theft and
accidents are higher there, just as they are in other urban areas.
The claims rate for personal injury and costs for treatment also
tend to be higher in urban areas, says Peter Kuhnmuench, executive
director of the Insurance Institute of Michigan. Hospitals have to
charge more in cities like Detroit, where there are large numbers
of people without health insurance, to make up for the costs of
treating so many people who can't pay.
Tough economic conditions make things worse. Insurers in
Michigan are allowed to consider credit information as a factor in
setting premiums, although they're not allowed to consider some
details, such as foreclosure.
Poorest pay the most
Detroit is one of the poorest cities in the country -- median
household income in 2011 was $25,193, about half the national
average -- and many residents "drive dirty" because they simply
can't afford car insurance.
"It's a matter of putting food on the table," says attorney
Steven Gursten, head of Michigan Auto Law.
Drivers who are uninsured and get injured in car accidents are
not allowed to seek any compensation from at-fault drivers, even if
the at-fault drivers were drunk or texting while driving, Gursten
says. He says he gets calls weekly about innocent people who
suffered catastrophic injuries but were uninsured. (See "Uninsured?
No gain for your pain.")
"I can't tell you how many people just lost their husband or
wife in an accident, and there's nothing I can do for them," he
says. "I think it's a civil justice and a civil rights issue."
He blames the problem on insurers' "excessive profit margins"
and wants Michigan to pass a law that would empower the state
insurance commissioner to consider profit margins in regulating car
The industry, not surprisingly, disagrees. Kuhnmuench cites data
from the Insurance Information Institute that shows Michigan at
dead last among states for insurers' 10-year average return on net
worth on personal auto insurance from 2001 to 2010.
To bring down rates, the Insurance Institute of Michigan wants
to give consumers the option to buy lower limits of PIP, institute
a medical fee schedule to limit how much health care providers can
charge for treatment and tighten up restrictions on lawsuits,
Keenan says the connection between voter registration and car
insurance should somehow be severed. People shouldn't have to think
about their car insurance when they register to vote, he says.
To make car insurance more affordable, some have suggested a
public insurance system in Detroit, where the strapped city
government is now under emergency management by the state.
"Things are dire enough that the potential is there to discuss
things you wouldn't normally discuss, like a public option on car
insurance," Keenan says. "You'd have more fertile ground for that
than ever before."