Can the Duggan Administration Bring Down High City Auto Insurance Rates?: Duggan's First Six Months

June 25, 2014

By J. Carlisle Larsen

“Driving without [insurance] is such a big risk, so I just don’t drive..."

—Shaina Smith

It’s no surprise that a city like Detroit—known internationally as the Motor City and home to the Big Three automakers—would have a long lasting love affair with cars. For many, getting one was a rite of passage. But for all of the commercials featuring Eminem and the American open road, owning a car for many Detroiters is an unattainable goal. Mayor Mike Duggan acknowledged one of the single biggest hurdles city residents face when it comes to transportation during his State of the City address in January.

During his speech, Mayor Duggan asked the crowd, “And what’s the single biggest barrier to driving a car as every Detroiter knows?" And the audience responded in unison, "Auto insurance!"

“When I moved from the suburbs to Detroit two years ago, our car insurance went from 3-thousand dollars to 6-thousand dollars. We moved less than 15 miles. It is not justified," Duggan said continuing with the State of the City address.

Duggan’s story isn’t uncommon. Detroit has long had a reputation of having exceedingly—almost prohibitively—high auto insurance rates. So one of the campaign promises Duggan made was to reign in auto insurance costs in the city.

“The Detroit City Charter provides that the city of Detroit can start its own insurance company. We have to do a joint feasibility study—between the city council and myself—and so we’re putting together a team to move on this quickly. We’re going to start our own insurance company that we call “D-Insurance”, ” Mayor Duggan announced.

Detroit consistently ranks as having the highest auto insurance rates in the country, beating out cities such as Pittsburgh and New Orleans. The goal of “D-Insurance”—set out in the State of the City address is to bring down the cost of auto insurance by potentially offering a municipally run insurance policy. But cheaper insurance may not come soon enough for some city residents.

At the corner of Cass Avenue and West Grand Boulevard, people are mulling about waiting to get any number of official state documents at the New Center branch of the Secretary of State. Detroit Resident Shaina Smith is waiting for her turn. She says she has her license, but doesn’t drive in the city because she can’t afford the insurance.

“Driving without it is such a big risk, so I just don’t drive," she says.

Smith is a young, working Detroit resident. She relies on friends and family for rides to her job, and when those rides fall through, she has to take a cab. Smith says she can’t get a better job to pay for a car or insurance because all of the better paying jobs require her to drive.

Smith says, “All the great jobs are out far and if you don’t have a car, you’re pretty much screwed. Because the bus—they don’t consider the bus to be reliable transportation anymore."

She says if a plan like “D-Insurance” takes off, she’d take advantage of the lower rates to get a car and try to find a better paying job further from her home. But for City Councilmember Raquel Casteñeda-Lopez—who is working with the Mayor’s office to look into the feasibility of “D-Insurance”—lower auto-insurance is only one facet of a larger transportation problem facing the city.

Casteñeda-Lopez says, “The reality of the situation is not everyone owns a vehicle in the city of Detroit. Actually, quite a few people don’t own a vehicle and they rely on public transit. And so I think a more cost effective approach that’s actually better for the city in the long run is to really look at how do we create a comprehensive network of walkable paths and bike paths that are very pedestrian friendly and then develop a public transit system that complements those networks.”

She says the high insurance rates present a quality of life issue for city residents, many of whom pay hundreds of dollars per month just to drive. And these costs have led some Detroit residents to drive uninsured, or claim another city as their place of residence to pay lower rates. Caleb Buhs is a spokesperson for the Michigan Department of Insurance and Financial Services. He says the state is familiar with insurance fraud. He says it’s widespread throughout the state, not just in Detroit. But Buhs says there’s a personal cost to insurance fraud. While some motorists may save some money, they’re giving up some of their democratic rights.

Buhs says, “They’re not getting—you know—a voter’s registration card in the city of Detroit. So then therefore it compounds itself and they’re not able to elect their local officials, and clearly it’s, it’s fraudulent because they’re not representing where they truly live. So, we understand why people do it, and that’s why we’re trying to combat the reason for that taking place and get to the heart of it and get at the things why premiums to be higher in the state of Michigan than they are anywhere else in the country.”

He says there have been ongoing moves in the legislature to reform the state’s no-fault auto-insurance laws, which drives up the cost of insurance throughout the state, but especially in cities like Detroit and Flint. The residents I spoke with say they would eagerly participate in “D-Insurance”, if it would alleviate some of the financial burden paying for auto-insurance creates. Councilmember Casteñeda-Lopez says the administration hopes to have the joint feasibility study wrapped up by this fall. Until then, Detroit residents will continue to pay some of the highest auto-insurance premiums in the country.

—J. Carlisle Larsen, WDET News

Mayor Mike Duggan Photo Courtesy of Kenny Karpov

Councilmember Raquel Casteñeda-Lopez Photo Courtesy of Raquel For City Council.

Find more coverage of Detroit's bankruptcy and its impact on people and neighborhoods on WDET's Next Chapter Detroit blog.

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