Last month, Detroit Mayor Mike Duggan applauded the Detroit City Council for approving in an 8-0 vote a key contract that officials say will move the city one step closer to possibly creating a city-sponsored auto insurance company. The legislative body approved the deal to award $75,000 to Pinnacle Actuarial Resources to study “the feasibility of creating a city-sponsored insurance company.”
Duggan’s office said the study will provide the administration with information in determining the next steps necessary to bring down auto insurance rates for Detroiters. The high cost of insurance was a top issue in the 2013 mayoral campaign during which Duggan vowed to create a D-Insurance to address what some residents call “ridiculous” high insurance rates in the city.
Adopting measures to bring down rates in Detroit will bring a huge sigh of relief for residents even though such action will be met with stiff challenges and opposition should Duggan aggressively push for it in 2015.
If the mayor decides to make auto insurance one of his biggest priorities next year, he will be waging a battle with the Insurance Institute of Michigan, the most influential public affairs voice of insurance companies in the state. The oranization has long maintained that there is no such thing as insurance redlining in Detroit.
In 2014, the group took issue with a front page article in the Michigan Chronicle, “Mr. Mayor, Stand Your Ground on Redlining,” regarding Detroit Mayor Mike Duggan’s call for insurance reform in his first State of the City Address.
“It is not justified. It doesn’t matter if you have a perfect driving record and never been in an accident. Most Detroiters are paying more a month for car insurance than the car payment itself,” Duggan said bluntly in his speech.
In a protest letter sent to the Chronicle, Pete Kuhnmuench, executive director of the Insurance Institute of Michigan, said, “When ‘redlining’ is used to mean discrimination based on race, this is illegal and is condemned by the insurance industry. However, many times the term ‘redlining’ is used incorrectly to describe the differences in price and availability of insurance based on real risk,” in the recent Chronicle article.
Contrary to what many believe, Kuhnmuench said, “The Insurance Institute of Michigan has worked for years to reform the state’s one-size-fits-all no-fault auto insurance law to lower the price of the product for everyone in the state. Detroiters would benefit from lower auto insurance premiums. That is a fact.”
Longtime Detroit political consultant Adolph Mongo said he is skeptical about any talk or action at city hall regarding insurance reform in Detroit, and he doesn’t think the mayor would do anything significant on the issue next year.
“I’ve been hearing about the need to deal with redlining since the days of Coleman Young and nothing has come of it,” Mongo said. “Let’s talk about it. You have a strong insurance lobby in Lansing and Washington DC. Nothing will ever come out of it.”
Mongo said to deal with insurance redlining, Detroit’s political leaders know what to do and that is more than just commissioning a study.
“We know what we need to do. How many studies do we need? We’ve been studying this thing (insurance redlining) for the last 50 years,” Mongo said. “I wonder how many people moving downtown have switched their insurance or are still maintaining a surbuban address while living in the city.”
The political observer said if Detroit were to take on the insurance lobby it will result in what he calls “a bloody fight.”
Detroit being a largely Democratic constituency, and with the recent election where Democrats lost virtually every seat (with the exception of the education boards), Mongo said there is no incentive in Lansing for a Republican controlled legislature to work with the city to bring down insurance rates.
“This issue is going nowhere because Democrats control nothing in Lansing. Let’s get real. It is a waste of money,” Mongo said.
Greg Roberts, who headed former Michigan governor Jennifer Granholm’s Office of Faith Based and Neighborhood Partnerships, recalled efforts to address the issue under a Democratic administration.
Roberts was tasked with identifying clergy in Detroit, Flint and Saginaw (as a start, that would be replicated in other cities) to recruit congregants and residents in their church neighborhoods to form a pool of potential insurance customers.
“The former governor believed, as did many who advised her on this issue, that we needed to use leverage with targeted insurance companies,” he said.
Kuhnmuench, who wrote a letter to Duggan saying creating a D-Insurance would be a difficult task, said his organization welcomes the idea into the marketplace.
“However, don’t get overly optimistic, adding a city-run insurance company in Detroit may increase competition but does nothing to address the real cost factors driving up premiums for all Michigan residents,” he said.
He added that “the real way to lower auto insurance premiums in Michigan is to address inflated costs of medical treatment, fraud and a system which puts limits on benefits.”
But in social media, especially Facebook, not everyone is buying the argument of the Insurance Institute of Michigan.
Detroiter Rachel Saltmarshall said she will support Duggan on the D-Insurance proposal.
“Yes, I will stand by him,” she said. “My homeowners insurance went from $3,200 in 2010 to now $5,085 with no claims on my policy. All they (insurance company) could tell me was that the rates went up all over Michigan. However, I don’t hear the suburbs complaining.”
House Republicans this year renewed their push for no-fault insurance reform that was challenged by Democrats like Saginaw State Rep. Erwin Oakes. It is unclear if the issue will come up next year.
“In Michigan, if you have a catastrophic accident, your medical expenses, wage loss, replacement services and damages caused to other people’s property are covered. Benefits are paid out of the Michigan Catastrophic Claims Association (MCCA), a private nonprofit association every Michigan driver pays into,” Oakes said.
“As of 2013-2014, insurance companies assess $188 per vehicle (including tax) to cover catastrophic claims. Under no-fault, the insurer pays the claim and is reimbursed by the MCCA for medical costs exceeding $500,000.”
She said efforts to cap and restrict coverage are very similar to what the people of Michigan decisively rejected by statewide vote in 1992 and 1994. Oakes noted that in 2011 and 2013 Gov. Rick Snyder’s proposed no-fault reforms failed to garner the necessary legislative support.
Oakes, who once was assistant attorney general in the Office of the Michigan Attorney General, said the average uncapped lifetime Personal Injury Protection (PIP) benefit costs Michigan drivers $544.20 per year, only $60 above the national average of $484.03.
“Michigan’s safeguards, protections and medical benefits are far superior to every other state for a nominal cost of $60 annually, evidence that we’re getting a tremendous return on our investment,” Oakes said.
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