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Editorial: Whipping Detroit’s auto insurance ‘tax’

Mike Duggan didn’t hesitate when asked what was the biggest surprise when he moved into Detroit a year ago. “The doubling of my car insurance,” replied the mayoral candidate. He now pays $6,000 a year on three cars instead of $3,000 when he lived in Livonia.

Welcome to Detroit, and to a grievance that has contributed mightily to the city’s depopulation.

Detroiters pay among the highest auto insurance premiums in the nation. The eye-popping rates amount to an added tax levied for living in a city where auto theft rages out of control.

It is one of the challenges facing whoever leads Detroit next. But unlike many of Detroit’s seemingly intractable long-term problems, this is an obstacle with short-term solutions.

An Insure.com study pegs Detroit’s average premium at $5,900 — more than double the Michigan average of $2,541, which is also America’s highest. Philadelphia, runner-up nationally among cities, is still $2,000 cheaper than Detroit.

As a result, more than half of all Detroit drivers are uninsured. In the state as a whole, 20 percent drive without insurance.

The reasons for Detroit’s high costs are its auto theft rate — 60 percent of Michigan’s car crimes occur in Detroit, ranking it 11th nationally — low credit scores and heavy traffic. But Detroiters also pay more because of decisions made in Lansing.

Bringing down rates requires reforming Michigan’s no-fault insurance law and improving its crime-fighting methods.

Insurance reform is an area where Lansing could not only help Detroit but the state as whole. Michigan is the only state that provides mandated, unlimited medical coverage as part of an auto insurance policy. The next most generous state is New York with a ceiling of $50,000 on insured medical payouts.

The result of that unlimited coverage guarantee are Michigan insurance rates 25 percent higher than our Midwest neighbors.

The Michigan Catastrophic Claims Association now covers the medical bills of nearly 13,000 accident victims, according to an Insurance Information Institute spokesperson. Placing a cap on medical payouts could reduce premiums by 25 to 45 percent, according to one study.

Reform legislation is pending in Lansing. Critics say altering the no-fault law would revive liability lawsuits and simply shift costs, not reduce them.

But the cost of insurance in Michigan is the primary reason so many motorists drive without insurance. That has to be fixed, and some lawmakers are working on it.

A recently introduced Senate bill, co-sponsored by Sen. Virgil Smith, D-Detroit, and Sen. Joe Hune, R-Hamburg Township, would limit auto injury coverage to $50,000 — like New York.

On the theft front, Detroiters should expect better performance from their police department. Both the coming emergency manager and the next mayor must make improving public safety the top priority.

And it can be done. Redmond, Wash., was the state’s auto theft capital, accounting for more than 40 percent of thefts statewide. In 2006, police adopted data-driven policies targeting the hardest-hit areas and most prolific theft rings.

“The impact of the Car Theft Initiative has been nothing short of remarkable,” reports the International Association of Chiefs of Police. “Car theft in King County has been in a steep decline since the beginning of 2007. Redmond experienced a … 50 percent decrease from 2007 to 2008. In comparison, auto thefts continued to increase in the state’s other most populous counties . . . whereas King County had over 4,000 fewer thefts.”

That’s the kind of turnaround Detroit needs. To recover, the city must hang on to its residents. No matter what happens at City Hall, those residents won’t stay if they have to keep paying such high penalties for living in the city.

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