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Nancy Kaffer: No relief in sight for sky-high car insurance rates

In Detroit’s 48227 ZIP code, annual car insurance rates quoted by six national carriers ranged from $3,059 to $8,403 annually.

At the top of the range, that’s about $666 a month to insure a vehicle, a price tag unaffordable by many in Detroit, where half of residents made less than $25,193 in 2011.

Michigan has some of the highest insurance rates in the nation, and Detroit has the highest insurance rates in the state. In a survey conducted by CarInsurance.com, cited in a report on Detroit revenue by the Citizens Research Council, major carriers quote rates in the city’s most expensive insurance ZIP codes ranging from $2,108 to that annual $8,403.

It’s true that 67% of car thefts statewide happen in Wayne County, according to Insurance Institute of Michigan statistics. It’s also not clear how many Detroit drivers are uninsured; the group reports that about 20% of drivers statewide aren’t insured, and estimates that up to 50% of drivers in the state’s urban areas drive without insurance, all of which drive insurance costs up.

But, come on — $666 a month for car insurance is insane. In three years, you’d have paid more in insurance than the total cost of my car.

If you’re a Detroit resident, there aren’t a lot of options. You can eat the cost, on top of high property taxes, an income tax, a utility users tax, a solid waste collection fee, all of which increase the cost of living or doing business in Detroit.

You can drive uninsured, which ultimately adds to the problem. You can shop for a lower rate, but that can also be risky; metro Detroit has a lot of storefronts selling bogus auto insurance as legitimate coverage. Or you can pursue another option: Find a relative in the suburbs who’ll let you claim their address as your residence, netting you a lower insurance rate — but that also means you’re not registered to vote in Detroit.

A report last month in the Center for Michigan’s Bridge Magazine dove into this wrinkle of the auto insurance mess: Low registration rates among new residents of Midtown and downtown means that the social and creative entrepreneurial renaissance we hear so much about may not have a lot of impact at the ballot box.

But when it comes to lowering auto insurance rates, there’s little to be done, whether you’re a new Detroiter or a lifelong resident.

The state can’t veto rates for cost, says Teri Morante, senior deputy director of the Michigan Department of Insurance and Financial Services. Insurance carriers file a rate increase, and it goes into effect. It’s difficult for the state to challenge an increase on the basis of cost, she said, because the market is competitive.

Morante says reform of the state’s no-fault insurance system could help reduce the cost of obtaining car insurance in the city, and that’s one of Gov. Rick Snyder’s priorities. But it’s incredibly controversial.

Supporters of the reform, which would actually change the personal injury protection portion of Michigan’s no-fault coverage, say the current system — which pays for lifetime care of those catastrophically injured in auto accidents, along with a percentage of salary for three years — isn’t sustainable.

All Michigan drivers pay an annual fee to support this kind of coverage. But the Michigan Catastrophic Claims Association, which administers the care, historically hasn’t made its records public.

Opponents of no-fault reform say that without those records, it’s impossible to evaluate the system’s sustainability. Opponents also say capping the benefits, or requiring motorists to purchase separate insurance to cover catastrophic auto injuries, would shift tens of millions of dollars of cost to the Medicaid system, and there’s no clear-cut agreement on how this reform would affect rates in Detroit.

In the absence of some significant industry reform, Detroiters aren’t likely to see relief from high auto insurance rates any time soon.

Contact Nancy Kaffer: 313-222-6585 or nkaffer@freepress.com. Follow her on Twitter @nancykaffer

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