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One of the barriers of people moving into (and a catalyst to move out) of the city is the cost of auto insurance in Detroit. This explainer was inspired by a personal experience. One of our contributors pays a whopping $485 a month for auto insurance in Detroit. For no-fault. If they moved across 8 Mile for the same coverage? Quoted by the same company for $169. Although on the high side, it’s in line proportionally with multiple stories our readers have told us.

$3,798 extra bucks a year for the privilege of living in the City of Detroit and following the law by having insurance where you actually live.

It’s open secret that many move into Detroit, but not quite, by keeping their voting and registration address outside the city. There aren’t exact numbers, but it’s often talked about that when you move into the city that you keep your legal address at a relatives house.

Because of the motor voter law, those folks cannot vote in city elections, and because their address isn’t from a legal perspective in the city, and they might not be paying resident property taxes — but on the other hand, they’re physically in the city, paying rent, going out, buying services, using services, all of that. Long term, that’s not a sustainable option, and encourages the churn of people who move to the city for a few years then leave as soon as life gets more settled down.

If city, state and business leaders truly want to stem the tide of people leaving and encourage people to come here, car insurance is one of the issues that needs to be handled. For today, we’re going to focus on auto insurance.

First, let’s get rid of the most common misconception — that car insurance rates are high because of theft. When it comes to numbers, theft has little to do with the cost.

Theft makes up just 18 percent of your car insurance premium, on average. Also, for a basic no-fault plan, theft of the vehicle isn’t included in your coverage.

What about collision? Do cars in drivers in Detroit crash more?

Simply, no. The average collision rate, according to a recent report, is about the same. Detroit drivers do not crash into each other more than other places.

It’s mostly about the PIP — Personal Injury Protection. And there are multiple factors making the price so high.

What is PIP? It’s medical coverage in case you have an accident. Michigan law mandates lifetime care, over and above whatever health insurance you may carry. But that’s not all.

Car Insurance in Detroit has 2x more expensive personal injury protection claims

There are double the number of PIP claims in the city of Detroit — and they’re for almost double the claim amount than in the suburbs. About $59,000 per claim in the city vs. $30,000 in the suburbs.

Why? There’s not one answer here, either. But here are a couple of causes of prices of auto insurance in Detroit to be so high.

There are some lawyers who are making a lot of claims — for instance one notable out-of-state firm is 411-Pain. Their ads are on the pink buses, and they’ve been cited as a reason there are more claims. As stated in the Michigan Auto Law blog:

Michigan’s No Fault insurance laws are a tempting plum for out-of-state personal injury law firms, who see big opportunity here. And when combined with massive advertising and targeting of Detroit automobile accident victims, this has now also become a big driver in No Fault costs and No Fault lawsuits.  It is a particular problem for cities such as Detroit, which is what Mayor Duggan described last Tuesday.

As Detroit Mayor Mike Duggan told the Free Press in the spring:

There are large numbers of Detroit-area billboards placed by lawyers seeking to be retained by accident victims and the legal industry has figured out how to get Detroit accident victims “into the maximum number of treatments they can get.”

Oh, but it’s not just lawyers. Hospitals are in on the fee feast, too.

When it comes to bad stuff happening to you, not all situations are made equal. If you get banged up outside of a car accident and are on Medicare or what’s commonly called Obamacare, a hospital can only charge about 10 cents on the dollar.

But, if you’re injured in an auto accident?

There’s a ton of financial incentive to rack up charges that fall under no-fault reimbursement in Detroit, as you can see in the graph below.

Cost difference of auto insurance in detroit michigan and reimbursement rates

Health care costs in general are like if you go out to eat and if you come in the side door of the restaurant it’s $10, but if you come in the front door the same item on the menu is $30. Same food. Same place. But vastly different prices, depending on how you ended up at the restaurant.

All of this is exacerbated by the fact as many as 60% of Detroit motorists are driving without insurance.

It’s illegal to drive without insurance — but for many Detroiters in a region with unreliable mass transit, it’s a reality for many poor Detroiters that their choice is possibly get caught for having no insurance, or not being able to go to work.

To get around this, by using weeklong policies, or starting a month of insurance but not renewing, people just slip off insurance by the thousands. And when an uninsured motorist gets into an accident, everyone else picks up the tab. It is from a practical perspective, a situation where you have poor people between a rock and a hard place.

At the average wage in this state of $21.70, Michiganders are working an extra 51 hours each year just to pay for our higher car insurance. Wayne County residents are working almost 91 more hours than if they had car insurance that was priced at the national average.

It’s not just auto insurance in Detroit. As a state we’re paying the most in the country.

Auto insurance in Detroit is also affected by Michigan’s laws that are almost unique in the level of coverage they provide. You get lifetime, unlimited medical coverage in case of a catastrophic accident.

But that coverage, over and above your private or Obamacare insurance, comes at a steep cost. A report by InsuranceQuotes.com says Michigan drivers pay more than double the national average of $815 a year at $1,923. Wayne County drivers, with their numbers skewed by Detroit’s high rates, pay on average $2,789.

That’s money that’s going right out of Michiganders pockets when they can afford it least. Looking back since 2003, the 2015 Alec-Laffer economic competitive index outlined Michigan as the worst-performing state in the union economically.

Back to Detroit’s auto insurance situation.

D-Insurance is the current plan, stalled in the legislature as of this writing, to try to address this at least in Detroit. It’s a start.

D-Insurance will not bring insurance rates in parity to the suburbs, but it would make a dent — some estimates say $600, others $3,000 per year. It would accomplish this by putting a cap on the health coverage — currently $250,000 per incident, same as the State of New Jersey, and on the high side nationally — instead of unlimited. One could also opt for a higher deductible to help bring the monthly payments down.

Auto insurance is expensive in Detroit, but it’s more expensive in Michigan than the rest of the nation, too. And until both sides of 8 Mile realize this and pressure lawmakers to make real change, we’re all going to continue paying a lot for it.