Detroit Mayor Mike Duggan criticized Michigan’s auto insurance sector on Wednesday and said rising costs hold back his city’s economic and population growth.
“The biggest scandal in the state is auto insurance,” Duggan testified before members of the Michigan House Competitiveness Committee. “It’s absolutely indefensible what the people of this state pay for insurance.”
“A whole lot of people are moving out of the neighborhoods because they can’t afford car insurance. It’s almost as much as a housing payment,” he said, as quoted by the
Detroit Free Press. “This is devastating for us.”
The Motor City’s drivers can pay up to $5,000 for an annual auto insurance policy, according to the Detroit Alliance for Fair Auto Insurance.
Duggan and lawmakers have sought to reform Michigan’s no-fault auto insurance system over the past few years, such as the D-Insurance program proposed in 2015. The proposal introduces an additional Personal Injury Protection (PIP) option for drivers: stick with the unlimited cap or, for a lower auto insurance rate, select a $275,000 per accident PIP limit. It also calls for the creation of a pool of trusted healthcare providers, excluding emergency services. It has since stalled.
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“This preferred provider network would reduce the number of fraudulent claims submitted to auto insurers by ensuring the medical care provided for injured parties was medically necessary and pertained only to the auto accident for which the claim was submitted,” according to the D-Insurance website.
The website says auto insurers don’t benefit from the status quo: “The unlimited no-fault PIP system in place has created an environment that is detrimental to both Michigan drivers and auto insurance companies. An unlimited PIP cap means that healthcare providers bill auto insurers for 100% of the medical care given to injured victims of car accidents.”
It claims the current system leads to fraud, when physicians charge auto insurance companies for services they did not perform or that were performed but had nothing to do with the injuries sustained in an auto accident.
“The result is auto insurers pay $1.28 in claims for every dollar of premium collected for PIP coverage in Detroit,” it said. “This 28% loss on PIP coverage with every policy makes providing insurance in Detroit unprofitable for insurers.”
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