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People in Motor City skip car insurance

Buy it, and it's incredibly expensive; look for a bargain price, and you could be buying a fake policy. So the drivers in this strapped city don't have good options.

By MSN Money Partner Jul 19, 2013 12:01PM
This post comes from Barbara Marquand at partner site logoAs executive director for Publius, a voter-education nonprofit in Michigan, Vincent Keenan got well acquainted with an odd phenomenon in his hometown of Detroit: A troubling number of residents aren't registered to vote in the Motor City.

Woman in car with headache (© Getty Images/Jupiter Images/Getty)The reason has nothing to do with citizen apathy.

Instead they are registered to vote in the suburbs, where car insurance is cheaper. They use an address outside the city to renew their driver's licenses and register, then report that address to insurers.

"It's an amazingly pervasive piece of information about living in the city of Detroit that people pick up on incredibly quickly," Keenan says. "It is effectively a poll tax."

The impact on voter registration is just one of the consequences of the city's sky-high car insurance rates. Another: Lots of folks don't buy insurance.

Michigan has one of the highest uninsured driver rates, with an estimated 19% of motorists going without insurance, according to the latest Insurance Research Council study. But estimates for the uninsured rate in Detroit are even higher.

In a commentary for the Coalition Protecting Auto No-Fault, Melvin Butch Hollowell, former Michigan insurance consumer advocate, put the number at 60%.

Good driver? $4,000 a year
While Michigan's car insurance rates are already high compared with other states, Detroit's are in another league.

Keenan, who's now running for City Council, knows firsthand. About 10 years ago he moved just one block from outside the city limits to inside Detroit. His car insurance premiums tripled.

In the most expensive areas of Detroit, according to an analysis of rates from six major car insurance carriers, the average rate for a 40-year-old driver with full coverage on a 2012 Honda Accord is about $4,500 a year. Move a ZIP code or two outside the city and those rates drop by half or more.

And that's for a driver with a clean record. Poor credit or violations would drive that number up considerably. Only some areas of Brooklyn, N.Y., can rival Detroit for whopping car insurance bills.

No wonder some Detroiters fall for fake insurance scams or make the decision to go without.

But getting caught means a fine of up to $500 --- and also much higher rates when they finally do buy insurance. Failure to pay means a suspended license, and in turn higher rates again because of the suspension.
Why so high?

Michigan is the only state that guarantees unlimited, lifetime personal injury protection (PIP) benefits for someone injured in a car accident.

Car owners have to buy personal injury protection as part of the policy. The benefits pay the medical bills of the policyholder and household members, and passengers who don't have PIP coverage. The injured person's insurer pays out the first $500,000 for medical treatment, and a state-created nonprofit called the Michigan Catastrophic Claims Association reimburses for any amount above the threshold. Premiums include an annual assessment from the association, which is $175 per vehicle this year.

The average PIP claim in Michigan is $45,000, according to the Insurance Institute of Michigan, much higher than any of the other 11 no-fault states.

Detroit's rates are higher still because the risks of theft and accidents are higher there, just as they are in other urban areas. The claims rate for personal injury and costs for treatment also tend to be higher in urban areas, says Peter Kuhnmuench, executive director of the Insurance Institute of Michigan. Hospitals have to charge more in cities like Detroit, where there are large numbers of people without health insurance, to make up for the costs of treating so many people who can't pay.
Tough economic conditions make things worse. Insurers in Michigan are allowed to consider credit information as a factor in setting premiums, although they're not allowed to consider some details, such as foreclosure.

Poorest pay the most
Detroit is one of the poorest cities in the country -- median household income in 2011 was $25,193, about half the national average -- and many residents "drive dirty" because they simply can't afford car insurance.

"It's a matter of putting food on the table," says attorney Steven Gursten, head of Michigan Auto Law.

Drivers who are uninsured and get injured in car accidents are not allowed to seek any compensation from at-fault drivers, even if the at-fault drivers were drunk or texting while driving, Gursten says. He says he gets calls weekly about innocent people who suffered catastrophic injuries but were uninsured.

"I can't tell you how many people just lost their husband or wife in an accident, and there's nothing I can do for them," he says. "I think it's a civil justice and a civil rights issue."

He blames the problem on insurers' "excessive profit margins" and wants Michigan to pass a law that would empower the state insurance commissioner to consider profit margins in regulating car insurance rates.

The industry, not surprisingly, disagrees. Kuhnmuench cites data from the Insurance Information Institute that shows Michigan at dead last among states for insurers' 10-year average return on net worth on personal auto insurance from 2001 to 2010.

To bring down rates, the Insurance Institute of Michigan wants to give consumers the option to buy lower limits of PIP, institute a medical fee schedule to limit how much health care providers can charge for treatment and tighten up restrictions on lawsuits, Kuhnmuench says.
Keenan says the connection between voter registration and car insurance should somehow be severed. People shouldn't have to think about their car insurance when they register to vote, he says.

To make car insurance more affordable, some have suggested a public insurance system in Detroit, where the strapped city government is now under emergency management by the state.

"Things are dire enough that the potential is there to discuss things you wouldn't normally discuss, like a public option on car insurance," Keenan says. "You'd have more fertile ground for that than ever before."

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Jul 19, 2013 2:38PM
avatar the way,..what's with the White woman graphic?  There's only 2 White women left in Detroit, is driving over the Windsor bridge right now,...and the other is locked in a bank vault, for safekeeping.
Jul 19, 2013 2:36PM
Detroiters have given up on lots of things,...trash collection, police protection and paying their taxes.
Jul 19, 2013 2:25PM

A 76' Coupe Deville don't need no insurance, baby!


Jus' sayin'.....get out the way.

Jul 19, 2013 2:23PM

Detroiters are worthless, scam the system, welfare nitwits that ouldn't care less about anyone but themselves. Detroit used to be a vibrant city and then the Blacks moved in .... Whitey moved out and the city became a bunch of burned out buildings, junkies and gangs???


Level the city and turn it into farm land. Send the Bruthas and Sistas packing back to Africa!! Problem solved.

Jul 19, 2013 2:48PM
I'm shocked!!!  Really?  Like that hasn't been going on for years.  A friend volunteers at one of the old churches near downtown Detroit, and most of the time even though he's in his 70's, has taken to open carrying a pistol for self defense.  People steal cars right out of the church parking lot, drive it around to a location behind the church and strip it.  He's called the police, but average response time for 911 calls is 58 minutes  He even called them once and let them know 2 cars were being stripped at the same time, but no response.  On top of that, many residents don't carry insurance at all anyway.  Ah yes, life in the bankrupt 'D'.
Jul 19, 2013 2:56PM
I wouldn't drive anything but an armored tank in Detroit. How do you buy insurance for that?
Jul 19, 2013 3:00PM

Dems in Detroit (dem's get it?) all voted for Obama who obviously has no management skills.  What else would you expect in Detroit?   It was rumoured that only 3 people voted for Romney in the last election that lived in Detroit City and they were the only ones that paid any taxes!   

Jul 19, 2013 2:47PM
You Dee-troit niggas done got what you voted fo.  Vote fo negrocrats an yo city gone turn into a shithoe.  You only gots yoselves to blame...da crooked @$$ clowns you done voted fo is da reason why Dee-troit full of boarded up buildins, every otha bidness a liqua sto, an ain't no one wanna do bidness wit da city no mo.  WAKE UP FOOLS!!!!!  It ain't Obama's fault, it sho as sheeit ain't Bush's fault, an it ain't Lansin's fault.  ITS YO FAULT!!!!! Rememba dat next time you go vote!!!
Jul 19, 2013 2:33PM
hockeydude.... why don't you tell us how you really feel.... LOL
it is a total clusterf#*! there fer sure :(
Jul 19, 2013 2:32PM
Detroit's Insurance problem has nothing to do with the PIP program here-- the unlimited coverage is strictly regulated to injuries actual incurred in  the accident.  Michigan as a whole as the best medical coverage for the median price. One of Detroit's problems was that it was redlined decades ago as a high cost, high risk area to do business as an insurer.  Knowing that, many "good" people are ditching their Detroit zip code financial handicap to qualify for lower collision insurance rates. I believe this probably is true, as the few motor  vehicle accidents I have been witness  to either involve an on the spot cash pay off  to avoid prosecution for no insurance, or an exchange of information so a person at fault can pay for the damaged out side the system --not involving the police so that their insurance would not go up.  Detroit has bigger problems right now then the cost of auto insurance.
Jul 19, 2013 2:50PM
And now Obama Care already showing they are going to screw people over. Take the Smokers, they are going to pay 50% more than everyone else. Obama said Obama Care would be fair for everyone, and now one would be left out or have pre existing conditions counted against them. What a LIE THAT WAS OBAMA! You have to truly see what this will mean to all people who sign up for Obama Care. The Insurance companies are saying you cost them money they will charge you lots more. You do not have to smoke to have Cancer, You do not have to smoke to have lung issues. You do not have to smoke to a Hart condition, of a Hart Attack. You do not have to smoke to have a Stroke. You do not have to smoke to have high blood pressure. So just about any thing that can happen to a smoker can happen to anyone! So I know you are saying Obama Care has a cap on it. Well So do Car Insurance Companies Now that was a law passed many years ago. So was Home Insurance, but Ask the people who just went threw Supper Storm Sandy how things are working out for them? Or Ask the people who Live in Oklahoma how insurance is working for them. And go ask the people on the West Coast dealing with the Fires how there Insurance is working for them? The Insurance companies are just waiting for you to join because they see Billions of New Dollars. Not just that the Insurance Companies just said they are going broke Now in the News. If that is true we the people are the Insurance Companies bail out. Obama is most likely getting a kick back to push along his Obama care Bill. Insurance Companies know it's law and they will screw us all in the end as Insurance Companies have for years. Now Obama says he will give you a Hundred Dollars back for joining and paying for Obama Care. What a joke. Obama and the Insurance companies will screw you once again. Vote No for Obama Care fight it, Obama broke the Law in the first place. He can not force you to have Obama Care!
Jul 19, 2013 3:04PM
Hmmmm....can you get penalties for not buying Obamcare if you in Detriot and are on welfare.  
Detroit is becoming our own 3rd world country, complete with a host of mosque worshiping jihad dreaming citizens, couldn't happen to a more deserving state and city!

Of course to liberal imbeciles just another frivolous law that really doesn't matter like immigration laws that are broken ......... only because those who get OVER paid to enforce those laws think that they are in a position to ignore them! 
Jul 19, 2013 3:35PM
I'm sure 100% will buy Obamacare! 
Jul 19, 2013 7:48PM
They should drop an atom bomb on the city like they level  every other rat's nest in this country.  Better yet, don't warn the residents what you are about to do.  Pittsburgh, the steel town, came back from the brink after all the mills closed so it is the culture that controls its destiny.   The welfare bums in Detroit are all takers and that is why they failed and things will get worse.  It is the people that ruined that city, not the economy. 
Jul 19, 2013 5:50PM
Its 2013, you'd think we'd have the technology for Robocop by now!  Can't think of a better (or worse) place to let him (or her) loose!  Judge Dredd would work well too!
Jul 19, 2013 4:28PM
4500 usd a year for car insurance no wonder the city is bankrupt .....that's one way to get out o paying for the new health care insurance ....America has turned into the egg on your face nation ....what reat leaders we have ....
Jul 19, 2013 3:03PM
Lying on an insurance form usually invalidates the policy. It might save them the 500 dollar fine if the police pulled them over but if they had an accident their insurance company could deny coverage.
Jul 19, 2013 2:54PM
the terminal chapter of modern american corpo-government of the corp by the corp for the corp= detroit once the most prosperous city in america
Jul 19, 2013 8:34PM
But these same people will pay for obamacare................My bad the rest of us get to pay for these people to get obamacare.Thanks everyone who voted for this empty suit.
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