Detroit has a lot of problems and, as it turns out, auto insurance premiums can be added to the growing list. Residents face the highest premiums in the country, which can climb to more than $3,000 a year for one car without the driver even batting an eye at the ridiculous cost. But why? Unfortunately, current Michigan laws meant to help are partly to blame for rising car insurance rates.
Michigan has a rather unique take on an already uncommon “no-fault” insurance system. Consequently, the rate at which residents are billed medically or receive disability benefits coupled with the number of absurd lawsuits results in auto insurance rates that just won’t stop going up. Most everyone believes that the system needs to be scrapped or at least heavily reformed, but how? Change isn’t such an easy task, even when most of us think it’s necessary for the benefit of everyone.
That is one reason why policymakers are focused on Detroit, rather than the whole of Michigan. After all, Detroit’s rates are much higher than the rest of the state, and if drivers move far enough outside of the city, they can potentially see rates cut in half. The thing is, that just creates another problem. In order to deal with Detroit, you really don’t have a choice but to make those aforementioned far-reaching changes even when that isn’t the intended outcome. It’s getting that done that is such a difficult task.
The reason that Michigan’s no-fault system was initially put into place was simple: help all automobile accident victims by taking away fault. The insurance system is therefore focused on helping the victims by reducing the need for lawsuits and granting easy access to benefits. It just didn’t work out that way. After all, there are a lot of people who would suggest that forcing everyone to share the rising insurance costs is a good idea in theory, but a terrible idea in practice. Should everyone have to pay the price when someone was indeed responsible for an accident, and would normally have his or her rates go up in place of everyone else’s?
Even though Michigan’s current system was meant to reduce lawsuits, many drivers find they still need to retain the services of a car accident lawyer in order to make sure they are not taken advantage of by insurance companies.
There are other states that have similar “no-fault” systems in place, but they have worked out a lot better than Michigan’s. So what changes can and should be made for the good of all?
First, Michigan chose not to place caps on no-fault benefits. Obviously, this made the recipe for rising costs all the more palpable. In addition, Michigan also places no cap on the prices that can be charged for medical services. Think about that–doctors can charge whatever they want, and insurance companies have no choice but to pay. If the cost is too high, then the rates simply go up. A more controversial option not yet in place is the addition of deductibles and co-pays for those bills, meaning the victim pays at least a little bit out of pocket.
These changes and others might not seem like much, but added together they could probably make a huge impact in reducing the rising costs of auto insurance premiums in the state of Michigan and the city of Detroit in particular. Will they be instituted, though? Only time will give us the answer to that question.
