How would Detroit Mayor Duggan's D-Insurance work?
Updated On: Feb 27 2014 05:49:38 PM EST
It's a long-time problem and this is the boldest solution yet.
For most people who move into Detroit, their car insurance premiums double. It's 100 percent higher than another urban market in Michigan such as Grand Rapids.
Mayor Mike Duggan's team is investigating why the premium gap exists and exploring the costs and feasibility of creating a non profit alternative to current providers. They would call it "D-Insurance."
"We don't think there's honest competition. We think it's kind of like shooting fish in a barrel. We have a mandatory system and people don't have options," said Butch Hollowell, Detroit's corporation counsel.
The industry is responding with this: "Adding a city-run auto insurance company in Detroit may increase competition but does nothing to address the real cost factors driving up premiums for all Michigan residents." -- Insurance Institute of Michigan
For instance, an independent study by the Citizens Research Council of Michigan found the insurer's cost to treat auto injuries in Detroit was 33 percent higher. Michigan's lifetime medical benefit contributes, and 60 percent of auto thefts in the state are in Wayne County.
Hollowell said all those factors are over-hyped.
The city does face barriers to entering the business. Before D-Insurance can sell a policy it must put millions of dollars in a fund up front to cover future claims. The city is reviewing how New Jersey and California created something similar.
"Could we work out an arrangement where we are maybe doing a PPO with an existing provider, or if we're able to have more cost benefit savings to people who have repair work done, that's two-thirds of the premium," said Hollowell.
Hollowell is leading the charge. He was Gov. Jennifer Granholm's consumer advocate for auto insurance.
How did this proposal and others play on with the city's emergency manager? Kevyn Orr was very upbeat about the programs outlined in Duggan's State of the City Wednesday night and the accountability the mayor is demanding on day-to-day operations.