House bill would close ‘loopholes’ that keep Detroit auto insurance rates high

When Governor Gretchen Whitmer and state lawmakers reached an agreement to lower Michigan’s notoriously high auto insurance premiums in May 2019, rates were supposed to become far more affordable.

But many Detroiters are still paying some of the highest insurance rates in the country.

State Rep. Abraham Aiyash, D-Hamtramck, introduced a bill Thursday aimed at closing “loopholes” that allow insurance companies to continue charging higher rates in Detroit than any other city in Michigan.

In May 2019, Whitmer struck a bipartisan deal to lower premiums by ending the state’s requirements that auto insurance providers guarantee unlimited medical benefits. Michigan was the only state that had such a requirement.

The plan also was supposed to prevent insurance companies from determining rates based on non-driving factors such as ZIP code, credit score, gender, marital status, occupation, education, and homeownership. That sounded like good news for Detroiters, who were paying more than twice the average annual premiums based on non-driving factors.

But the bill has not prevented insurance companies from using territorial rating schemes and consumer credit information from determining rates. Instead of using ZIP codes to determine rates, for example, some insurance companies are using census blocks.

Aiyash’s bill would prohibit auto insurance companies from setting rates based on credit information and territory classifications such as census blocks.

“We have much to do to fix ‘the fix,’” Aiyash said in a written statement. “Despite the promise of eliminating redlining, people in Detroit and Hamtramck still suffer from excessive rates because of where they live and what their credit history is. Eliminating the use of ZIP codes and credit scores but still allowing the use of territories and consumer credit information is still discriminatory rate setting. Drivers in Detroit deserve a real deal.”

A recent report by The Zebra, an auto insurance comparison website, found that Michigan still has the highest auto insurance rates in the country at $2,535, though rates dropped by 18% between 2019 and 2020. The report doesn't break down rates by city.

Another report from The Zebra in January 2020 found that Detroit is by far the most expensive city for auto insurance. The average annual rate for car insurance in Michigan in 2019 was $3,096, a 7.3% increase over 2018 and a 39.5% increase over 2011. Louisiana ranked second highest at $2,379 a year.

A University of Michigan study in 2019 found that Detroiters on average spend 18% of their income on auto insurance. In some Detroit ZIP codes, auto insurance soaks up 36% of drivers’ income. Anything beyond 2% is “unaffordable,” according to the U.S. Treasury Department’s Federal Insurance Officers.

While rates have dropped since then, Aiyash said Detroiters are still paying too much.

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