My interview with Bloomberg News on the No Fault insurance crisis in Metro Detroit
High car insurance rates in Detroit might not be news to us, but it is to the rest of the country. Last week, I was interviewed by Chris Christoff of Bloomberg News. Chris wanted to delve into this complicated issue, and how the sky-high cost of insurance in Detroit might be an impediment to its comeback and attracting new city residents.
Here’s the full Bloomberg story: “Detroit’s Soaring Car Insurance Costs Add Roadblock to Bankruptcy Comeback.”
To start, Chris wanted to get to the bottom of why Detroit has the highest auto insurance rates in the nation, according to Carinsurance.com.
I told him that to fix the problem of high insurance rates, we first have to have the facts:
That means transparency. Right now, we have none when it comes to insurance company profit margins.
We can extrapolate, based upon data from the Michigan Department of Insurance Financial Services, that auto insurance companies are extremely profitable. For instance, Michigan auto insurance companies collected more than $2 billion more in auto premiums in 2011 than they paid out in claims, as I told the Detroit Free Press.
Also, “highly profitable” is how former Insurance Commissioner Jay Angoff describes Michigan’s largest auto insurance companies. And if that’s not enough, in his July 2014 study, “An Analysis of Profitability and Pricing In the Michigan Auto Insurance Market,” Angoff determined Michigan drivers are paying up to 26% more than they should for auto insurance.
But we don’t have the hard data, which is ridiculous. How can we legally require Michigan drivers to purchase No Fault insurance, and impose criminal penalties when they don’t, but we don’t require the private companies that provide this product to tell us how much money they’re making by selling it? As of now, insurance companies do not have to disclose profit margins.
Tomorrow, I will continue this topic with my solution to lower the cost of auto insurance in Detroit.