Those that want to observe how government policy affects auto insurance rates should take a trip to Detroit. Almost half of the 322,000 vehicles (around 111,000) on the road in the Motor City have no insurance, according to Mayor Mike Duggan.
The cars are uninsured because of the high cost of insurance mandated by Michigan state law, which mandates no-fault insurance and unlimited medical care for accident victims. The typical Detroit resident pays around $3,400 for insurance, or more than double the national average rate for auto coverage, which is $1,503 a year, according to My Car Insurance.
Duggan is trying to change that situation by promoting legislation in the state legislature that would essentially allow Detroit to opt out of the no-fault system, The Detroit Free Press reported. Under Dugan’s plan, medical costs would be capped at $250,000 for hospitalization and $25,000 for outpatient care. The so-called D-Insurance would also allow Detroit residents to opt out of the state’s Catastrophic Claims Fund, which requires drivers to pay $186 to fund care for accident victims.
If it is successful, Duggan’s scheme will destroy Michigan’s auto insurance system because other voters in other communities would demand lower rates as well. The system would be far from perfect, but it would at least give poor Detroiters a fighting chance for lower costs. It could help the poor because many drive without insurance because they cannot afford it.
Costs would still be high because the D-Insurance plan still requires more coverage than that offered in 45 states. Five of the eight Senators on Michigan’s Senate Insurance Committee voted for the D-Insurance plan, but it still needs to pass both houses of the legislature and be signed by the governor.
Is This the Beginning of the End of No-Fault Auto Insurance in Michigan and America?
Interestingly enough, an amendment added to the bill would extend D-Insurance to other cities. It looks as if Michigan’s no-fault insurance system could soon be dismantled, which will be good news to the state’s drivers.
Other cities that could see insurance cost relief include Saginaw, Warren and Kalamazoo. My guess is that Republicans on the Committee want to destroy no-fault by giving citizens an alternative.
One has to wonder if any of the other states with no-fault auto insurance—Florida, New Jersey, New York, Pennsylvania, Kentucky, Kansas, Hawaii, Massachusetts, Minnesota, North Dakota and Utah—will follow Michigan’s example. The commonwealth of Puerto Rico also has no-fault auto insurance.
Hopefully this will mark the end of the no-fault auto insurance experiment in America. The example of Detroit shows how this hideous idea harmed the poor and made many average people into criminals.