Editorial: Revisit no-fault auto insurance law

A new push is underway to demand lower auto insurance rates in Detroit, this one led by pastors and community activists who rightly note the devastating impact of policies that cost two to three times as much in the city as they do in the suburbs.

The Detroit Alliance for Fair Auto Insurance wants an end to what it calls auto insurance redlining — charging Detroiters more for insurance than suburban motorists with similar driving records.

The group also wants lower rates without giving up the unlimited health care coverage that Michigan provides to those who suffer serious injuries in automobile accidents under its no-fault system.

Here’s where reality intervenes: Detroit can’t have both.

The catastrophic care coverage is the major reason auto insurance costs more in Michigan, and particularly in Detroit.

Mayor Mike Duggan gets that it is medical claims that are driving up auto insurance costs in the city. He contends that doctors and hospitals charge those with unlimited personal injury protection up to four times more for the same services.

At $59,000, Detroit has the costliest personal injury claim average in the nation. Michigan as a whole also outstrips the nation, at an average of nearly $37,000 per claim.

Duggan hopes to lower rates by allowing Detroit motorists to opt out of the lifetime benefits in exchange for policies that cap payouts at $275,000.

The mayor’s office estimates the D-Insurance plan would save city motorists 25 percent to 37 percent on policies that average between $3,000 and $5,000 annually.

Duggan asked the Legislature to pass a D-Insurance bill in 2015, and renewed his call in his State of the City address earlier this year.

Critics of the plan, including the Detroit fair insurance group, worry seriously injured Detroiters would be harmed by policies that cap medical benefits. Duggan’s plan would move those needing long-term care onto their health insurance coverage.

That’s one reason many health insurers and medical groups have opposed tampering with the no-fault system.

Lawmakers are less likely to pass a reform that benefits just Detroit than they are one that reforms no-fault statewide. And that’s what they should be debating.

Though Detroit is the extreme example, insurance rates across the state are far higher than they are nearly everywhere else. The average policy cost in Michigan is $1,351, according to the National Association of Insurance Commissioners (2014 numbers), third behind New Jersey and Louisiana. That’s 37 percent higher than the national average.

All motorists need relief from such exorbitant rates.

Under the current system of mandatory personal protection, there are very few limits or cost caps on the services and treatments provided. At the very least, lawmakers should impose cost controls and rein in the range of services. Unlimited coverage invites unlimited abuse.

But ideally, the Legislature would revisit the 1973 no-fault law in its entirety with the goal of cutting consumer costs for everyone. What’s good for Detroit is good for Michigan.