Study: D-Insurance would save drivers up to $2,300

Mayor Mike Duggan's D-Insurance plan, which would offer lower-cost auto insurance for Detroit motorists, would save drivers $600 to $2,300 a year off their premiums, according to a study by an actuarial firm the city hired.

Duggan's proposal – working its way now through the state Legislature – would allow Detroit drivers to opt out of the state's now-mandatory unlimited personal injury health care policies paid by auto insurers under the state's no-fault auto insurance system which is unique in the nation. D-Insurance would cap total health care benefits at $275,000, with any additional costs picked up by medical insurance policies ranging from from Medicare and Medicaid to employer-provided insurance or plans purchased through the Affordable Care Act.

The study by Pinnacle Actuarial Resources, based in Bloomington, Ill., found:

A Detroit driver with a policy that costs $2,371 a year – an average cost for Detroit auto insurance policies reported by insurers, which includes policies that include only injury care and not collision or theft coverage – would see a 26% reduction, cutting the cost to $1,754.

The percentage savings would be even greater – 37% – for a driver paying $4,952 a year for insurance, reducing the policy to $3,108. Pinnacle said the $4,952 figure was obtained by seeking quotes for insurance online.

A Detroit driver who couldn't' get a commercial insurance policy on the open market and had to rely on Michigan's last-resort Michigan Auto Insurance Placement Facility would also see a 37% reduction, with an annual policy of $6,288 reduced to $3,961.

Duggan said during a news conference this afternoon that the study by Pinnacle, performed independently of health care providers and auto insurers, provides more support for D-Insurance as he seeks approval of state lawmakers – including fellow Democrats skeptical of the proposal.

Noting that half of the drivers of the 322,000 vehicles registered in Detroit are estimated to be driving without insurance because policies are so high, Duggan said D-Insurance targets the main reason car insurance is so high in the city: health care costs. Detroit drivers have roughly the same crash rates as suburban drivers, but the study by Pinnacle confirms that Detroiters file medical claims at twice the rates as suburban drivers, and the medical claims Detroit drivers file cost close to double the amount charged to suburban drivers.

Related: Duggan: Give Detroiters a break on auto insurance



"My aggravation throughout this is, 'Who speaks for the 50% of Detroiters who cannot drive a car legally because they can't afford their insurance?" Duggan said.

The issue has faced stiff resistance in Lansing from health care providers who say that taking unlimited benefits from Detroiters will mean they lose the extensive benefits Michigan's auto insurance system provides.

That includes intensive rehabilitation therapy for people with spine and closed-head brain injuries and even pay for family members to stay home and provide care to loved ones with severe injuries – benefits not provided by health insurers. The proposal has faced criticism from state lawmakers who represent Detroit, saying it leaves city residents with inferior insurance coverage.

Criticism grew this afternoon when House Democratic Leader Tim Greimel (D-Auburn Hills) and other Democrats released a statement saying the party's representatives were opposed to the D-Insurance legislation, Senate Bill 288, that passed out of the Senate's insurance committee today.

"This cheaper insurance policy targeting Detroit residents, and others who would qualify, limits needed medical care and compromises families' long-term financial security. That isn't a good deal for any of Michigan's residents," Greimel said. "Limiting medical care coverage is not an acceptable way to address the high cost of no-fault insurance, particularly in Detroit."



The study did not explain how the use of credit scores or ZIP codes factor into determining insurance rates.

"If we are concerned with real rate reduction, let's put a stop to red lining by removing ZIP code, credit score, occupation and education from the list of factors that can influence rates," said state Rep. Brian Banks (D-Detroit).

Under D-Insurance, Detroiters would be able to keep policies with unlimited medical care and continue to pay sky-high premiums, or opt into lower-cost policies with a cap of $275,000, Duggan said.

"The vast majority of Detroiters I talk to want that option," Duggan said.



Jeri Eutsey, a retired Detroit Public Schools aide who lives on the city's northwest side, is one of the Detroiters who'd be interested in the plan, even if it means fewer health care benefits.

"I sure would," said Eutsey, who pays $400 a month to insure her 2008 Chrysler Sebring. "It's to the point where it's worth me relocating from the city so I don't have that cost. It's ridiculous."

The City Council, which approved $75,000 for the actuarial study last year, still must approve the plan. It also would have a vote on which insurers the city selects to provide D-Insurance.

Under the legislation, the selected insurers would manage health care costs by creating "a limited provider network and require an injured individual to receive post-acute care through an in-network provider, as well as obtain preauthorization from the insurer," according to a Senate Fiscal Agency analysis of the bill.

The Pinnacle study was conducted by Roosevelt Mosley Jr., a principal with the firm and a Saginaw native and University of Michigan graduate. One of the nation's largest independent actuarial companies, Pinnacle's clients have included the state of Florida, which enacted no-fault reforms that have reduced insurance policies there 14%-25%.

No other state mandates unlimited health-care coverage by auto insurers as Michigan does. The next closest state is New Jersey, which caps catastrophic coverage at $250,000. Most states don't force drivers to have additional health coverage on their auto insurance policies.

Detroit's top lawyer, corporation counsel Melvin (Butch) Hollowell, said the high costs of auto insurance in Detroit leaves too many Detroit residents with no option but to drive without insurance.

"Either you're forced to buy the most expensive auto insurance in the United States or you're criminalized," Hollowell said. "That's why we're putting this proposal forward, because Detroiters have to face terrible choices."

Duggan said that the debate in Lansing has long been between the auto insurers and health care providers arguing over whether savings will materialize.

"When the insurance industry says, 'Make these changes and we'll lower the rates,' the health care industry says, 'How do you know the insurance companies are really going to lower their rates?'" Duggan said. "The City of Detroit hired an independent actuary, the Pinnacle company, and this is the first independent assessment that you've got that didn't come from either industry that says, 'Here's what's going to happen if you adopt this.' "

Duggan said the city will be prepared to select insurance companies that would provide D-Insurance this fall if the proposal makes it through the Legislature, and the insurers would be able to begin selling the cheaper policies in January 2016.

Contact Matt Helms: 313-222-1450 or mhelms@freepress.com. Follow him on Twitter: @matthelms.