High-Cost No-Fault Insurance is One Reason We Need Regional Transit. There Are Many More.

In a nutshell:

Most leaders in Southeast Michigan agree that regional transportation services are important; disagreements arise from the need for additional transportation services beyond those already provided by SMART and other area transit agencies.

One reason public transportation is important is because people in urban areas face real barriers to driving, including the high cost of car insurance in Detroit and throughout Southeast Michigan.

Expanded regional transportation is needed because of these barriers to car ownership and the fact people in the region are disconnected from jobs and other places they need to go.

Regional transportation is a hot topic in Southeast Michigan as leaders debate the merits of the Regional Transit Authority and putting a transit tax proposal on the November 2018 ballot. While it is unclear if an RTA tax will make it that far, the Suburban Mobility Authority for Regional Transportation (SMART) will have a transit tax renewal on the August ballot. SMART provides regional transportation services throughout Wayne, Oakland, and Macomb counties, with certain communities opting out of the tax and service in Wayne and Oakland counties.



The need for regional transit in Southeast Michigan

The need for regional transportation services in Southeast Michigan is a settled matter. What remains an open question is the the amount of service. The current debate revolves around whether the region needs additional transit services and the RTA to coordinate and provide them. County leaders in Macomb and Oakland, many of whom do not support the RTA or a new RTA tax, would say they support current SMART bus service.

More specifically, should the region invest billions more dollars in regional transportation to better connect people with jobs and services throughout Wayne, Oakland, Macomb and Washtenaw counties? Or do current transit agencies provide adequate transportation services? Should additional transportation dollars be directed toward roads and other infrastructure needs?

The high price of no-fault insurance

While road funding is important, funding for public transportation is imperative too, as many residents of Michigan, and Southeast Michigan in particular, face real and growing barriers to driving. One is the high cost of Michigan’s no-fault auto insurance system.

No-fault auto insurance means that parties in a car accident receive compensation from their insurance companies no matter who was at fault in the collision. Michigan’s insurance law was enacted in 1973 in order to reduce the number of disputes, fraudulent claims, and litigation associated with car accidents. It has been successful on some counts, but insurance premiums and associated medical costs have proven to be more expensive than those in all other types of insurance systems.

In Michigan, medical claims cost car insurers 57 percent more than claims for similar crashes in other states and insurance premiums are 17 percent higher on average. Factors driving these high costs include the fact that auto insurers rather than health insurers are the primary payers for care related to car accidents; that auto insurers have limited power to negotiate discounts for medical care; and that Michigan has unique and generous medical coverage related to car accidents and associated health care.

A recent study found that the average cost of car insurance in the U.S. is $1,427 per year. This cost is even lower in the Great Lakes region at $1,375. Michigan is an outlier with the highest average annual premium of $2,610. The report also found that Detroit was the most expensive city in the country for car insurance with an average annual premium of $5,414 (this was almost $2,000 higher than the second highest cost city – New Orleans at $3,433). Detroit is the biggest, but certainly not the only, example of a section of the state where insurance rates are substantially higher than other parts of the state. Rates across much of Metro Detroit are higher than the state average, which is already higher than the national average.

Lansing’s response: There’s always next year

A bill aimed at lowering the cost of car insurance in Michigan was defeated in fall 2017 in the Michigan House of Representatives. This bill would have done many things, including allowing drivers to choose their level of personal injury coverage (rather than being forced to pay for unlimited lifetime benefits) and the state to regulate rate increases and health care reimbursement rates. Some opponents argued it did not go far enough in controlling insurance costs because it failed to address the issue of insurance companies using non-driving factors (e.g., zip code and credit score) to determine rates; others argued against the state regulating insurance rates.

Recently, scaled-back bills cleared the Michigan Senate. Senate Bill (SB) 0787 and SB 1014 would allow seniors 65 and older to choose a $50,000 personal protection policy as opposed to the currently mandated lifetime benefits. They also add limits on attendant health care. They do not create a hospital fee schedule or differing levels of personal injury protection for people under 65.

What does no-fault have to do with regional transportation?

Whether one believes the high cost of no-fault insurance should be maintained, the fact remains that car insurance in Michigan, and especially the urban areas of Southeast Michigan, is expensive. The high costs of car ownership in Detroit and other urban areas in the region create a barrier to driving, at least legally, throughout the region. This barrier to driving creates a disconnect between people and jobs.

U.S. Census data on commuting patterns show that county-to-county commuting flows in Southeast Michigan are among the highest in the nation. A Brookings Institute analysis of transit options and jobs in Metro Detroit found the share of working-age residents with access to transit was 60 percent, but those residents had access to less than 22 percent of the jobs in the area via a 90-minute-or-less transit commute. Access to jobs becomes even more important in our current economy with an April 2018 unemployment rate of 3.6 percent in the Detroit metro area and jobs going unfilled in the region.

One potential solution is expanded regional transportation. Expanded regional transportation in Southeast Michigan, especially services that would connect people across counties, can better connect people with places of employment and the other places they need to go. Without public transportation options, people are left with the options of either not driving at all, or driving without insurance, which is illegal and unsafe.

Barriers beyond insurance costs

The barriers to driving go beyond the high cost of car insurance in Southeast Michigan to include Michigan’s aging population. Census data shows that by 2030, all baby boomers will be 65 or older and one in every five Americans is projected to be retirement age. According to some sources, Michigan’s population is aging even faster than the nation’s as a whole. A recent report by the Southeast Michigan Council of Governments (SEMCOG) found that a demographic shift to an older population is likely to lead to transportation difficulties for the elderly, particularly those who live in suburban, rural, and other areas with limited transportation options.

Expanded regional transportation will not be easy or cheap. It may not even be possible in the current political climate. But with so many factors making car ownership difficult or impossible for many residents in the state’s most populous region, it is undeniably needed to connect more people to jobs in the area and for the region to thrive and grow.