Tuesday, 13 March 2007
Michigan Looking To Reduce Urban Insurance Rates
Insurance rates in urban areas of Michigan — particularly in the Detroit city limits — are much higher than in the surrounding suburbs. Lawmakers recently met and discussed solutions to reduce rates for city residents.
One tentative proposal was to eliminate the use of zip codes when setting insurance premiums.
Michigan insurers have a long-standing practice of charging rates based on where people live. Many Detroit residents are paying significantly higher rates than people living just blocks away in suburban zip codes.
But the executive director for the Insurance Institute of Michigan, Peter Kuhnmuench, points out there is a greater risk of their car being stolen or their home being burglarized in urban areas. Insurance companies charge higher rates in city limits because of the higher risk.
It also may be difficult to get insurance companies to reduce rates because of Michigan’s unlimited medical benefits. Michigan is the only state in the U.S. with no cap on the amount of medical benefits a person can receive if seriously injured in an auto accident — another factor that drives premiums up.
“A cap of $500,000 might be a compromise,” said State Rep. Virgil Smith, who is the chairman of the House Insurance Committee.
“Governor Jennifer Granholm and Linda Watters, commissioner in the state Office of Financial and Insurance Services, are seeking other ways to reduce insurance costs,” said state spokesman, Ken Ross.
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