Friday, November 03, 2017

Insurance reform defeated. What next?

Interior of the Michigan Capitol Building - Photo by Frank Nemecek

The State House of Representatives shot down a bill yesterday that would have lowered auto insurance rates throughout Michigan and in Detroit in particular. The reform bill was defeated by a vote of 45-63, in a sharp rebuke to Mayor Mike Duggan in lobbied strongly for it.

I have argued for years, on this blog and elsewhere, that finding a way to lower auto insurance rates in Detroit was crucial to this city's recovery. We simply cannot continue with so many residents being forced to drive illegally because they cannot afford to spend thousands of dollars for auto insurance nor can we continue to operate where a large portion of our residents live elsewhere on paper in order to get a somewhat normal rate on their insurance.

I give Mayor Duggan an enormous amount of credit for trying repeatedly to get some type of relief from the Michigan Legislature. Others have spent decades trying to get such relief and our mayor has gotten closer to success than any of them.

Still, after suffering under oppressive insurance rates for decades, I believe that it is time to try something different - even if that something might sound unorthodox at first.

It has become apparent that after decades of trying to reform insurance rates, Detroiters must reluctantly accept the fact that - in all likelihood - the Michigan Legislature will never allow auto insurance reform to happen. I could spend hours going over the various reasons why one group or another is steadfastly opposed to change. The bottom line, though, is that Detroiters need reform and Lansing is not going to allow that to happen.

Our only remaining option, therefore, is to bring about reform in a way that Lansing cannot easily interfere with. It is time, I believe, for the City of Detroit to set up its own insurance company - an insurance company that would be set up to deliver more affordable coverage to Detroiters.

It will not be easy or cheap for the City of Detroit to set up its own insurance company. There a multitude of licensing requirements to starting such a company, not the least of which is having an initial pool of cash on hand to pay any claims that might come about during the early days of the company's operations.

I will not sugar the size of those upfront costs. It will likely cost millions of dollars upfront to get such a new insurance company operating for Detroiters.

Instead, I will simply point out the following:

  • It took $416 million in 2016 dollars to build Comerica Park with much of that cost being born by Detroit's taxpayers;
  • Ford Field had a construction price tag of $666 million in 2016 dollars with Detroit's taxpayers paying much of that cost;
  • Taxpayers also spent $279 million to renovate Cobo Center in 2010; and
  • More recently, the Little Caesars Arena was built at a cost of $826.9 million with Detroit's taxpayers covering a healthy portion of that cost.
While I do not mean to disparage the value of these project, I do mean to point out that Detroiters found a way to come with approximately $2.2 billion to cover their costs.

$2.2 billion.

Let there be no mistake, the City of Detroit could establish its own insurance company - one that would provide quality auto insurance to Detroiters at much more reasonable rates than we currently see - for far, far less than $2.2 billion.

Detroiters found a way to get it done for each of these projects, It's time to do it again and establish our own insurance company.

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