Buying auto insurance in Michigan is frustrating for just about everyone, especially in Detroit. While reviewing hundreds of premium quotes offered by some of the state’s major auto insurers on behalf of the Coalition Protecting Auto No-Fault (CPAN), auto insurance expert Doug Heller identified 10 quotes that are particularly outrageous examples of the various ways auto insurance companies have cheated good drivers in Michigan, even as the insurers blame anybody but themselves for the high cost of their product. A PDF showing screen shots of each quote is available here.
Under Michigan law, every driver is required to purchase auto insurance coverage, yet the state has among the highest levels of uninsured drivers in the nation. A significant reason for this is that insurance companies have unaccountable pricing practices that result in inexplicable and unfair premiums for certain, typically lower-income, yet good drivers.
# 10 $128 More for Female Driver with Perfect Record than a Male Who is Caught Speeding
Progressive quoted a woman with a perfect driving record $1,428 per year for basic coverage. When tested, instead, as a male driver who was recently cited for speeding (and everything else remained the same) Progressive quoted a premium of $1,300 per year for the same coverage.
That’s 10% more for the safer driver, if the safer driver is a female and the driver with a speeding violation is male.
#9 $49 More for 6-month Policy After Having a Break in Coverage While Serving our Country
Auto Club quoted a driver living in Detroit $991 for months for basic coverage but increased his rate to $1,040 when he reported that he was not currently insured due to a military deployment. A 5% penalty for protecting our country.
#8 Premium Rises $1,676 Because Driver only has “Above Average” Credit Score and not “Excellent” Credit
Using Progressive’s online price comparison tool, we found that Allstate would charge a 35-year old driver in Detroit $1,972 per year for basic coverage if she had excellent credit, but it would charge her $3,648 if her credit was in the “Above Average” range, despite her having a perfect driving record. (It rose to $4,960 if she had “Average Credit”—a $3,000 annual penalty for only having average credit.)
#7 No Payment Plan Offered to Customers Without a College Degree; Only Coverage Option Is to Pay $2,271 Up-Front
Esurance, the online subsidiary of Allstate, offers customers the option of paying their six-month premium all at once or in monthly installments. Except, that is, if you don’t have a college degree. Drivers with only a high school diploma were not offered the installment plan with their online quote and appear to be required to pay the entire premium up front. That means the good driver in Detroit without a college degree has to write a $2,271 check to get six months of basic coverage, while the same driver with a college degree has the option of making six $385 monthly installments or paying $2,090 at once. Having only a high school diploma also means the driver’s premium is 9% higher.
#6 Woman charged 27% More Than Man for the Same Basic Coverage Policy
Progressive offered a 35-year old male driver in Detroit with a clean driving record an annual premium of $1,122 for a minimum coverage policy with coordinated PIP benefits. The company raised the annual cost of coverage to $1,428 if the driver was, instead, female, even though she had the same perfect driving record, drove the same car, and lived at the same address.
#5 $306 Auto Insurance Rate Hike Because You Rent Your Home
State Farm added $306, or 5%, to the annual premium of a good driver living in Detroit solely because the customer rents a home rather than owns it. Allstate also charges a sizable surcharge to renters; our test found its auto insurance premium quote rose by $210 in Detroit, simply due to the driver’s homeownership status.
#4 The Widow Penalty: Hundreds of Dollars More per Year After Husband Dies
Our testing found that Liberty Mutual and Esurance charged women between 4 and 13 percent more if they are widows rather than married. In Detroit, the widow penalty cost a 60-year old woman $204 with Liberty Mutual and $280 with Esurance. Esurance specifically asks its customers if they are widows before imposing the rate hike, while Liberty Mutual just asks if customers are married or not.
#3 $3,898 Penalty for Living on the Wrong Side of the Street
Two 35-year old women living within 279 feet of each on either side of Mack Ave. – one in a Grosse Pointe Park zip code, the other in Detroit – have the same car, the same perfect driving
record, and are the same in every other regard – are charged dramatically different premiums for basic coverage from Allstate. The annual premium to the Grosse Pointe Park resident is
$3,452 per year, while her neighbor across the street is quoted an annual premium of $7,350, more than double for the same coverage.
#2 $848 More for a Better Driver Due to a Short Break in Coverage
The Auto Club (AAA) quoted a premium of $2,752 for six months to a Detroit insurance executive with an MBA degree who caused an accident this year. But for the exact same coverage, a janitor with a high school diploma who has never caused an accident, received a ticket, or filed a claim but had a brief break in insurance coverage was quoted a six-month premium of $3,600. $848 more for the working-class driver despite a better driving record. If the good driver wanted to buy full coverage, his or her premium would be $1,570 more for a six-month policy than the worse driver with the higher socioeconomic status and continuous coverage.
#1 The $31,432 Premium: Below Average Credit Score Raises Detroit Good Driver Premium by more than 600%!
Using Progressive’s online price comparison tool, we found that State Farm would sell a basic coverage policy to a 20-year old good driver in Detroit with an excellent credit score for $4,410 per year. However, if that same Detroit driver with a perfect driving record has a below average credit score, the annual premium will increase to as much as $31,432 for basic coverage.
“These premium quotes are just ten examples of tens of thousands of times that safe drivers in Michigan pay more for auto insurance than they should simply because insurance companies are allowed to charge whatever they want, with little oversight, and fewer scruples,” said Douglas Heller, an insurance expert who conducted the research for CPAN.
The Coalition Protecting Auto No-Fault (CPAN) is a broad based coalition of organizations representing consumer advocacy groups and health care professionals of all political persuasions. These organizations are united to preserve Michigan’s model no-fault auto insurance system and to make sure that the Michigan auto insurance industry kept the original no-fault promise it made to Michigan citizens when the No-Fault Act was passed in 1972.
About Douglas Heller:
Douglas Heller is an independent consultant and nationally recognized insurance expert. During nearly two decades of work on public policy and regulatory matters related to property-casualty insurance, Heller has written several reports on auto insurance pricing in the United States, overseen regulatory challenges to insurance company rates and practices, and, for nine years, served as the Executive Director of the national consumer advocacy organization, Consumer Watchdog.