Detroit Residents Struggle with High Car Insurance Costs
Residents of Detroit pay some of the highest car insurance rates in the nation, with annual premiums averaging $5,300 in a city where the median household income is just $38,080. The high costs are partly due to rate-setting practices that have little to do with driving habits. U.S. Rep. Rashida Tlaib (D-Detroit) is backing legislation that aims to change this by banning the use of census tracts and credit-based scores to determine auto insurance rates.
The bill, which was previously introduced in 2023 but failed to pass, seeks to address the loopholes in Michigan’s 2019 law that banned ZIP code-based pricing but allowed insurers to continue using location-based factors. An investigation by Outlier Media and The Markup found that insurers continue to use drivers’ locations to set rates despite the ban on ZIP code-based pricing.
“If you don’t have reliable mass transit, residents need auto insurance to get to work, to get to school, to live their lives,” Tlaib said. “Rates built on factors unrelated to driving keep people in a cycle of poverty.” The legislation aims to give drivers “a fair shot at getting auto insurance rates that are fair to them, not based on whether they have a high academic degree and a good credit score, but based on what kind of driver they are.”
The bill faces opposition from the insurance industry, with Dave Snyder of the American Property Casualty Insurance Association arguing that it would increase insurance costs for many consumers and undermine state insurance regulation. However, consumer advocates see it as a step in the right direction. Douglas Heller of the Consumer Federation of America praised the bill for closing loopholes but suggested that lawmakers should go further by banning the use of any geographic unit smaller than a city or township to set rates.
The issue is not unique to Detroit, though the city’s premiums are particularly high. Insurers often point to crime rates as a justification, but investigations have found that crime alone does not explain the disproportionately high premiums. “Detroiters pay some of the highest auto premiums in the country, not because living in Detroit makes you a worse driver, but because being in Detroit makes you less attractive to the insurance companies,” Heller said.
