Is the Price of Car Insurance Unconstitutionally High?

By John B. Swift posted 10-15-2018 09:16


Detroit Mayor Mike Duggan, along with eight Michigan residents, have filed a lawsuit against the state of Michigan over the high price of car insurance in Michigan, and in Detroit in particular. The suit seeks declaratory action from the court that the Michigan No-Fault Insurance Act of 1973, as interpreted by the courts, is unconstitutional in that it requires Michigan motorists to purchase coverage that is excessively expensive. The ultimate goal of the suit is for the state legislature to fix the issues with the current system or, alternatively, to have Michigan return to a fault-based tort system, much like Ohio and Indiana, which have much cheaper insurance rates.

The complaint in this case does a nice job of highlighting many of the concrete ways in which the current system plays out to the detriment of Michigan motorists. One of the primary issues is whether car or health insurance should pay for car accident–related injuries, which to some extent is part of a larger conversation on health care expenses. Additionally, there is the question of whether an insurer should be able to assign higher risk to a policy based on the applicant’s zip code. The latter issue gets even more complicated when you take into account the racial makeup of particular zip codes with higher car insurance rates.

I think most folks assume that a higher risk insurance policy should probably cost more. That is more or less how insurance works. When I first got my license, I managed to total two cars before I was 17. My mom’s auto insurer simply said they would no longer cover me … at any price (at least that’s what she told me). I had to go find “high risk coverage,” which, while expensive, was still feasible for me. It ran me about $150 a month for liability coverage only. That’s about $240 in today’s money.

One of the plaintiffs in the Duggan lawsuit, a 76-year-old female resident of Detroit, pays nearly that much ($220) for basic coverage even though she has a good driving record. Now I’m no actuary and I am sure there are many variables to consider. Additionally, this is not a perfect comparison and the lawsuit makes several more direct comparisons. It will be very interesting to see how the court views these alleged disparities and whether they actually rise to the level of violating either of our constitutions.