The cost of car insurance has skyrocketed over the past year, but rates have been even higher for certain drivers solely based on where they live. Take the most expensive city in the U.S. to insure a car. On average, car insurance costs $5,300 per year in Detroit, Michigan. Insurers claim the high prices are due to crime rates, but the data proves otherwise.
The line of thinking is that more crime occurs in densely populated areas, and if you live in those areas, it would cost more to insure a vehicle. However, Michigan outlawed insurance companies from using zip codes to set rates in 2019. The most considerable disparity is seemingly by race, with Black customers paying more than white drivers. And no, Black Michiganders aren’t the majority population in the state’s cities, but they certainly are in Detroit.
Outlier Media spent a year working with the Markup to investigate this costly trend:
Insurance rates were generally more expensive in more densely populated areas. But even within those areas, Black customers were asked to pay significantly more based on their addresses.
For example, white residents outnumbered Black residents by almost 2-to-1 in Auto Club’s most densely populated territories. But almost twice as many Black residents were asked to pay the most expensive rates in those territories.
The part of an insurance policy that covers things like theft or break-ins is called comprehensive coverage. Payouts from other coverage categories, including car rental and roadside assistance, may also be triggered by a property crime. Customers can expect these types of coverage to cost more in higher-crime areas.
But if crime was the factor causing these location-based price differences, and particularly the upcharge in areas with more Black residents, excluding crime-related coverage should have eliminated those disparities.
Yet, for four of the five insurers we analyzed, removing crime-related coverage had little to no effect on our original findings of how unequal location effects fall along racial lines across the state.
Living in the Motor City is hard enough already. Detroit is consistently found in the top five poorest cities in the U.S. In 2019, the University of Michigan found that Detroit drivers spend up to 36 percent of their income on car insurance. Maybe another highway sign will spruce things up.
