Car insurance plan to help residents in cities - Auto-Owners lowers premiums

Auto-Owners Insurance Co., one of Michigan's largest insurers, has agreed to participate in a state-initiated program to cut insurance rates for low-risk drivers and homeowners who live in urban areas.

Today in Detroit, Gov. Jennifer Granholm is to announce the partnership between the Delta Township insurance company and nonprofit community groups in Detroit and Flint.

Starting this week, metro Detroit and Flint residents who have good driving records will be able to buy insurance policies through local Auto-Owners agents and receive an automatic 10% discount off the insurer's usual rates. Additional rate cuts are possible based on individual cases.

The insurance rate-cut program was announced earlier this summer; about 5,000 people have filled out surveys to see whether they're eligible for the discounts, said Leslee Fritz, a spokeswoman for Granholm.

The state offices of Community and Faith-based Services and Financial and Insurance Services and the nonprofit community groups Metro Group Quality of Life Improvement Association in Detroit and Unification for Urban Equality in Flint negotiated with four insurance companies that competed for the business.

Auto-Owners got the job.

"If a community struggles with a problem, then the community must come together to solve it," said the Rev. Charles Adams, pastor of Hartford Memorial Baptist Church in Detroit. "For too long, Detroit residents have paid more for insurance solely because we live in the city. We are committed to changing that."

Insurance in Detroit often costs twice as much as a comparable policy in a nearby suburb. High insurance and high taxes are key reasons people cite for leaving the city.

Insurance companies have been able to charge territorial rates in Michigan since 1979. Under territorial rates, Michigan and most other states use people's hometowns, driving records and homeowners' records to determine rates. That leads to higher insurance costs in communities that have more crime and more traffic accidents.

The insurance industry has said that where people live is a crucial factor in their risk of having accidents, having a car stolen or having a home vandalized or burglarized. Eliminating the geographic factor would result in higher rates for everyone, the companies say.

"Environmental factors affect the potential risk to drivers as well. Theft rates and roads that are in disrepair do impact your experience as a driver," said Peter Kuhnmuench, executive director of the Insurance Institute of Michigan. "We feel the industry is, quite frankly, better prepared and able to ascertain the risk of individual drivers."

Basing insurance prices on location -- often called redlining -- has been a hot-button issue for years. When she was running for governor in 2002, Granholm said she would put an end to territorial rates.

Today's announcement, just eight weeks before the Nov. 7 election, could give Granholm's re-election bid a boost in the Democratic-leaning areas where turnout could be a key factor in the election.