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Lawmakers in the state of Michigan have long tried to tackle residents' auto insurance premiums, which almost always rank at the top of the nation in terms of annual cost. But none within the Wolverine State pay more than those of its biggest city: Detroit. As a consequence, the mayor of Detroit has begun seeking ways in which he can reduce costs for drivers there, and it seems one plan just might work. Insurance agents with clients in the city might want to think about talking with their clients about the ways in which their plans might change if such measures pass, and what they can do in the meantime.

Detroit mayor Mike Duggan recently announced a plan that would cap payouts from auto insurance policies for catastrophic injuries at $250,000, according to a report from CBS Detroit. This measure alone would likely reduce the average resident's auto insurance coverage costs by about $1,000 per year.

Potential obstacles
However, it should be noted that such caps on coverage have been proposed before, and they've generally been quite contentious, the report said. For one thing, the state legislature would have to sign off on any such change, because the state has a no-fault insurance system, which, while expensive, provides extensive coverage for those who need it most. Opponents generally say that it would be unfair for people who were in a car accident to have the amount of help they will get for their ongoing care capped at $250,000.

The average Detroiter pays nearly $6,000 per year - almost $500 a month - for coverage, but Duggan claims that 44 percent of that money goes directly to the personal injury protection portion of the plans, the report said. Only about 18 percent are related to theft insurance. Those in the city also point out that many lawyers operating there exploit that system to get major payouts for minor injuries, which serves to continually drive up that cost even further.

An economic disadvantage
Unfortunately for many residents, Detroit is one of the cities hit hardest by the economic downturn; the median income in the city was slightly more than $26,000 annually, as recently as 2013, the report said. Considering that close to $6,000 of that goes to auto insurance, and the average family earning $25,000 in the city pays some $3,400 in taxes - one of the highest rates in the nation - this could present a major problem related to affordability.

Plenty of data suggests that consumers who have a fairly complete understanding of what their auto insurance does and does not cover, and why it might cost what it does, are generally going to be more satisfied with their plans overall. As a consequence, the more agents can do to make those explanations and build a relationship with their clients, the better off both are likely to be going forward. Not only will drivers know more about what they're paying for, but they're probably also going to boost agents' customer satisfaction rates and client retention numbers down the road.

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