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For years, residents of Detroit, Michigan, have faced major challenges when it comes to paying their auto insurance premiums, just because they were so expensive. The average driver living within city limits was paying several times the national average for their coverage, and the problem became such an epidemic that a large percentage of residents simply stopped buying coverage; in many cases it was cheaper to go without and then pay for repairs when they became necessary than continue paying huge premiums every month. Now, the city has possibly done something about this issue, and it's something insurance agents will have to be aware of.

Detroit is in the process of getting together its own insurance fund for city residents - known as D-Insurance - to help reduce financial risk and therefore lower costs to individuals in the city when it comes to buying coverage, according to a report from Michigan Public Radio. However, critics say that there is a very serious financial risk inherent to the plans the city has poised to be put in place, and moreover, legal experts believe that this is really only treating the symptoms of what causes high insurance rates, rather than getting at what could be seen as the root of the problem.

Potential benefits
Detroit mayor Mike Duggan notes that, if effective, the premiums residents pay - in part due to the state's no-fault insurance laws plus the city's high rates of both crime and uninsurance - would fall by anywhere between 25 and 33 percent, the report said. Because of the no-fault rules, and the fact that Detroit residents tend to file far more medical claims than their suburban counterparts after an accident, coverage for medical expenses about 70 percent for Detroiters on average. D-Insurance would necessarily slash that number, potentially by quite a bit, and with it would go the premiums drivers there pay.

Potential risk
These plans would lower premiums, yes, but by reducing the maximum amount paid after an accident to emergency rooms (to $250,000) and for ongoing care ($25,000), the report said. That might leave some people who are very seriously injured in an accident in the lurch, and potentially saddle them with massive medical bills.

""We're going to be honest,"" Duggan told the station. ""This is going to be real. You're not going to cut your premiums without cutting your coverage.""

If insurance agents can do a little more outreach work to make sure their clients fully understand their coverage, both parties are likely to be better off going forward. That's because a good knowledge of how plans work and what they do and don't cover, plus a strong working relationship with their insurer or agent, are generally better drivers of customer satisfaction than simply being able to pay a slightly lower price for their coverage. That, in turn, will typically also lead to higher client retention rates, which will obviously be good for any agents who make the effort.

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