Participants may get more discounts

Madelyn Kendricks was one of the first Detroit residents to benefit from an insurance pooling program that will offer discounts to low-risk drivers and homeowners in urban areas.

"It's about time," the 75-year-old Detroit resident said. "I haven't had an accident in six years."

Kendricks' homeowner's insurance rates went from $798 to $500 a year and her auto insurance went from more than $1,000 to $797 a year.

Separate nonprofit groups in Detroit and Flint will run the insurance pool, which was initiated by the state. The nonprofits -- Metro Detroit Quality of Life Improvement and the Flint Unification for Urban Equality -- will determine if an applicant's driving and homeowners' records are clean enough to join the insurance pool. There will be no charge to become a member.

Consumers in the pool will get policies from Auto-Owners Insurance with an automatic discount of 10% off base rates charged in that area.

The company will review the performance of the pool of customers annually. If their records remain good, the 10% discount could increase. More than 5,000 people have already filled out surveys to determine if they're eligible to belong to the pool.

Gov. Jennifer Granholm said at a news conference in Detroit on Monday that additional discounts would be given for people over 50, customers who have both a homeowners and auto insurance policy with Auto-Owners and drivers who have antitheft devices in their cars.

Those discounts are standard for most insurance agencies, including Auto-Owners, said John Lindauer, of Auto-Owners Insurance.

"All of the Auto-Owners discounts that are available to these groups are available to all groups Auto-Owners writes," he said.

Peter Kuhnmuench, executive director of the Insurance Institute of Michigan, said the company can offer the discount because a group of insured people requires less marketing and less sales effort.

"Group products aren't all that new, they're just a different way to ascertain risk," he said. "The actual experience of the group after a year will determine if the discount remains."

Insurance companies have been using territorial rates, which base rates in part by location, since 1979. Insurance rates are higher in Detroit and Flint, insurers say, because more cars are stolen or vandalized, accident rates are higher and road conditions are poor.

Homes, meanwhile, are more susceptible to break-ins and vandalism in urban areas. As a result, customers in places like Detroit and Flint, often pay more than double the rates charged to their suburban counterparts.

Urban legislators and others, including Granholm, have tried for years to stop the practice. Insurance Commissioner Linda Watters tried to end the practice of using credit scores as one way to determine rates, but the insurance industry sued and prevailed in court.

"Let's have insurance rates based not on where you live, but how you drive," Granholm said.

For more information on the insurance program, call 313-494-4478 in Detroit or 810-743-3900 in Flint or go to www.michigan.gov/outreachcq-daustin. Contact KATHLEEN GRAY at 313-223-4407 or gray@freepress.com.

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BY KATHLEEN GRAY
FREE PRESS STAFF WRITER

Copyright © 2006 Detroit Free Press Inc.