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Auto insurer that doesn't use credit scores opens Detroit office

Jul 05, 2023

Michigan's fastest-growing auto insurer that doesn't use credit scores when pricing customer rates and crusades against what it considers predatory towing and repair shops has opened its first physical office in Detroit.

New Jersey-based CURE auto insurance, which arrived in Michigan in July 2021, in the wake of the state's controversial no-fault overhaul, is a new tenant in the former UAW-GM training center building on Detroit's east riverfront, which is now known as The Icon and owned by Dan Gilbert's Bedrock.

The not-for-profit insurer has about 60 employees in the office who work hybrid in-office/remote arrangements, and anticipates growing to more than 100 employees within two years. All of CURE's Michigan workforce previously worked remotely.

After just over two years in Michigan, CURE says it now insures about 75,000 vehicles in the state — 58% of them belonging to Detroit residents. It has done significant marketing on billboards and TV and is a Detroit Pistons sponsor.

CURE is one of the few auto insurers in the state — possibly the only one — to not use a credit score-like metric known as an "insurance score" when pricing rates. Instead, CURE relies primarily on driving history. This approach is a big deal in Detroit, where many have less-than-perfect credit.

Detroit Mayor Mike Duggan was among the officials on hand Wednesday at a ribbon-cutting ceremony for CURE's new office space at 200 Walker St.

"If you have a sub-700 credit score, the average car insurance carrier in the country will charge you twice the rate of the exact same person, same car, same driving record," CURE's CEO Eric Poe told the group.

Poe was an adviser to Duggan back in 2015, when the first-term mayor was researching ways of reducing Detroit's highest-in-the-nation auto insurance rates. Some of his suggestions, such as introducing cost controls for medical services, were in the statewide 2019 no-fault overhaul law.

“I made him a promise eight years ago, that if he could help the Legislature pass a bill to put fee schedules and caps into place, that we would expand our business into Michigan," Poe said. “And that mission on our side was to come into this state and not use what the rest of our industry uses, which is credit scores, education, occupation, income proxies, and give real meaningful affordable rates to Michiganders under that new law.”

According to a survey of over 21,000 CURE applicants, the average savings per six-month policy was $736 compared with what the drivers paid before. And 40% of CURE customers were not insured before signing up.

CURE is one of several auto insurers that began doing business in Michigan for the first time after the 2019 overhaul that aimed to reduce the cost of insurance. CURE waited to write its first Michigan policy until July 2021, which is when the new cost controls on no-fault medical services took effect.

Prior to the overhaul, an estimated 60% of all Detroit drivers lacked insurance and were driving illegally. It was common for Detroiters to pay well over $200 a month for car insurance — oftentimes significantly more.

More:Michigan no-fault auto insurance: How to pick the cheapest options

More:Auto insurer goes after metro Detroit towing, repair shops over big bills

The Michigan Supreme Court ruled last month that the new medical cost controls don't apply to accident victims whose injuries predate the 2019 overhaul. Prior to that ruling in Andary v. USAA, the cost controls were widely interpreted by state regulators and insurance companies as applying to everyone. The justices left the controls in place for accidents that happened since the overhaul.

“The Andary case really hurts the rest of the industry a lot worse than it hurts us," Poe told the Free Press. "That’s why I wouldn’t step foot in the city of Detroit or the state of Michigan until July 1 of ’21 because there could be a Supreme Court ruling like that."

Poe said a major reason why CURE can afford to offer reasonable rates to drivers is that it doesn't have to pay out for pre-reform no-fault claims.

The average PIP, or Personal Injury Protection, claim for a CURE customer insured in Michigan is under $8,000, he said. Prior to the cost controls, industry data put the average Michigan PIP claim at about $56,000, according to Poe.

“So do we do things differently than everyone else? We do," he said. "But we also don’t have legacy claims.”

The 2019 no-fault reform also gave Michigan drivers a first-ever choice in the amount of no-fault medical coverage to buy. Previously, all auto policies came with unlimited lifetime no-fault medical coverage and in-home assistance, regardless of whether the driver had health insurance that covers auto accidents.

“Every Medicare recipient in this state was spending $1,000 for unnecessary duplicative coverage," Duggan said Wednesday, "including my mother, who thinks the auto insurance bill has been the best thing that I have done.”

Unlimited medical is still available and is the default option when no PIP option is selected. But few CURE customers are choosing unlimited PIP.

According to CURE, 94% of its customers choose one of the reform's newly available coverage options: $0 PIP, $250,000 PIP or $500,000 PIP, or just for Medicaid recipients, a $50,000 PIP option. Generally speaking, lower PIP coverage has a lower price tag.

However, like most other auto insurance companies, CURE has raised Michigan premiums in recent months in response to higher costs for vehicle parts and repair.

For Poe, the biggest surprise about the car insurance business in Detroit was the discovery of widespread extortionate pricing scams by some metro Detroit towing businesses and collision repair shops.

These businesses take in a CURE customer's vehicle after a crash and refuse to release it until CURE pays an extravagant amount for towing, storage and miscellaneous fees, sometimes totaling $5,000 or more for a single vehicle.

The scammers essentially sidestep the Detroit Police Department's program for "authorized" towing and impounds, under which firms are generally prohibited from charging more than $125 per tow and $15 per day for storage.

The scammers are charging "like $300 a day to stow a car in an unsecured lot in Detroit with no fencing, barbed wire or anything," Poe said. The scammers also make it difficult for CURE to locate and retrieve the vehicles, which runs up storage fees even more, he said.

About 30% of CURE's average claim in Detroit is for towing and storage fees, Poe said.

CURE has filed lawsuits against about 20 businesses for the alleged scams. It also has been working with Detroit police to make drivers aware of the possibility of exorbitant fees if they choose to go with non-authorized tow providers who show up at accident scenes.

“We realize that they were unaware that about 70% of all of the tows in the city limits of Detroit were non-police authorized tows," he said.

Michigan is the third state after New Jersey and Pennsylvania where CURE sells insurance, and it is now the insurer's biggest state market.

CURE is a not-for-profit reciprocal insurance exchange, which is when a group of people with similar backgrounds pool their premiums and share the combined risk to reduce everyone's premiums. The company was started in 1990 by Poe's mother, an insurance actuary, and his stepfather, a former New Jersey insurance commissioner.

Contact JC Reindl: 313-378-5460 or [email protected]. Follow him on Twitter @jcreindl.