An Open Letter To Legendary Investor Warren Buffett
Dear Legendary Investor Warren Buffett:
May the odds be ever in your favor. Your underwriting of the Quicken Loans Billion Dollar Bracket Challenge made for some momentary March Madness mayhem, even if the odds of winning were one in 9.2 quintillion — or, if you know how to pick ponies, as good as one in 128 billion.
Step off the court with me for one shining moment. Now that you and Dan Gilbert are BFFs — and you declared at Ford Field, “I have a real love for the city. And the potential is huge.” — I’d like to talk to you about something less momentous, yet even more maddening than basketball bracketology.
As encouraging as your words are (and as delicious as your Dairy Queen Blizzards are), what Detroit really needs is for you to lend us your actuaries. We know that you are a math whiz, and I can only assume that the number crunchers at your company Geico are at least as clever as the cavemen, reptile and other characters that pitch your product.
Yes, car insurance. Even those of us who are bullish about the future of transit in Detroit agree that most people need a car to get most places here. The state, reasonably, mandates that drivers insure their vehicles, but insurance costs are far from reasonable — even for drivers who spend 15 minutes to save 15 percent or more with you.
Just ask Mike Duggan. When he moved a few miles from Livonia into Detroit’s Palmer Woods, his auto insurance bill jumped from $3,000 to $6,000. Said Mayor Mike: “It is not justified. It doesn’t matter if you have a perfect driving record and have never been in an accident. Most Detroiters are paying more a month for car insurance than the car payment itself.”
The cost is so high that it makes lots of folks outlaws: Nearly 60 percent of the cars in the city go uninsured. Even the intrepid young professionals who are bringing their zeal, talent and creativity to Detroit often opt to keep their official residency outside the city to keep their insurance premiums low. Among other things, this prevents them from voting — in a city that already struggles with perennially low voter turnout.
Here’s where you come in, Mr. Buffett. The insurance industry’s lobbyists tell the mayor and the public that claims in Detroit are higher — most recently in a letter to the Michigan Chronicle, our leading African American newspaper. That’s unsurprising. Everybody expects insurance to cost more in the city than in some cornfield where there are no collisions or thefts. But you’ll search the papers in vain for any intelligent discussion about the real question: How much higher?
We need your actuaries to figure it out. Right now the city has to spend its money fixing the streetlights and can’t afford high-priced math geniuses of its own. The mayor wants to start a city-owned insurance company. Can he really make it fly, with prices below the current market, or is the cost of accidents in Detroit just too high?
Lots of folks here think that Detroit is getting a raw deal. Michigan has laws prohibiting “unfair discrimination” in insurance rates — unfair if they are “not reasonably justified by differences in losses, expenses or both, or by differences in uncertainty of loss” — but the Insurance Commissioner, our state official charged with enforcing those laws, has not been heard from in any of the newspaper debates.
It compounds the mood of suspicion that Michigan used to have laws limiting rate differences between city and suburbs; under Gov. John Engler and the anti-regulatory fever of the 1990s, those laws got gutted.
Help us dispel some ignorance. We’re a good bet.