Michigan Democrats Target Insurers Over Bad Faith Claims Denials

Democrats in the Michigan House are pushing a dozen bills they say are needed to protect consumers from unfair claims practices by insurance companies.

But insurers maintain the measures are unnecessary and will do more harm than good.

The House Insurance Committee is scheduled to hear the bills today.

According to the Democrats, Michigan has weak laws to protect consumers against wrongful denial of insurance claims by home, auto and health care insurance firms.

“By not honoring their promise to be there for consumers in their time of need, insurance companies boost their profits, forcing Michigan families into bankruptcy and even foreclosure just to care for the people they love,” the Democrats’ statement says.

The bills would impose heavy fines up to as high as $1 million against insurance companies. They would also levy civil penalties up to triple the amount of the original claim and charge insurance executives who encourage wrongful denial of claim with felonies.

However, according to the insurance industry, the state already has laws that govern claims handling. To add these additional restrictions and penalties now would be excessive and could further harm the state’s troubled economy, insurers argue.

“Michigan’s insurance regulator already has the power the check into claims handling,” said Ann Weber, Property Casualty Insurers Association of America (PCI) vice president, regional manager and counsel. “This group of bills unnecessarily singles out insurers and places excessive restrictions on a stable industry that employs thousands of people in the state. Considering the state of Michigan’s economy and its high unemployment rate, this legislation seems particularly ill-conceived.”

Weber said that similar legislation has been defeated in other states when lawmakers are told about the duplicative nature of the proposals and potential for negative consequence.

“Excessive ‘bad faith’ legislation clogs courtrooms with frivolous lawsuits, hinders insurers’ ability to fight fraud and drives up insurance costs,” said Weber. “These bills would create an extraordinarily harsh environment for the insurance industry. Michigan cannot afford to alienate responsible businesses that are providing jobs and working hard to serve their policyholders in the state.”

Pete Kuhnmuench, executive director, Insurance Institute of Michigan,
said that most policyholders are satisfied with the claims process and that the number of complaints to the state and his own group’s hotline has been dropping.

Democrats scheduled people who have worked in the insurance industry for a press conferences with legislators.

The proposals before the committee include HB 4144 through HB 5151 along with previously filed bills HB 4244, HB 4844 and HB 484.