Michigan’s insurance regulator released an October 24th bulletin cautioning automobile insurers that it will act against claims administration practices that breach state law and disadvantage policyholders. It is not clear whether the notice was prompted by specific complaints, a pattern of observed conduct, or a broader regulatory initiative to reinforce compliance standards in the state’s insurance market.
Citing the Insurance Code of 1956, the Department of Insurance and Financial Services reminded carriers that “their claims administration practices must follow the Code,” and that it “will take regulatory action if it identifies a Code violation or a pattern of practices that violate the Code.” The bulletin quotes the statutory requirements for conduct: “An insurer may not undertake a course of conduct that fails either ‘to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies’ or ‘to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.'”
The department set out a non-exhaustive list of conduct that “may include, but [is] not limited to,” practices it views as improper for collision and comprehensive cover. Among them are “making misrepresentations to claimants during claims administration,” “failing to investigate claims promptly,” and “failing to make timely payment on claims that are not reasonably in dispute.” It also called out “failing to pay the statutorily required interest for untimely paid claims,” underlining the expectation that late payments carry the interest mandated by law.
Several examples focus on total loss handling and title transfers. The bulletin warns against “declaring a vehicle a total loss and having the claimant transfer the vehicle’s title and then refusing to pay the claim,” and against “taking possession of a vehicle and retaining the proceeds from the sale of the vehicle when the claim has been denied or the insurance policy has been rescinded.” The regulator also highlighted settlement tactics that suppress payouts when liability is clear, including “denying claims or offering to pay substantially less than what is owed on claims when liability is reasonably clear, including by prolonging the claims administration process or making unreasonable proof-of-loss demands to improve the insurer’s bargaining position.”
The agency paired this guidance with an explicit reminder of its powers. “Possible sanctions for the abusive practices described above include, but are not limited to, fines and/or suspension or revocation of an insurer’s certificate of authority.” At the same time, it stressed procedural fairness and confidentiality: “This bulletin does not establish that any insurer has committed the practices described above,” and “under the Code, such complaints and investigations are generally considered confidential until the Department initiates formal legal action.”
The agency also reminded consumers how to file complaints. “DIFS strongly urges any consumer who has knowledge of the abusive conduct described above, or of any other abusive practices in claims administration, to file a complaint on the DIFS website at Michigan.gov/DIFScomplaints or by calling DIFS Monday to Friday from 8 a.m. to 5 p.m. at 877-999-6442.” The bulletin provides a further point of contact for “any questions,” directing inquiries to the Department’s Office of General Counsel in Lansing.
