Insurance Industry Bashes Michigan 'Bad Faith' Legislation

By Chad Hemenway, associate editor, BestWeek
A. M. Best
PR Newswire
July 14, 2009

The insurance industry is denouncing a series of bills coming out of Michigan that deal with unfair trade practices and "bad faith" claims handling.

The package of bills "unfairly attacks" the industry, said a statement from the Property Casualty Insurers Association of America.

"Michigan's insurance regulator already has the power to check into claims handling," said Ann Weber, 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," she added.

The bills, HB 4144 through HB 5151 as well as several others, are aimed at protecting policyholders from unfair claim denials. Some Democratic lawmakers held a press conference recently to announce the legislation. Pete Kuhnmuench, executive director of the Insurance Institute of Michigan, said "it is unfortunate that a time when House Democrats could be working with the insurance industry to grow jobs to help Michigan's economy, they are focused on duplicative legislation and politically motivated news conferences."

The Michigan House Insurance Committee will consider the bills at a hearing.

The insurance industry, Kuhnmuench said, is focused on settling claims and helping policyholders after a loss. The American Insurance Association added that automobile and homeowners insurance policies accounted for only 32% of all complaints to the state in 2008.

John Birkinbine, AIA assistant vice president of the Midwest region, said bad faith bills like those being introduced in Michigan "only invite frivolous lawsuits and higher insurance costs."

Recently, industry trade organizations applauded the defeat of bad faith legislation in Maine. Insurers also have won battles against bad faith legislation in Connecticut, Iowa, Montana, New Mexico and Oregon (BestWire, June 19, 2009). Insurers recently testified against bad faith legislation proposed in Washington D.C. (BestWire, June 29, 2009).

The top five writers of homeowners multiperil insurance in Michigan in 2008, according to A.M. Best state/line data, were: State Farm Group, with 20.4% market share; Auto-Owners Insurance Group, 14.5%; Auto Club Group, 10.2%; Hanover Insurance Group, 9.3%; and Allstate Insurance Group, 8.0%.

The top five writers of private passenger auto insurance in Michigan in 2008, according to A.M. Best Co. state/line product information, were: State Farm Group, with 18.6%; Auto Club Group, with 16.0%; Auto-Owners Insurance Group, with 9.5%; Progressive Insurance Group, with 8.6%; and Hanover Insurance Group Property and Casualty Cos., with 7.8%.

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