The Michigan Department of Insurance and Financial Services (DIFS) published a bulletin informing automobile insurers of claims practices that may violate the state insurance code.
The Department reminds insurers that their claims administration practices must be compliant with Insurance Code, 1956 PA 218, MCL 500.100 to 500.8302, and warns that violations will result in regulatory action.
The Department highlights in particular MCL 500.2026(1)(c) and (f), which state that an insurer commits an unfair or deceptive act if it fails to adopt and implement reasonable standards for prompt claim investigation and if it fails to settle in good faith claims where liability is reasonably clear. The Department states that the following acts may be considered improper claims administration practices:
- Making misrepresentations to claimants
- Failing to investigate claims promptly
- Failing to make timely payments
- Failing to pay the required interest for late payments
- Declaring a vehicle a total loss without first completing an investigation and agreeing to pay the claim
- Canceling or rescinding a policy after acquiring a vehicle’s title
- Retaining the proceeds of a sale after canceling or rescinding a policy
- Investigating underwriting issues after a claim is filed and not before
- Denying claims or offering a low settlement on claims where liability is reasonably clear
- Unreasonably prolonging the claims process or making unreasonable demands of the insured