Local businesses, trade associations, and nonprofit organizations have joined together to launch the Don’t Touch MI Rates Coalition with the mission of protecting Michigan families and small businesses from so-called “bad faith” legislation introduced in the state Legislature.
Today, a member of the coalition, The American Property Casualty Insurance Association (APCIA), released a study on the economic impact of proposed bad faith insurance reforms in Michigan showing the bills could impose big costs on consumers if signed into law.
In fact, the changes in House Bill 4681 and Senate Bill 329 would create 35 new avenues for legal action against insurance companies, creating a potential cost to Michigan consumers ranging between $2.4 billion and $4.7 billion, or 11 percent to 21 percent on average across all types of insurance policies (as indicated on page 16 of the report).
The potential for disruption of the insurance market could lead to higher auto, home, and other insurance costs for all Michiganders.
The proposed legislation was drafted to include nearly all types of insurance in Michigan. However, the most dramatic impact is likely to be on Michigan’s 7.2 million drivers where auto insurance policies could skyrocket by nearly 40 percent.
“The proposed bills would lead to higher insurance costs that could have a disproportionate effect on low-income Michiganders, who are less likely to be able to pay higher premiums,” says Dawn Crandall, executive vice president of the Home Builders Association of Michigan in Lansing. “Being unable to afford insurance would leave more low-income people vulnerable to financial ruin in the event of a car accident, house fire, or other emergency.”
While the bills are being touted as a consumer protection measure, they are more about increasing profits for the trial bar than protecting consumers, the study notes.
“The proposed bills will create costly and frivolous lawsuits over insurance claims, which means everyday Michiganders may end up paying more for insurance,” says Tim Daman, president and CEO of the Lansing Regional Chamber of Commerce. “This is the last thing consumers need, when they are already feeling the impact of higher costs due to inflation.”
It’s not just consumers that will be impacted though, small businesses will feel the financial burden of the proposed reforms if enacted.
“This study notes that these proposed bills could lead to escalated costs for consumers and businesses across the state, increase fraud, and open the litigation floodgates creating detrimental consequences for all Michiganders particularly small business owners,” says Jared Burkhart, CEO of Big I Michigan.
Similar efforts have been tried in other states to the detriment of consumers.
When states like California, Florida, and Washington passed similar legislation, studies showed there was an increase in the cost of insurance claims and insurance premiums, attributable to unwarranted increases in both settlement amounts and lawsuits.
“We should heed the warnings from these other states. If similar increases occurred in Michigan, it could ultimately negatively affect consumers,” Burkhart adds.
Michigan has strong, robust consumer protections regarding insurance claims practices and strong regulatory protections, oversight, and investigations. The Michigan Department of Insurance and Financial Services (DIFS) has many tools at its disposal, including market conduct examination, fines, penalties, enforcement litigation, and suspending a business’ license to protect Michigan consumers.
The mission of the Don’t Touch MI Rates Coalition is to protect working families and small businesses from so-called “bad faith” legislation introduced in the Michigan Legislature. Learn more about the Don’t Touch MI Rates Coalition by visiting its website.
