TIPTON – State Representative Dudley Spade (D-Tipton) today called for the House to take swift action to protect Michigan consumers from wrongful denial or "bad faith" insurance practices. The Representative called on members of the House Committee on Insurance to immediately consider legislation that would stiffen penalties for insurance companies and hold corporate leaders responsible for policies that establish claims denial quotas or create incentives for adjustors to inappropriately deny legitimate claims. Rep. Spade noted that similar legislation is already in place in 46 other states.
"There are many insurers right here in Lenawee County and across our state that do the right thing every day. Unfortunately, there are bad actors in the market who gives these legitimate providers a bad name while hurting Michigan's citizens," Spade said. "I know constituents here in our community who have made legitimate claims to their insurance provider only to have them denied. They deserve better."
Bad faith insurance practices consist of a set of tactics to delay or deny legitimate property, automotive or health care claims in order to maximize a company's bottom line. Such practices can have devastating consequences for consumers while reaping profits for companies.
Michigan's current law offers little or no protection against bad faith insurance practices, and the state's lack of penalties acts as an incentive to encourage companies to break their promises and exploit residents. According to a 2007 Bloomberg News report, at least two insurers doing business in Michigan have employee incentive programs for adjusters who deny the most claims. According to the same report, insurance companies even make money by low-balling claims and collecting interest when they delay a consumer's claim.*
"Customers pay their premiums faithfully and rely on their insurance to help get them through some of the toughest times of their lives," Spade continued. "They deserve to have a fair review of their claims rather than being automatically denied in an effort to widen insurance companies' profit margins."
- Dietz, David and Preston, Darrell. "Home Insurers' Secret Tactics Cheat Fire Victims, Hike Profits," Bloomberg News, Aug. 3, 2007.