Do You Have To Wait? Auto Insurance Companies Wrongly Telling Drivers To Wait For Savings

July 19, 2020

The Department of Insurance and Financial Services (DIFS) has raised the alarm about auto insurance companies wrongly advising their customers that they will have to wait until their renewal period in order to take advantage of the savings associated with Michigan’s new insurance reform. For some auto-insurance customers, this could mean waiting months if not even into 2021, to be able to take advantage of the cost-savings associated with Michigan’s no-fault auto insurance system which took effect on the 2nd of July.

Michigan Auto Insurance Overhaul cause rate reduction

Michigan’s new insurance reform means that vehicle owners in Michigan will no longer need to pay for unlimited personal injury protection (PIP) coverage as standard with their policy and instead can choose the level of coverage that they wish to pay for. Previously, mandatory unlimited PIP coverage had caused premiums for vehicle owners in Michigan, and Detroit in particular, to be some of the highest in the nation, but thanks to the new reform, drivers could see savings of hundreds of dollars now that they are able to specify the level of PIP coverage that they require. Drivers can even choose to rely on their own health insurance plans to cover any medical bills associated with an auto accident and those with Medicare, or a commercial health insurance plan that cover injuries sustained from auto accidents, have the choice to opt-out of PIP altogether and to make serious cost-savings.

In light of these dramatic changes, the DIFS are encouraging Michigan drivers to review their policies and to shop around with other providers for the best rates, but this has been easier said than done for many consumers, and The Free Press has been inundated with complaints since the insurance reform took effect.

One driver reporting to the Free Press has said that his insurer, The Hartford, notified its policy-holders by letter that they would not be able to offer the new PIP options until their renewal period. Although this is not untrue, as The Hartford does not offer their customers the option to make mid-term changes, it is not the full answer, as it fails to notify drivers of their option to cancel their policy and to reissue it with the new coverage options. By misinforming customers of the options available to them, auto-insurance carriers are tricking them into keeping a more expensive policy until their renewal date.

Another driver was told by his insurance provider that he needed to wait until his policy came up for renewal in 2021, something that was reiterated to him by several staff members over the phone but he now knows to be untrue.

Anita Fox, who is the director of the Department of Insurance and Financial Services, issued a formal bulletin to insurance companies on Wednesday the 8th of July proclaiming that forcing their customers to wait until their renewal period, which for many was months away, was ‘improper behavior’ and that auto insurance providers must give their customers at least one of two options to make changes in light of the insurance reforms otherwise they are breaking the law.

The two options that should be given to auto-insurance customers are:

  1. The opportunity to modify their existing policy and make mid-term changes
  2. Or the option to cancel and reissue their policy to include the new coverage choices associated with Michigan’s new insurance reform. The same provider can reissue the policy, or the customer could take their business elsewhere.

Although modifying an existing policy is clearly the easiest route for most people to take, not all insurance providers offer mid-term changes to their customers, in which case they should then be offering their customers the second option to cancel and then reissue their policy with either the same provider or to go elsewhere.

According to DIFS and the bulletin by Anita Fox, any auto insurance carriers who are telling their customers to wait until their renewal period and who are not clearly offering at least one of these two options to their Michigan customers are violating the law. If insurance carriers fail to provide their customers with at least one of these two options, then they leave themselves open to fines and legal action that could see them have their licenses revoked.

The Michigan Insurance Department has opened a hotline to answer questions on this subject or for consumers to file complaints against their insurance providers if they are not offering them the chance to make midterm changes or to cancel and reissue their policy. The hotline can be found at 833-ASK-DIFS.