CPAN Applauds Order Requiring Auto Insurance Refunds, Says More Consumer Protections Still Needed

CPAN Applauds Order Requiring Auto Insurance Refunds, Says More Consumer Protections Still Needed

Michigan Drivers Will Overpay All Summer Without More Action at DIFS

LANSING, Mich. — (June 3, 2020) — CPAN today applauded the Department of Insurance and Financial Services (DIFS) order requiring auto insurers to provide refunds to Michigan drivers in light of the COVID-19 pandemic, and said the move is an important first step toward protecting policyholders from being overcharged.  

Under the order, insurance companies are required to provide actuarial justification for their refunds or "an explanation of why a refund or premium waiver is not warranted at this time.” CPAN President John Cornack said that while it is unlikely that any insurer could justify refusing to give any refunds during the spring lockdown, it is essential that the public have access to the explanations insurers provide to ensure they are giving back enough money and not sitting on a windfall.

Cornack also noted that mileage remains significantly below pre-pandemic driving levels, so the insurer responses to the DIFS order should include plans for refunds as far back as March and going forward into the summer.

“With driving reduced and car accident claims way down since the pandemic hit, Michiganders should be getting substantial refunds on premiums, and that needs to continue throughout the summer, because we are not driving nearly as much even as the state starts to re-open,” Cornack said. “Whether you’ve lost a job or are working from home nowadays, everyone is still required to buy insurance, so we need to be sure that people are not being gouged by auto insurance companies that have been making huge profits since so much of the risk they cover has been reduced by the pandemic.”

Cornack added that the new rates set to take effect on July 2 are going to be excessive immediately, given the new normal we are facing when it comes to driving. Because the July 2 rates were developed before anyone knew there would be a pandemic that would have a lasting change on auto insurance risk, the rates that were approved assumed we would all be driving like it was 2019. State Farm acknowledged this problem when it announced that it would lower rates by around 12% starting in September, but other companies will still be using rates based on old data that are no longer sufficient to predict future risk. 

“The new auto no-fault rates will be excessive on day one and DIFS needs to call on all insurers to make plans to provide ongoing refunds until they have new rates in place that reflect the changes that this pandemic has caused,” Cornack said. “Furthermore, the reductions in benefits and claims payouts resulting from the changes in Michigan’s insurance law starting July 2 will also result in significant cost savings for insurance companies and this fact should not be lost in this conversation.”