Protecting Michigan's Auto Insurance Promise

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New report finds auto insurance companies overcharged Michigan policyholders by $1.2 billion in 2020

New report finds auto insurance companies overcharged Michigan policyholders by $1.2 billion in 2020

Hutchings: This should be final straw for Michigan legislators

 

LANSING, Mich.—(Aug. 25, 2021)—In the latest egregious example of Michigan’s auto insurance companies taking advantage of their customers, a new report from the Consumer Federation of America (CFA) and the Center for Economic Justice (CEJ) has found that Michigan policyholders were overcharged by $1.2 billion in 2020, as miles driven, vehicle crashes and auto insurance claims dropped because of the pandemic.

The report, which analyzed every U.S. state, found that Michigan consumers were overcharged more than those in all but four other states. In total, the report found that insurers should have returned $42 billion of premium overcharges to consumers, but actually returned just one-third of that amount.

“Michigan’s auto insurance companies have a long, sordid history of unacceptable behavior,” said Devin Hutchings, president of CPAN. “For years, they’ve used redlining and other non-driving rating factors to jack up the rates of drivers in low-income communities like Detroit and Flint. Since July, they’ve been responsible for hundreds of catastrophically injured auto accident victims losing access to necessary care, since they’ve been unwilling to negotiate with providers under the state’s new and devastating 45% reimbursement cap. And now, they’ve effectively stolen billions from the pocketbooks of Michigan consumers, as they struggle to get back on their feet following the economic destruction wrought by the pandemic.”

While auto insurance companies socked it to Michigan consumers, they were raking in record profits. According to research conducted by Douglas Heller, an insurance expert with CFA who helped compile the report, here’s how some of Michigan’s largest insurers fared in 2020:

  • Progressive reported a 44% increase in profits nationwide, netting $5.7 billion in income.

  • Allstate more than doubled its auto insurance “underwriting income” to $3.4 billion.

  • State Farm reported a national auto insurance “underwriting gain” of $1.6 billion; this is 50% higher than State Farm’s next best underwriting results from the last 10 years.

  • Citizens insurance, which is owned by the Hanover Group, reported 2020 personal lines insurance income before interest and taxes that was 47% higher than 2019. 

Meanwhile, the 45% reimbursement cap on specialized rehabilitation services for auto accident victims—which was passed as part of auto insurance reform in 2019—has created an unfolding and growing crisis in Michigan. Nearly 700 patients have already lost needed care, while more than 1,500 health care jobs have been lost, according to a dashboard kept by the Michigan Brain Injury Provider Council. Several bills that would have offered a narrow and technical fix to the reimbursement cap were introduced earlier this year, but failed to receive even a hearing due to fierce lobbying from the auto insurance industry.

“This should be the final straw for Michigan legislators,” Hutchings said. “It’s time to take action to protect Michigan consumers and hold these auto insurance companies accountable for their bad deeds.”

The report notes that despite analyses and warnings from CFA and CEJ starting in March 2020, when it was clear that the reduction in driving had made then-current insurance prices excessive – and in violation of the law in almost every state – the vast majority of insurance regulators took no action to compel insurers to return the illegal profits.

Heller said that the Michigan Department of Insurance and Financial Services (DIFS) did the right thing early in the pandemic and ordered that insurers make refunds of excess premiums for two months last spring, but they didn’t demand insurers give back all of the unnecessary premium and they didn’t order insurers to continue the rebates as the pandemic dragged on and accidents remained low.

“Michigan lawmakers, along with Gov. Whitmer and her administration, need to be thinking about priorities when it comes to the auto insurance system,” Heller said. “Should they be deferring to the insurance companies who are flush with cash and putting windfall profits into the pockets of shareholders and executives? Or should lawmakers be shoring up the system of care that Michigan policyholders have been paying into for decades?”

Scott Swanson