Michigan insurance regulators are reminding property/casualty insurers that relying on “zero-dollar claim” in their insureds’ loss history is not allowed.
In Bulletin 2021-27-INS, issued by Michigan Department of Insurance and Financial Services Director Anita Fox, the DIFS said some P/C insurers are improperly using zero-dollar claims in their loss history in their rate, underwriting and renewal decisions.
The Bulletin states:
“Specifically, it appears that some insurers are increasing premiums, negatively underwriting, or refusing to renew coverage on the basis that an insured inquired about policy provisions such as a collision deductible; asked for an inspection of potential damage but ultimately did not file a claim; or, an insured filed a claim, but withdrew it prior to the insurer paying the claim.
“A zero-dollar claim is not a ‘loss’ because it does not result in reimbursement under the terms and conditions of the insurance policy.
“To the extent an insurer is using a zero-dollar claim as a proxy for loss history, this practice is not permitted under the Insurance Code.
“For personal lines of business, Chapter 21 of the Insurance Code, MCL 500.2101 et seq., limits the factors on which an insurer’s underwriting rules or rates may be based. For commercial lines of business, Chapters 24, 26, 27, 29, and 33 of the Code apply.
“In all instances, insurers may not rely on a zero-dollar claim as evidence of “loss” or include a zero-dollar claim on the insured’s loss history or claims information report.
“This bulletin informs insurers that the department will not approve underwriting rules or rates that purport to directly or indirectly increase premiums or limit coverage (including non-renewals) on the basis of a zero-dollar claim.
“Insurers that have existing underwriting rules or rates to the contrary are strongly encouraged to self-report to the Department and, in any event, must file a rule or rate revision that eliminates these provisions at the earliest possible opportunity, but no later than July 30, 2021.
“Insurers that are found to have relied on zero-dollar claims for rate, premium, or underwriting purposes will be subject to appropriate administrative action.”
Source: Michigan DIFS
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