Michigan Reminds Insurers: ‘Zero-Dollar Claim’ Is Not a Loss
Michigan insurance regulators in a June 15 bulletin reminded property/casualty insurance companies that relying on a “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.”
The department said it will not approve underwriting rules or rates that use zero-dollar claims directly or indirectly to increase premiums or limit coverage, including non-renewals.
Insurers have until July 30, 2021, to file a revision to any existing underwriting rules or rates that rely on or include zero-dollar claims as a basis for loss.
“Insurers that are found to have relied on zero-dollar claims for rate, premium, or underwriting purposes will be subject to appropriate administrative action,” the bulletin states.