LANSING – In response to robocalls attacking State Representative Barb Byrum (D-Onondaga) and other lawmakers after they introduced a plan to protect consumers and crack down on unfair insurance practices, Byrum and State Representative Mike Simpson (D-Jackson) today reiterated their commitment to end the culture of wrongful denial that has had devastating consequences for Michigan consumers.
"No one should have their life destroyed because an insurance company will not do what it promised," said Byrum, Chair of the House Committee on Insurance. "Insurance companies that play by the rules have nothing to fear from stronger consumer protections. These robocalls will not get us to back down from standing up for people that have been defrauded by their insurance companies. Insurance companies and CEOs should play by the same rules as everybody else, and no intimidation campaign will get me to back down."
Hours after Byrum and Simpson unveiled legislation to end the wrongful denial of legitimate claims by insurance companies, residents began receiving robocalls, or automated telephone calls, asking them to leave messages for Byrum in her office. The robocalls did not identify who had paid for the calls and failed to disclose which group or organization they belonged to.
Michigan is one of only four states that have no penalties for wrongful denial or "bad faith" insurance practices, which consist of a set of tactics to delay or deny legitimate property, automotive or health care claims in order to maximize a company's bottom line. The state's lack of penalties acts as an incentive for insurance companies to break their promises to boost profits. According to many news studies, including a 2007 Bloomberg News report, insurance companies make money by low-balling claims and collecting interest when they delay a consumer's legitimate claim. 1
"Insurance companies have all the resources in the world to get what they want done, but families depend on us to stand up for their interests," said Simpson, whose family was forced into bankruptcy after fighting an insurance company to get them to live up to their promises following the death of his daughter from cancer. "We're not going to be intimidated by insurance company pressure tactics. It's appalling that we're one of only four states that don't have protections against wrongful denial of insurance claims for our families. I ran for office to make sure that this didn't happen to anyone else again, and I'm not going to be silenced by insurance companies hiding behind robocalls."
The House Democrats' plan will:
- Strengthen consumer protections by punishing insurance companies that illegitimately deny consumer claims with penalties including a $1 million fine.
- Punish corporate leaders who knowingly foster or encourage wrongful denial of claims by making the misconduct a felony that could result in four years in prison plus a $50,000 fine.
- Create a whistle-blower protection plan to shield employees who report that an insurance company is engaging in wrongful denial of claims.
- Require insurance companies to repair a consumer's credit rating when harmed by wrongful denial of coverage.
The bills are currently in front of the House Committee on Insurance.
1 Dietz, David and Preston, Darrell. "Home Insurers' Secret Tactics Cheat Fire Victims, Hike Profits," Bloomberg News, Aug. 3, 2007.