Democrats in the Michigan House are supporting about a dozen consumer protection bills that address unfair trade and “bad faith” claims practices by insurance companies. The underlying rationale for the Democrats’ staunch support of these bills is that Michigan has weak laws to protect consumers against wrongful denial of insurance claims by home, auto and health care insurance companies.

However, the insurance industry disagrees with the Democrats’ stance on this issue and maintains that Michigan already has state laws that govern claims handling. The insurance industry also argues that additional restriction and penalties could further harm Michigan’s economy. The Property Casualty Insurers Association of America issued a statement stating that Michigan bills "unfairly attack" the insurance industry, and the American Insurance Association supplied supporting statistics to this end, citing "that automobile and homeowners insurance policies accounted for only 32% of all complaints" in Michigan in 2008.

The proposals before the Michigan House committee include HB 4144 through HB 5151, along with previously filed bills HB 4244, HB 4844 and HB 484, which are all aimed at protecting policyholders from unfair claim denials. If passed, these bills would impose heavy fines up to $1 million against insurance companies. Civil penalties could also be levied up to triple the amount of the original claim and insurance executives who encourage the wrongful denial of claim could be charged with felonies.

Additionally, HB 5151 proposes that if a court determines that an insurance company has acted in bad faith in failing to pay timely benefits under the policy, the insurance company would be required to send letters to the three largest national credit reporting agencies including the following information: (1) a statement that any delinquency made by the insured in making a payment related to the act of bad faith is the fault of the insurer; and (2) a request that the agency amend the insured’s credit history.