Who Regulates Insurance and Provides Protection to Insurance Consumers in Michigan?

The Michigan Department of Insurance and Financial Services (DFIS) regulates the insurance industry in Michigan. As part of its role, the DFIS monitors the activities of institutions that sell financial and insurance products within the state, ensuring sound business practices to protect insurance consumers from fraud and abuse. In addition to regulating the following, the Michigan Department of Insurance and Financial Services also oversees:

• Banks
• Credit Unions
• Insurance Agencies
• Insurance Agents
• Mortgage Licensees

Michigan has an estimated population of over 10 million. The state’s 40,174.61 square miles of water body makes it vulnerable to tornadoes, severe storms, floods, and winter storms. Michigan residents also experience damage from wildfires, earthquakes, and power outages. These disasters and many others are covered by one form of insurance or the other.

As part of its National Flood Insurance Program (NFIP), the Federal Emergency Management Agency (FEMA) educates citizens on ways to reduce the impacts of natural disasters. The NFIP provides insurance coverage to lessen the socioeconomic impact of disasters on U.S. property owners by providing affordable disaster insurance policies and enforcing floodplain management regulations. For information on how FEMA, through its NFIP, protects Michigan residents from floods, contact the FEMA Mapping and Insurance Exchange (FMIX) at (877) 336-2627 or via email.

Insurance customers in Michigan can enjoy additional protection through the state’s insurance guaranty associations. Insurance guaranty associations are statutory bodies established by state laws to protect insureds of insolvent insurers in the event of bankruptcies. All registered insurance companies in Michigan must belong to either the Michigan Life and Health Insurance Guaranty Association (MLHIGA) or the Michigan Property and Casualty Guaranty Association (MPCGA) as a condition for operating within the state.

All insurance companies offering life and health insurance coverage in Michigan are members of MLHIGA. Likewise, all registered property and casualty insurers in the state are members of MPCGA. If a member of a guaranty association is declared insolvent by a court of competent jurisdiction, the association will step in to fulfill the member’s commitments to their customers. A guaranty association will pay for an insured’s claim up to the limits stated in the association’s Act. Michigan insurance guaranty associations are non-government, non-profit organizations funded through membership assessments and also by disposing of the estates of insolvent members.

What is the Michigan Department of Insurance?

The Michigan Department of Insurance and Financial Services (DIFS) (formerly known as the Office of Financial and Insurance regulation) is the agency that regulates insurance and financial activities within the state. It ensures that all insurance and financial products consumers have access to secured services. Also, DIFS protects consumers against the fraudulent activities of entities offering insurance and financial services in Michigan. The Michigan Legislature enacted the Michigan Department of Insurance and Financial Services (DIFS) through Act 218 of the 1956 Insurance Code/mileg.aspx?page=getObject&objectname=mcl-act-218-of-1956) to monitor the activities of the institutions offering insurance products within the state. Some of the statutory duties of the DIFS include:

• Protection of Michigan residents from fraudulent acts by insurance and financial institutions
• Regulating insurance companies
• Educating the public on insurance products
• Licensing of insurance and financial institutions applying to operate in Michigan
• Monitoring the activities of banks, insurance agents, mortgage licensees, credit unions, and other consumer finance-related entities

The DIFS administers 39 public Acts in the Michigan finance and insurance industry. In addition, it regulates other financial product licensees within its jurisdiction like credit unions to protect consumers and ensure that actors in the industry abide by the rules. Insurance customers in Michigan with complaints about their insurers can file such complaints with the DIFS:

• By calling toll-free at (517) 284-8800 or (877) 999-6442
• Through fax at 517-284-8837
• By mail to:

Department of Insurance and Financial Services

P.O. Box 30220

Lansing, MI 48909-7720

OR

Department of Insurance and Financial Services

530 W. Allegan Street, 7th Floor

Lansing, MI 48933

Who Regulates the Michigan Department of Insurance?

The Michigan Department of Insurance is overseen by the Financial Service Director, who is also the Insurance Commissioner, in the Department of Insurance and Financial Services. The Insurance Commissioner is an executive appointee of the Michigan governor whose role is to oversee the activities of the state’s insurance industry.

What are the Unfair Trade Practices in Michigan?

Unfair trade practices use deceptive, unethical, and fraudulent methods to gain an advantage against competitors in business and cheat customers. Examples of unfair trade practices in the Michigan insurance industry include:

• Misrepresentation of facts about an insurance product
• Inducement using gifts
• Offering a rebate to an insurance consumer as a form of inducement for patronage
• Deceptive pricing
• Non-compliance to industry standards
• Failing to make a refund as agreed before the sale of products or services that do not meet the promised standards
• Discriminatory treatment of consumers
• Misappropriation of policyholder’s fund by an insurance agent
• Omitting the necessary information that may likely influence an insurance consumer’s choice
• Intentional misquote of premium to land an insurance sale
• Misrepresenting the benefits of an insurance product to make a sale
• Charging a consumer above the price for similar goods and services
• Entertaining transactions that encourage consumers to waive a right, benefit, or immunity conferred on them by the law
• Selling a product to a consumer through coercion or under duress

The Michigan Consumer Protection Act/mileg.aspx?page=getObject&objectName=mcl-445-903) (Act 331 of 1976) prescribes punitive measures against individuals who engage in unfair trade practices in the state. It also does the following:

• Ensures that businesses in Michigan abide by the rules that govern business operations in the state
• Protects consumers from fraudulent acts of business owners and their agents
• Promotes fair practices in businesses by defining the laws that business owners and service providers must observe in Michigan

Based on the unfair trade practices law, the attorney general, a prosecuting attorney, or a private citizen may file suit against entities that violate the law. To be considered an unfair trade practice in a lawsuit, an action must be consistent, and the burden of proof falls on the plaintiff. In Michigan, the penalty for violating the unfair trade practices law varies based on the types of businesses and services. However, a court may award civil fines between $100 and $25,000 for persistent and deliberate violations. In addition, certain violations may attract an additional daily fine of $1,000 for daily occurrence.

How to Report Suspected Unfair Trade Practices in Michigan

Michigan residents who want to report unfair trade practices may do so through the state Attorney General’s Office online. Alternatively, you may complete the consumer complaint/inquiry form, attach any necessary documents and submit it to the Attorney General’s Office via mail to:

The Michigan Department of Attorney General

Consumer Protection Division

P.O. Box 30213

Lansing, MI 48909-7713

Fax: 517-241-3771

Consumer complaint/inquiry forms can also be mailed to addresses provided in the Michigan Department of Attorney General complaint directory depending on the category of complaints.

What is the Michigan Life and Health Insurance Guaranty Association?

The Michigan Life and Health Insurance Guaranty Association (MLHIGA) is a non-government-funded association that protects holders of life and health insurance policies in the state. It shields consumers of life, health, and annuity insurance products from the full impact of financial losses if a member insurance company becomes financially incapable of meeting its obligation to its customers. The Michigan legislature enacted the life and health insurance guaranty association through Chapter 77 of the Insurance Code of 1956/documents/mcl/pdf/mcl-218-1956-77.pdf). If a member insurance company of the MLHIGA becomes insolvent and is declared bankrupt, the MLHIGA will pay an insured up to the following limits:

How Does the Michigan Life and Health Insurance Guaranty Association Work?

In Michigan, if a court of competent jurisdiction declares an insurance company insolvent, it will appoint a receiver (liquidator) to assess its assets and liabilities. After assessments, the MLHIGA would take over the insurance company's obligations. The Michigan Life and Health Insurance Guaranty Association will strive to transfer policies of insolvent members to capable insurers subject to the insured's consent. To transfer policies to new insurers, the MHLIGA must obtain the court’s approval. If a policyholder decides to file a claim for a covered event, the Michigan Life and Health Insurance Association will pay an amount within its payment limits as stated in the association’s law. To get more insight into how the Michigan Life and Health Insurance Guaranty Association works, below are some FAQs:

• What claims are covered by MLHIGA?

  The MLHIGA pays insureds for covered claims of life, health, and annuity policies of insolvent member insurers in Michigan

• How does MLHIGA raise funds for claim payments?

  The MLHIGA is an NGO. Money for claim payouts is raised by assessing members of the association. Additional funds are raised by selling the estates of insolvent life, health, and annuity insurers in the state

• How fast does MLHIGA pay claims?

  How fast policyholders of an insolvent member of the MLHIGA are paid depends on the length of the assessment period. If a member of the association is declared bankrupt by a court, all payments from the company’s accounts will be suspended. A receiver (liquidator) will be appointed by the court to assess its assets and liabilities. As a part of the assessment process, the court (through the court clerk) will send a proof of claim form (official form 410) to the insolvent company’s policyholders and other creditors to petition for payments. MLHIGA only steps in to make payouts after the assessment process is complete, and this may take weeks or even months

• Do I continue to pay a premium for my policy if my insurer goes bankrupt?

  If your insurer is declared bankrupt by a competent court, you either cancel your policy (or have it canceled by the court), or you continue with the policy. If a policy is canceled (or terminated), you do not need to pay further premiums. However, if you wish to maintain the policy and its coverage, you must continue to pay premiums

• To whom do I pay a premium if I wish to continue with my life insurance policy?

  One of the goals of MLHIGA is to transfer the policies of insolvent members to more capable insurance companies as soon as possible with the permission of the court. While the process of securing willing insurers is ongoing, all premium payments are made to MLHIGA. However, once your policy is transferred to another insurer, you should pay the premiums to the new insurance company

• What if my claim exceeds the MLHIGA limit?

  MLHIGA pays for claim amounts that are within limits stated in the association’s Act. If a claim exceeds the limit, Michigan Life and Health insurance Association will pay up to the allowable amount, and the policyholder may have to forfeit the excess amount. Alternatively, you can file the excess claim against the insolvent insurer’s estate, and the association may pay it if there are leftover funds after payments for other policyholders' covered claims

• Will I still be protected by MLHIGA if I move permanently out of Michigan?

  MLHIGA protects the policyholders of insolvent insurance companies who live or operate (if a business entity) in Michigan. If you no longer reside in Michigan, your new state’s life and health insurance guaranty association will protect you if your insurance company is a member of the association

• How do I confirm if I have protection under MLHIGA?

  To confirm whether your insurer is a member of the MLHIGA, you can call the Michigan Department of Insurance and Financial Services call center specialists at (877) 999-6442 from 8:00 a.m. to 5:00 p.m., Monday through Friday

• How does the “one life” limit policy work?

  The one life limit applies per person per an insolvent insurer. This means that in the event of an insurer’s insolvency, an individual is entitled to only one payout for a particular type of policy regardless of how many they have with the insurer. For instance, if you have two annuity plans with the same insurance company, your annuity benefit payout is pegged at $250,000 if the company is declared bankrupt

• Why did my insurance company not tell me about MLHIGA?

  The law prohibits insurance companies from using the membership of MLHIGA or any guaranty association as a form of advertisement to entice the public to buy their products

• How do I determine the financial standing of an insurance company in Michigan?

  You can find out the financial standings of insurance companies under the supervision of the Michigan Department of Insurance and Financial Services at (877) 999-6442. You can also confirm an insurance company’s financial ability through rating agencies like Standard and Poor’s, A.M. Best, Moodys, and Fitch Ratings

What Is the Michigan Property and Casualty Insurance Guaranty Association?

The Michigan Property and Casualty Guaranty Association (MPCGA) is an unincorporated entity established by the state Senate through Section 500.7901/mileg.aspx?page=getObject&objectName=mcl-218-1956-79) of the Insurance Code of 1956. The MPCGA protects policyholders of property and casualty insurance companies in the state (aside from those of disability insurance and annuity contracts) from some of the financial losses that may result due to the insolvency of their insurers. As criteria for operating in the state, all insurance companies offering property and casualty insurance in Michigan must register as members of the MPCGA. The Michigan Property and Casualty Guaranty Association handles claims involving:

• Automobile Insurance
• Workers' Compensation Insurance
• Title Insurance
• Allied lines, credit, earthquake, farm owner’s multiple perils, fire, inland marine, homeowner’s multiple peril insurance
• All other types of insurance except life and disability insurance

How Does the Michigan Property and Casualty Insurance Guaranty Association Work?

The Michigan Property and Casualty Guaranty Association provides coverage to policyholders of its members in the event of any member’s bankruptcy. When a member becomes insolvent and cannot fulfill its responsibilities to its consumers, the MPCGA will step in to take responsibility for some of those obligations for covered claims up to the limits stated in the guaranty association’s Act. With the exclusion of worker’s compensation insurance, the MPCGA will pay up to $6,720,000 for covered claims and $1,780 for unearned premium refunds as of 2022. The figures are reviewed on the first day of each year to reflect changes in living costs. Also, the amount for a covered claim is rounded to the nearest $10,000.

The FAQs below answer some of the questions on how the Michigan Property and Casualty Guaranty Association works.

• Who is protected by the MPCGA?

  MPCGA protects policyholders of insurance companies that are members of the association if such companies become insolvent

• What does MPCGA not cover?

  MPCGA does not cover disability, life, and annuity contracts (these are covered by the Michigan Life and Health Insurance Guaranty Association). Also, the association does not cover surplus line insurance

• What is the benefit limit for worker’s compensation insurance?

  There is no limit to worker’s compensation claims. The MPCGA can pay the full benefit of such claims

• Will my worker’s compensation insurance benefits be interrupted if my insurer is declared insolvent?

  If your insurer becomes insolvent, the MPCGA will make an effort to pay your benefits when due based on available information from the insurance company. However, payments may depend on the availability of funds

• Will I still be entitled to my full benefit if my insurer is insolvent?

  Except for workers’ compensation insurance, the MPCGA may not make full payments for covered claims due to the statutory limit for claims. Your payout for covered claims will not exceed the maximum amount for covered claims at the time of insolvency of the insurer

• What types of payments does MPCGA exclude?

  Although MPCGA pays for claims covered in a policy’s contract, it excludes those that falls within the following categories :

  • Claims filed after one year from the date of the liquidation by the court
  • Claims filed by individuals with net worths of over $5,000,000 at the time the insurance company was declared insolvent.
  • Claims against an insured individual whose net worth is over $50,000,000 at the time the insured event occurred
  • Claims made by individuals who are directly or indirectly under the control of the insolvent insurer as of December 31 of the year before liquidation
  • Payments due to any reinsurer, insurer, insurance pool, or underwriting association
  • Supplementary obligations such as attorney fees and expenses, court costs, adjustment fees and expenses, interest, and bond premiums that may arise as policy benefit or otherwise before the appointment of a receiver

• Do I need to file a new claim with MPCGA if I have already done so with my insolvent insurer?

  Yes, you need to file a claim with MPCGA regardless of any outstanding claim you had with the insurer before its insolvency. If your insurer is declared insolvent, you can quickly complete and sign a proof of claim form and submit it to MPCGA

• Do I have a deadline for claim submission?

  Yes, there is a deadline for submitting claims. You should submit your claim to the MPCGA or the receiver on or before the date set for claim submission by the liquidation court

• Does MPCGA cover claims for unearned premiums?

  Yes, MPCGA covers claims for unearned premiums. The maximum amount payable as an unearned premium for 2022 was $1,780. This figure is reviewed on the 1st of January each year to reflect changes in the cost of living

• If I have other insurance to cover my claim, will it affect how MPCGA responds to my claim?

  If you have other insurance coverage to pay for damages (other than disability or life insurance coverage), these other policies will become your primary insurance. You must exhaust all benefits of these policies before looking up to the MPCGA. Payments for damages and benefits accruing from such other policies are considered credits to the MPCG

• At what point does MPCGA step in to provide coverage?

  The MPCGA will take over the obligations of an insolvent member after assessment by the court-appointed liquidator. The assessment process may take weeks or months

• How do I find out if I am eligible for MPCGA protection?

  You are eligible for protection if your insurer is a member of MPCGA. You can confirm your eligibility by calling the Michigan Department of Insurance and Financial Services toll-free at (877) 999-6442, or via email

• What happens if there are pending court cases involving the insolvent insurer?

  All court cases in which the insolvent insurance company is obligated to defend the accused, or is a direct defendant are stayed for six months commencing from the date the court appoints a liquidator. The court may allow additional time for the defendant to prepare fully

• What do I do if there is a new claim or lawsuit against me?

  If there is a claim or lawsuit that has coverage under your policy with an insolvent insurer, you should immediately complete and sign a Statement-of-Claim Form and submit it to the MPCGA along with copies of relevant documents