After being forced by the Insurance Commissioner to take its 7-day auto insurance policies off the market, the agency offers short term car insurance policies that cancel after 13 days
L.A. Insurance promised the Insurance Commissioner last year that it would stop selling short term car insurance policies to Michigan drivers.
L.A. Insurance lied.
Not even 7 months after the agency swore that it would take its 7-day auto insurance policies off the market – and replace them with 6-month policies – L.A. Insurance is back at it, cutting corners and breaking its word with policies that will under certain circumstances automatically cancel after 13 days.
In his Crain’s Detroit Business story on April 9, 2019, “After state barred 7-day plans, L.A. Insurance selling plans that can expire after 13 days,” Chad Livengood reports:
“[D]ozens of agents” for L.A. Insurance have been pitching and selling “a six-month plan as way to buy 13 days of auto insurance coverage,” thereby allowing drivers just enough time to obtain or renew tags before the policy cancels automatically due to non-payment.
Essentially, Michigan drivers are right back where we started with L.A. Insurance and its craven insistence on driving up profits by inciting drivers to flout Michigan’s No-Fault law and, thus, drive without insurance.
For a long time, I’ve been a vocal opponent of short term car insurance policies and this latest development only reinforces my previous denunciations of them as nothing short of legalized fraud.
Specifically, short term car insurance policies of 7-days and 13-days in duration are:
“Where the greed of Michigan No Fault car insurance companies merges into the reckless indifference of Michigan lawmakers. It enables massive insurance fraud in many Michigan cities like Detroit. It jeopardizes the public’s welfare. It allows up to a 1.5 million people to drive without insurance in this state. The seven-day car insurance policies pedaled to Michigan drivers, especially in Detroit, by outfits like L.A. Insurance, are ultra-short-term No-Fault insurance policies that are created to help people violate Michigan’s mandatory requirement that owners of motor vehicles have auto No-Fault insurance.”
Additionally, short term car insurance policies like these result in more people driving without – not with – the legally mandated No-Fault auto insurance coverage. As I’ve said before, these policies “are not stepping stones leading people to becoming fully and legally insured drivers”:
“[T]hese ultra-short-term policies are just a cheap way of cheating the system and, thus, adding to Michigan’s growing problem of ‘uninsured’ drivers. Indeed, our own auto accident attorneys have found that the vast majority of the uninsured drivers who crash into our clients first purchased these short-term and one-week insurance policies, and then let them lapse so they could keep driving uninsured. The proliferation of these one-week auto insurance policies has led some cities in Michigan, such as Detroit, to have now more than 50 percent of drivers on the road uninsured.”
Again, thorough reporting by Crain’s Detroit backs this up. In his April 9, 2017, Crain’s Detroit Business story, “Solution to 7-day auto insurance could be difficult,” Chad Livengood reported:
Eighty-four percent of the Michigan drivers who registered their vehicles using a 7-day car insurance policy “did not have insurance coverage” “90 days later.”
Something must done about this abuse of the No-Fault auto insurance system. Thankfully, there’s plenty that can – and should – be done.
What can and must be done to end short term car insurance like the 13-day and 7-day auto insurance policies sold by L.A. Insurance?
If lawmakers and the Insurance Commissioner are actually serious about stopping people from driving without insurance, then they should consider any and all of the following courses of action for eliminating short term car insurance once and for all:
- The Insurance Commissioner could discipline L.A. Insurance.
- The Insurance Commissioner could withdraw approval of short term car insurance policies.
- The Insurance Commissioner could revoke the licenses of the L.A. Insurance agents who sold the 13-day policies.
- The Michigan Legislature could enact a law prohibiting the sale of any auto insurance policy for terms 7- or 13-days.
- The Michigan Legislature could require that, for policies of less than 6 months, drivers must make a full, non-refundable, upfront payment of the No-Fault PIP premium and the Michigan Catastrophic Claims Assessment – either when they apply for insurance or when they apply for plates and tags.
- The Michigan Legislature could change the law which allows drivers to cancel their auto insurance at any time – and, apparently, for any or no reason at all – and then be refunded the unpaid portion of their premium (See MCL 500.3020(1)(a))
Thirteen-day short term car insurance is illegal for the same reason 7-day auto insurance policies were
In withdrawing its approval of the 7-day policies that L.A. Insurance had been selling for years, the Insurance Commissioner, in its March 2017 notice, provided the following explanation for why it found the 7-day policy to run afoul of the law as stated in the No-Fault law:
The “seven-day policy term” and the “automatic expiration/nonrenewal provisions” – both of which are “fundamental to the entire Jump Start Policy” – are “not designed to ensure that Michigan drivers will maintain continuous no-fault coverage, as required by MCL 500.3101(1) … Rather, the Jump Start Policy as a whole is designed to ensure that coverage will automatically expire … in just seven days … and not be renewed, exposing drivers to periods of interrupted coverage without mandatory no-fault insurance.”
(Source: Department of Insurance and Financial Services, “Notice of Withdrawal of Approval” of Integon National Insurance Company’s “Jump Start Program w/ 7-Day Policy Term,” March 15, 2017)
Change “seven” to “thirteen” and the Insurance Commissioner can copy and paste the previous wording from 2017 into the withdrawal of approval notice that she is hopefully going to send to L.A. Insurance soon.
Significantly, the similarity in the functioning of the 7-day and 13-day short term car insurance policies is confirmed by what L.A. Insurance’s spokesperson (Mort Meisner) told Crain’s:
Like the automatic expiration/non-renewal provisions of the 7-day policy, “‘[i]f you don’t make the payment within 13 days [on the 13-day policy], it’s cancelled.’”
Is there still 7-day insurance in Michigan?
No. Well, at least, there are no more 7-day auto insurance policies being offered by L.A. Insurance.
After the former-Insurance Commissioner withdrew approval for the 7-day policies in a 2017 notice, in September 2018 the then-Insurance Commissioner and L.A. Insurance reached an agreement that the 7-day policies would no longer be sold.
I applauded this development because by encouraging drivers to forgo insurance, these short term policies were setting drivers up for devastating financial harm should be they be involved and/or injured in a crash.
In place of the 7-day policies, it was agreed that L.A. Insurance would offer 6-month, installment-payment policies.
Ironically, the 6-month policies are the ones that L.A. Insurance agents have recently been pitching as 13-day policies.
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