Key Takeaways
- The Michigan Insurance Code prohibits misrepresentation, false advertising, and unfair claims practices
- Rebating is prohibited in Michigan with limited exceptions for premium financing and dividends
- Twisting and churning are prohibited practices subject to license revocation and fines
- Michigan requires claims to be acknowledged within 30 days
- Unfair discrimination in underwriting is prohibited except for actuarially justified factors
Last updated: January 2026
Unfair Trade Practices
The Michigan Insurance Code prohibits various unfair or deceptive practices in the P&C insurance industry.
Misrepresentation
Producers and insurers are prohibited from:
False Statements
- Making false statements about policy terms or benefits
- Misrepresenting the financial condition of an insurer
- Using misleading policy illustrations
- Making false statements about competitors
- Misrepresenting the nature of insurance transactions
Examples of Misrepresentation
| Prohibited Statement | Why It's Misrepresentation |
|---|---|
| "This policy covers everything" | No policy covers all losses |
| "Your rates will never increase" | Rates can and do change |
| "You don't need PIP coverage" | PIP may be important protection |
| "You must buy today or lose rate" | False urgency |
| "MBPIA coverage is the same as regular" | Coverage may differ |
False Advertising
Michigan prohibits deceptive insurance advertising:
- Ads must be truthful and not misleading
- Must clearly identify as insurance advertisement
- Cannot use testimonials that are not genuine
- Cannot imply government endorsement
- Must include insurer's name
- Cannot guarantee claims payment beyond policy terms
Rebating
Rebating is offering inducements not specified in the policy:
Prohibited
- Returning part of premium to insured
- Offering gifts of substantial value
- Paying for referrals
- Sharing commission with non-licensed persons
- Any valuable consideration not in the contract
Exceptions (Limited)
- Premium financing arrangements
- Legitimate filed discounts
- Dividends specified in policy
Exam Tip: While Michigan prohibits rebating, there are limited exceptions for legitimate premium financing and policy dividends.
Twisting and Churning
Twisting
Making misrepresentations to induce replacement:
- Falsely claiming existing policy is inadequate
- Misrepresenting policy values
- Hiding costs of replacement
- Exaggerating benefits of new policy
Churning
Excessive replacement of policies to generate commissions:
- Multiple replacements for same client
- Pattern of replacements in book of business
- Ignoring client's best interests
Penalties
| Violation | Potential Penalty |
|---|---|
| First offense | Warning to suspension |
| Per violation | Significant fines |
| Pattern of violations | License revocation |
| Consumer harm | Restitution required |
Unfair Claims Practices
Michigan has specific claims handling requirements:
Prohibited Claims Practices
- Misrepresenting policy provisions to claimants
- Failing to acknowledge claims promptly (within 30 days)
- Failing to communicate claim decisions
- Denying claims without reasonable investigation
- Offering substantially less than reasonable value
- Delaying payment to force settlement
- Not attempting good faith settlement when liability clear
- Making threatening statements to claimants
Claims Timeline
| Action | Requirement |
|---|---|
| Acknowledge claim | Within 30 days |
| Investigate | Promptly upon receipt |
| Decision | Within 60 days of proof of loss |
| Payment | Within 30 days of settlement |
Unfair Discrimination
Michigan prohibits unfair discrimination in P&C insurance:
Prohibited Factors
Cannot discriminate based on:
- Race or color
- Religion
- National origin
- Gender (without actuarial support)
- Disability (with exceptions)
Permitted Underwriting Factors
- Driving record
- Claims history
- Territory (with limitations)
- Vehicle type and safety features
- Years of experience
Test Your Knowledge
Within how many days must a Michigan insurer acknowledge receipt of a P&C claim?
A
B
C
D
Test Your Knowledge
Which of the following is an example of twisting?
A
B
C
D