“Michigan stops LA Insurance’s sale of 7 day car insurance policies, but will the uninsured driver problem in Detroit improve now that 7 day policies are being replaced with 6 month car insurance with installment payments?”

L.A. Insurance will no longer be allowed to sell week-long policies (underwritten by Integon National Insurance Company).

These car insurance policies are being replaced with new 6 month car insurance policies – with installment payments.

The question now is will this be an improvement over the notorious 7-day policies that L.A. Insurance has been flooding Detroit with since 2011?

As an insurance and auto accident lawyer who has closely watched (and strongly criticized) this situation for years, I’m not optimistic that the answer to the question I’ve posed above will be “yes” now that 7 day car insurance policies are no longer allowed in Michigan.

The problem is the “installment payments.” It’s the same problem, just dressed up differently to sound better.

The “Game” of 7 Day Insurance Policies continues with 6 Month Car Insurance Policies with Installment Payments

People will still be able to get insurance just long enough to get their cars registered, then they’ll stop paying for coverage.

The only difference is that instead of the 7-day policies’ automatic termination/nonrenewal provisions, drivers with 6 month policies will now just quit making installment payments.

An official from the Insurance Commissioner’s office admitted as much, agreeing with Crain’s Detroit Business’s assessment that “[l]ike any auto insurance plan that’s paid in installments, motorists can still drop the coverage at any point in the six-month term”:

“We can’t force consumers to make those payments and keep that coverage in place … for the full six-month term,” [said Randall Gregg, senior deputy director and general counsel of Department of Insurance and Financial Services (DIFS)]. “But under the code, those people are entitled to have a product that is renewable if they continue to make those payments.”

Why flawed 6 month car insurance policies will now replace 7-day policies

In his story, “L.A. Insurance stops selling controversial 7-day auto plans after settlement,” Crain’s Detroit Business’s Chad Livengood reported on this recent development:

“L.A. Insurance has ceased selling seven-day auto insurance plans in Michigan under a settlement agreement its carrier reached with state regulators earlier this year to eliminate the controversial no-fault insurance product” which “allow[ed] drivers to legally register their vehicles before driving without coverage for the rest of the year.”

Significantly, Livengood reported that 6 month, installment-payment policies will be replacing the now defunct 7-day policies:

• It will be a “six-month insurance policy called New Horizons that is a membership-based affinity group policy …”
• It will be “renewable and people are going to get the invoices so they can continue to make the installment payments to continue their coverage,” according to a senior deputy director and general counsel of DIFS.

Livengood noted the new 6 month policies are expected to comply “with the no-fault law’s requirement of continuous coverage …”

As I explained in my own blog post, “It’s time to stop 7 day insurance policies,” this action is long-overdue:

The weekly car insurance policies sold in Detroit by L.A. Insurance is “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. As a car accident lawyer who tries to help people in cities like Detroit who are catastrophically injured by at-fault drivers with no insurance, I’ve been trying to sound the alarm about these 7 day insurance policies on the pages of this blog for years.”

Will 6 month car insurance policies cause more Detroiters to carry No-Fault car insurance?

I doubt it.  And, as I noted above with the quote from the Insurance Commissioner’s deputy director, I’m not the only one with doubts about whether the 6 month car insurance policies with installment payments will be a big improvement on the now disallowed 7 day insurance policies.

It’s true that L.A. Insurance will no longer be selling the 7-day policies which were designed to encourage and enable motorists to drive without auto No-Fault insurance.

But there’s nothing even close to a guarantee for the innocent public that is now put at risk by uninsured drivers that a 6 month car insurance policy – involving installment payments – will stop people from buying insurance only long enough to get their vehicles registered and then not make further payments on the installment plan when they’ve received their plates.

Indeed, the agreement reached between the Insurance Commissioner and L.A. Insurance has no effect whatsoever on the Insurance Code’s long-standing – and still-standing – law:

“A policy of casualty insurance … including all classes of motor vehicle coverage … may be canceled at any time at the request of the insured, in which case the insurer shall refund the excess of paid premium or assessment above the pro rata rates for the expired time …” (MCL 500.3020(1)(a))

Why L.A. Insurance’s 7 day policies were so flawed? 

What’s so bad about the 7-day policies that L.A. Insurance has been selling in Michigan and, especially, Detroit since 2011?

For me, as a car accident lawyer, the worst thing about these policies is that they were intentionally designed to enable drivers to break the law and drive without auto insurance.  If the only risk were to themselves, that would be one thing.  But uninsured drivers pose a grave risk to all of us and to our families.  Being uninsured puts the drivers, themselves, and everyone else at great personal and financial risk in the event of a car crash.

From the Insurance Commissioner’s perspective, the flaws in the 7-day policies were much more technical in nature.

As I explained in my blog post, “Why are weekly car insurance policies still sold in Detroit?,” the Insurance Commissioner highlighted in a March 2017 letter the following problems with the 7-day policies being sold by L.A. Insurance:

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.”

Chad Livengood’s excellent reporting for Crain’s Detroit Business on this puts an even finer point on this, confirming the suspicion that so-called “Jump Start” policies really more like “The End is Near” policies:

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.”