Michigan DIFS Bulletin Prohibits Discounting Labor Costs for Depreciation

Michigan Department of Insurance and Financial Services (DIFS) Director Anita Fox released a new bulletin explicitly prohibiting insurers from discounting labor costs for depreciation when paying a homeowners insurance claim unless the insured has agreed in advance to the reduction in exchange for a lower premium.

Fox said the new bulletin ensures that beginning next year, consumers who incur a covered loss to their home will not have labor costs discounted from their claim payment due to depreciation unless the consumer chose that coverage in exchange for a lower premium.

“As a consumer protection agency, DIFS works to ensure that consumers are protected from confusing or deceptive contract language,” said Fox “Consumers might not be aware that their insurer depreciates not only damaged property, but also the cost of labor to repair the damaged property.

he new DIFS bulletin clarifies that because labor to repair covered damage is not a physical object that can depreciate, consumers may be confused or misled by policies that include labor in the definition of ACV or depreciation. Beginning in January, carriers cannot include this language in their standard policy definitions. However, consumers may be able to include an optional endorsement allowing for depreciated labor in exchange for paying a lower premium.

DIFS is the state consumer protection agency that regulates the insurance industry in Michigan. DIFS reviews insurance company filings for compliance with applicable laws, regulations, and bulletins.

Through this review process, DIFS identifies and disapproves all policies with misleading, inconsistent, or ambiguous language that may deceive consumers. Once this new bulletin takes effect, DIFS will check insurance policies and forms for the inclusion of labor or other nontangible items in the insurer’s standard definitions. DIFS will reject filings that do not comply with the bulletin.

Source: DIFS

Topics Michigan