(WXYZ) — Michigan drivers were overcharged more than $1 billion in auto premiums in 2020, according to a study by a national consumer advocacy group.
“I know everybody talks about how tough a year the pandemic was,” said Doug Heller, an insurance expert and consumer advocate. “But not for the auto insurance companies.”
While most consumers received a refund early on in the pandemic, Heller says more was owed to drivers, faulting the state's insurance watchdog for failing to police what he called "excessive" premiums.
Thanks to pandemic-induced shutdowns and many offices adopting a work from home policy, vehicle accidents in Michigan plummeted last year from 314,377 in 2019 to 245,432 in 2020—a drop of nearly 25%.
Nationwide, miles driven fell to the lowest level in 20 years, even while drivers kept paying their full premiums.
“Our roads were empty,” Heller said. “And if our roads are empty, we’re not causing accidents.”
The Department of Insurance and Financial Services, which regulates insurance rates in Michigan, ordered $95 million in reimbursements halfway through 2020.
But the initial refunds didn’t amount to much, according to Steve Gursten, a Farmington Hills-based automobile accident attorney.
State Farm’s credit worked out to about $20 per month, he said, while Progressive offered drivers a refund of $46 per vehicle. Auto-Owners’ refund was about $28.
The average auto policy in Michigan costs $3,096, according to thezebra.com, an insurance comparison website. In Detroit, the average is about $6,280.
Linda Dillard’s refund didn’t make a dent in her premiums.
“I got a whopping $60,” Dillard said, who’s worked from home for the last eighteen months.
“Most people didn’t drive because most places, most businesses were closed,” she said. “What am I paying for?”
In their study, Heller and the Consumer Federation of America compared just how much insurers made last year in premiums with much they paid out in claims.
They found that, nationwide, insurers collected more than $30 billion in excess premiums. In Michigan alone, they concluded that insurance companies pocketed between $1 billion and $1.2 billion in excess premiums.
Spread across Michigan’s 5.8 million insured drivers, that’s about $195 Heller says insured Michigan driver is owed for 2020 alone.
Erin McDonough, executive director of the Insurance Alliance of Michigan, declined a request for an interview on the recent study.
In a statement, she did not dispute the findings of the Consumer Federation of America’s study, but said that while there were far fewer accidents in 2020, the severity of those accidents increased.
State resists further reimbursements
Anita Fox, the Director of Michigan’s Department of Insurance and Financial Services, ordered reimbursements for drivers twice last year: first in May, and then again two months later.
She has not ordered any reimbursements since.
“We don’t see the same stark disparity, but we’re aware of the potential,” Fox said.
She points out that while there were nearly 70,000 fewer vehicle accidents last year in Michigan, there were 108 more fatal crashes.
The more severe an accident, she said, the higher the cost to insurers.
“We believe the reductions were actuarially justified,” Fox said. “Doesn’t mean we’re not willing to look at additional data and take a look at it again. We always do.”
Gursten says other states have more aggressively policed premiums throughout the pandemic.
“You have an insurance commissioner (in Michigan) who is too willing to take the insurance industry at their word,” he said.
After ordering a round of reimbursements in 2020, California’s Insurance Commissioner did it again this March. State Farm has returned another $400 million to drivers there, but not in Michigan.
In a statement to 7 Action News, State Farm did not dispute the findings of Consumer Federation of America’s study but says its current rates are below pre-COVID-19 levels.
“I think if our insurance commissioner had done what they did in California, we would most certainly be getting another check back from State Farm and Allstate and AAA this year,” Gursten said. “We would have to.”
Director Fox hasn’t ordered any reimbursements since July of last year.
“Would it be accurate to say that you are confident State Farm did not overcharge Michigan drivers?” asked Channel 7’s Ross Jones.
“That question is kind of loaded with some assumptions that I don’t feel comfortable with,” Fox said. “I know that the reductions based on the driving data, our actuaries and our staff reviewed were appropriate based on the data submitted.”
Fox said that while further reimbursement orders are possible, none are planned right now.
Heller hopes Fox will reconsider.
"It’s not enough to say, 'Well, we stood up once for consumers,' he said. "Their job is to always be standing up for consumers because we are always required to buy this insurance product."
Contact 7 Investigator Ross Jones at firstname.lastname@example.org or at (248) 827-9466.