New clause restrictions for insurance policies

The Office of Financial and Insurance Regulation (OFIR) has issued rules prohibiting three types of clauses found in insurance policies that consumers have found misleading or harmful. Consumer complaints suggested that many policyholders were being harmed by certain clauses in insurance policies. The rules now prohibit insurers from inserting clauses into insurance policies that:

1. are more inclusive in defining disability than social security if disability coverage ceases if they are denied social security benefits;
2. include a blank endorsement in a personal insurance policy that would allow the insurance company to unilaterally alter the terms a policy after it was in effect;
3. require policyholders to travel out of their home county to arbitrate a disputed claim, unless the insured consents to another location after the arbitral dispute occurs.

As of August 1, 2010, insurers are prohibited from using these nonconforming clauses in any new or revised insurance policy. By September 1, 2010, insurance companies must submit to OFIR a list of forms in use in Michigan that contain one or more of these nonconforming clauses, or a letter certifying that the company has no forms currently in effect containing any the clauses.

To review the rule set, visit: http://www.state.mi.us/orr/emi/admincode.asp?AdminCode=Single&Admin_Num=50002231&Dpt=LG&RngHigh