December 1, 2009, Introduced by Reps. Roberts, Liss, Haugh, Slavens, Segal, Switalski, Geiss, Constan, Tlaib, Lemmons, Huckleberry, Robert Jones, Durhal, Cushingberry, Womack, Young, Nathan, Lisa Brown, Stanley, Gonzales, Leland and Lipton and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 2106, 2108, 2109, 2110, 2114, 2115, and 2127
(MCL 500.2106, 500.2108, 500.2109, 500.2110, 500.2114, 500.2115,
and 500.2127), section 2115 as amended by 1980 PA 461, and by
adding sections 2103a, 2106a, 2107a, 2109a, 2109b, and 2128; and to
repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2103a. As used in this chapter:
(a) "Group automobile insurance" means automobile insurance
written on a group, franchise, blanket policy, or similar basis
covering eligible employees or members, with or without their
eligible dependents, of a governmental corporation, unit, agency,
or department, or to a corporation, partnership, individual
employer, or an association.
(b) "Total return rating" means the consideration of total
revenue and available assets of the insurer, including, but not
limited to, investment income, capital and surplus, underwriting
and operating profits, premium revenue, and all other reserves.
Sec.
2105. (1) No A policy of automobile insurance or home
insurance shall not be offered, bound, made, issued, delivered, or
renewed in this state on and after January 1, 1981, except in
conformity
with this chapter. This chapter shall does not apply to
policies of automobile insurance or home insurance offered, bound,
made, issued, delivered or renewed in this state before January 1,
1981.
(2)
This chapter shall does not apply to insurance written on
a
group, franchise, blanket policy, or similar basis which that
offers
home insurance or automobile insurance to all members of the
group, franchise plan, or blanket coverage who are eligible
persons.
Sec. 2106. Except as specifically provided in this chapter,
the
provisions of chapter 24 and chapter 26 shall do not
apply to
automobile insurance and home insurance. An insurer may use rates
for
automobile insurance or home insurance as soon as those rates
are filed. An insurer shall not use rates for automobile insurance
until those rates have been approved by the commissioner. To the
extent
that other provisions of this code act are inconsistent with
the
provisions of this chapter, this chapter shall govern governs
with respect to automobile insurance and home insurance.
Sec. 2106a. To be authorized to write group automobile
insurance in this state, an insurer shall offer the group coverage
to every eligible person in the group in a uniform manner and shall
follow the rate-making, underwriting, and other applicable
provisions of this act.
Sec. 2107a. (1) By not later than 1 year after the effective
date of this section and annually thereafter, each insurer subject
to this chapter shall file base rates for automobile insurance and
shall make filings that conform to this act as amended by the
amendatory act that added this section and the amendatory act that
added section 2107b.
(2) The commissioner shall review a filing submitted under
subsection (1) and shall approve or disapprove the filing within 60
days after its submission.
(3) A filing approved under subsection (2) shall not be
revised for 12 months after the effective date of the filing unless
the revision meets either of the following:
(a) Lowers the price of the coverage.
(b) Is in response to a ruling or decision by the
commissioner, the court, or a hearing officer.
(4) A rule change or other change filed with the commissioner
that results in a change in the cost of coverage is considered a
revision in a rate filing under this section.
(5) If a filing is disapproved under subsection (2), the
insurer, within 30 days of the order of disapproval, shall make a
revised filing with the commissioner. The revised filing is subject
to review under this chapter in the same manner as an original
filing made under this chapter.
Sec.
2108. (1) On Except as
otherwise provided in section
2107a, on the effective date thereof, each insurer shall file with
the commissioner every manual of classification, every manual of
rules and rates, every rating plan, and every modification of a
manual of classification, manual of rules and rates, or a rating
plan
which that it proposes to use for automobile insurance and
home insurance. Each filing shall state the character and extent of
the coverage contemplated. Each insurer subject to this chapter who
maintains rates in any part of this state shall at all times
maintain rates in effect for all eligible persons meeting the
underwriting criteria of the insurer.
(2)
An Except for filings
concerning rates, an insurer may
satisfy
its obligation to make filings under subsection (1) by
becoming a member of, or a subscriber to, a licensed rating
organization
licensed under chapter 24 or chapter 26 which that
makes
those filings, and by filing with the commissioner a copy of
its
authorization of the rating organization to make those filings
on its behalf. Nothing contained in this chapter shall be construed
as requiring any insurer to become a member of or a subscriber to
any rating organization. Insurers may file and use deviations from
filings
made on their behalf, which deviations shall be are subject
to the provisions of this chapter.
(3) Each filing shall be accompanied by a certification by or
on behalf of the insurer that, to the best of its information and
belief, the filing conforms to the requirements of this chapter.
(4) Each filing shall include information that supports the
filing with respect to the requirements of section 2109 or 2109a,
as applicable. The information may include 1 or more of the
following:
(a)
The experience or judgment of the insurer or rating
organization
making the filing.
(b)
The interpretation of the insurer or rating organization
of any statistical data it relies upon.
(c)
The experience of other insurers. or rating organizations.
(d) Any other relevant information.
(5) A filing and any accompanying information shall be open to
public inspection upon filing.
(6) An insurer shall not make, issue, or renew a contract or
policy
except in accordance with filings which that are in effect
for the insurer pursuant to this chapter.
Sec.
2109. (1) All rates for automobile insurance and home
insurance shall be made in accordance with the following
provisions:
(a) Rates shall not be excessive, inadequate, or unfairly
discriminatory. A rate shall not be held to be excessive unless the
rate is unreasonably high for the insurance coverage provided and a
reasonable degree of competition does not exist for the insurance
to which the rate is applicable.
(b) A rate shall not be held to be inadequate unless the rate
is unreasonably low for the insurance coverage provided and the
continued use of the rate endangers the solvency of the insurer; or
unless the rate is unreasonably low for the insurance provided and
the use of the rate has or will have the effect of destroying
competition among insurers, creating a monopoly, or causing a kind
of insurance to be unavailable to a significant number of
applicants who are in good faith entitled to procure that insurance
through ordinary methods.
(c) A rate for a coverage is unfairly discriminatory in
relation to another rate for the same coverage if the differential
between the rates is not reasonably justified by differences in
losses, expenses, or both, or by differences in the uncertainty of
loss, for the individuals or risks to which the rates apply. A
reasonable justification shall be supported by a reasonable
classification system; by sound actuarial principles when
applicable; and by actual and credible loss and expense statistics
or, in the case of new coverages and classifications, by reasonably
anticipated loss and expense experience. A rate is not unfairly
discriminatory because it reflects differences in expenses for
individuals or risks with similar anticipated losses, or because it
reflects differences in losses for individuals or risks with
similar expenses.
(2) A determination concerning the existence of a reasonable
degree of competition with respect to subsection (1)(a) shall take
into account a reasonable spectrum of relevant economic tests,
including the number of insurers actively engaged in writing the
insurance in question, the present availability of such insurance
compared to its availability in comparable past periods, the
underwriting return of that insurance over a period of time
sufficient to assure reliability in relation to the risk associated
with that insurance, and the difficulty encountered by new insurers
in entering the market in order to compete for the writing of that
insurance.
Sec. 2109a. (1) All rates for automobile insurance shall be
reviewed by the commissioner by examining the insurer's report
prepared pursuant to section 2128 and any input received pursuant
to a public hearing under section 2107b and shall be made in
accordance with total return rating and the following provisions:
(a) Rates shall not be excessive, inadequate, or unfairly
discriminatory. A rate shall not be approved by the commissioner
unless it is actuarially justified based upon the information
received pursuant to section 2128. The commissioner may examine the
percentage of uninsured drivers in the state in making a
determination under this subdivision. The percentage of uninsured
drivers may be obtained from information, including, but not
limited to, statistics and data from the insurance information
institute, the national association of insurance commissioners, and
law enforcement agencies.
(b) A rate shall not be held to be inadequate unless the rate,
after consideration of investment income and surplus, is
unreasonably low for the insurance coverage provided and is
insufficient to sustain projected losses and expenses; or unless
the rate is unreasonably low for the insurance provided and the use
of the rate has or will have the effect of destroying competition
among insurers, creating a monopoly, or causing a kind of insurance
to be unavailable to a significant number of applicants who are in
good faith entitled to procure that insurance through ordinary
methods.
(c) A rate for a coverage is unfairly discriminatory in
relation to another rate for the same coverage if the differential
between the rates is not reasonably justified by differences in
losses, expenses, or both, or by differences in the uncertainty of
loss, for the individuals or risks to which the rates apply. A
reasonable justification shall be supported by a reasonable
classification system; by sound actuarial principles when
applicable; and by actual and credible loss and expense statistics
or, in the case of new coverages and classifications, by reasonably
anticipated loss and expense experience. A rate is not unfairly
discriminatory because it reflects differences in expenses for
individuals or risks with similar anticipated losses, or because it
reflects differences in losses for individuals or risks with
similar expenses.
(2) The commissioner shall not approve a rate increase for
automobile insurance unless the commissioner determines that the
data received from the report prepared pursuant to section 2128
justifies a rate increase. The commissioner shall not approve a
rate increase by examining actuarial data from a line other than
the insurer's automobile insurance line or if the insurer fails to
file the data required by section 2128. The commissioner shall not
approve a rate increase if the commissioner finds the insurer's
administrative expenses to be excessive.
(3) Each insurer shall submit annually to the commissioner a
complete breakdown of litigation costs associated with first and
third party automobile insurance claims that have been received or
are in the process of being litigated and of amounts reserved to be
used for those expenses. The commissioner shall not approve a rate
if the administrative costs associated with the litigation of first
party claims exceed 1% of the administrative costs associated with
the litigation of third party claims. Each automobile insurance
insurer's total administrative expenses shall be allocated to each
territory according to the insurer's proportionate share of premium
written in each territory. Each premium charged within each
territory shall contain an equal share of the administrative
expense for the territory. Rates shall be filed and charged under
this section so that each automobile insurance premium includes an
equal share of each insurer's overall administrative expense.
Sec. 2109b. (1) If the commissioner determines that any person
or organization has violated the automobile rate-making or
underwriting provisions of this chapter, the commissioner may issue
a cease and desist order and order the person or organization to
pay a civil fine of not more than $500.00 for each violation and a
civil fine of not more than $5,000.00 for each willful violation. A
default in the payment of a civil fine under this section may be
remedied by any means authorized under the revised judicature act
of 1961, 1961 PA 236, MCL 600.101 to 600.9947.
(2) If the commissioner finds that a violation of the
automobile rate-making or underwriting provisions of this chapter
has occurred and that the violation has resulted in an increase in
automobile insurance premiums or a decrease in benefits, the
commissioner shall order the insurer to return the premium or the
amount of benefits that should have been paid, along with a simple
interest charge of 12% per annum to be applied from the time the
premium was collected or the benefit was due or would have been due
to the consumer.
(3) The commissioner may suspend the license of an insurer
that fails to comply with the commissioner's order to correct a
violation of this chapter.
Sec. 2110. (1) In developing and evaluating rates pursuant to
the
standards prescribed in section sections
2109 and 2109a, due
consideration shall be given to past and prospective loss
experience
within and outside this state; , to
catastrophe hazards,
if any; to a reasonable margin for underwriting profit and
contingencies; to dividends, savings, or unabsorbed premium
deposits allowed or returned by insurers to their policyholders,
members, or subscribers; to past and prospective expenses, both
countrywide and those specially applicable to this state exclusive
of
assessments under this code act; to assessments under this code
act; to underwriting practice and judgment; and to all other
relevant factors within and outside this state.
(2) The systems of expense provisions included in the rates
for use by any insurer or group of insurers may differ from those
of other insurers or groups of insurers to reflect the requirements
of the operating methods of the insurer or group with respect to
any kind of insurance, or with respect to any subdivision or
combination thereof for which subdivision or combination separate
expense provisions are applicable.
(3) Risks may be grouped by classifications for the
establishment of rates and minimum premiums. The classifications
may measure differences in losses, expenses, or both.
Sec.
2114. (1) A person or organization aggrieved with respect
to
any filing which that is in effect and which that affects
the
person
or organization may make written application to the
commissioner for a hearing on the filing. However, the insurer or
rating
organization which that made the filing shall not be
authorized to proceed under this subsection. The application shall
specify the grounds to be relied upon by the applicant. If the
commissioner finds that the application is made in good faith, that
the applicant would be so aggrieved if the grounds specified are
established, or that the grounds specified otherwise justify
holding a hearing, the commissioner, not more than 30 days after
receipt of the application, shall hold a hearing in accordance with
Act
No. 306 of the Public Acts of 1969, as amended the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328, upon not less than 10 days' written notice to the
applicant,
the insurer, and the rating organization which that made
the filing.
(2) If after hearing initiated under subsection (1) or upon
the
commissioner's own motion pursuant to Act No. 306 of the Public
Acts
of 1969, as amended the
administrative procedures act of 1969,
1969 PA 306, MCL 24.201 to 24.328, the commissioner finds that a
filing
does not meet the requirements of sections 2109, and 2109a,
or 2111, as applicable, the commissioner shall issue an order
stating the specific reasons for that finding. The order shall
state when, within a reasonable time after issuance of the order,
the filing shall be considered no longer effective. A copy of the
order shall be sent to the applicant, if any, and to each insurer
and rating organization subject to the order. The order shall not
affect a contract or policy made or issued before the date the
filing becomes ineffective, as indicated in the commissioner's
order.
Sec. 2115. (1) If as part of a decision in a proceeding under
section 2114, or in a separate proceeding on the commissioner's own
motion,
held pursuant to Act No. 306 of the Public Acts of 1969, as
amended
the administrative procedures
act of 1969, 1969 PA 306, MCL
24.201 to 24.328, the commissioner finds that a reasonable degree
of competition does not exist on a statewide basis with respect to
automobile
insurance or home insurance, the
commissioner shall by
order
require each insurer which that
transacts that type of home
insurance in this state to comply with the provisions of chapter 24
or
26. , as the case may be, with respect to that insurance
which
was
the subject of the commissioner's finding. The order shall take
effect not less than 90 nor more than 150 days after the order is
issued. On or after the effective date of an order issued under
this subsection, none of the provisions of this chapter shall be
applicable
to the home insurance. which was the subject of the
order.
(2) After an order issued pursuant to subsection (1) has been
in effect for 1 year, if the commissioner has reason to believe
that
there would be a reasonable degree of price competition for
the
type of insurance affected by the order, or if, upon the
petition of an insurer or a resident of this state, there is a
showing that there is reason to believe that there would be a
reasonable
degree of price competition, for that type of insurance,
the
commissioner shall hold a hearing pursuant to Act No. 306 of
the
Public Acts of 1969, as amended the
administrative procedures
act of 1969, 1969 PA 306, MCL 24.201 to 24.328, to determine if a
reasonable degree of price competition would exist if the order
were no longer in effect. The hearing shall be held upon not less
than 20 days' written notice to each insurer subject to the order
and upon not less than 20 days' notice in not less than 3
newspapers of general circulation within this state.
(3) If the commissioner finds after the hearing that a
reasonable degree of price competition would exist, the
commissioner shall by order state when, not less than 90 nor more
than 150 days after issuance of a new order, the preceding order
will no longer be effective. On and after the effective date of an
order issued under this subsection, the provisions of this chapter
shall
be applicable to the type of home
insurance. which was the
subject
of the order.
Sec. 2127. The commissioner may by order or rule prospectively
require insurers, rating organizations, and advisory organizations
to
collect and report data only to the extent necessary to monitor
and evaluate the automobile and home insurance markets in this
state. The commissioner shall authorize the use of sampling
techniques in each instance where sampling is practicable and
consistent with the purposes for which the data are to be collected
and reported. Orders issued or rules promulgated under this section
are in addition to, and do not replace, the reporting requirements
in section 2128.
Sec. 2128. On or before April 1 of each year, each insurer who
issues automobile insurance in this state shall file with the
commissioner on forms prescribed by the commissioner, the following
automobile insurance data, by territory, for the prior calendar
year:
(a) With respect to personal protection insurance coverage:
(i) The number of claims for personal protection insurance
benefits for which payment is made.
(ii) The number of claims for personal protection insurance
benefits that are closed without payment.
(iii) The number of claims for personal protection insurance
benefits that involve some form of litigation and are closed
without payment.
(iv) The number of claims for personal protection insurance
benefits that involve litigation and for which payment is made
after litigation commences, including the length of time between
the filing of the claim and the first payment.
(v) The amount of interest charges paid on claims for personal
protection insurance benefits and the number of cases for which
interest charges have been paid.
(vi) The litigation costs for claims for personal protection
insurance benefits.
(vii) The number of cases going to verdict and the amount of
the verdict in those cases where an award is made.
(viii) The number of verdicts of no cause of action.
(ix) The number of cases where attorney fees are paid, the
total amount of attorney fees paid, and the amount of attorney fees
paid for each case where fees were paid.
(b) With respect to residual liability insurance coverage:
(i) The number of third party automobile bodily injury tort
claims closed by payment to the claimant before the commencement of
litigation and a breakdown of how many of these claims were death
threshold claims, serious impairment of body function threshold
claims, and permanent serious disfigurement threshold claims.
(ii) The number of third party automobile bodily injury tort
claim lawsuits filed, and a breakdown of how many were filed for
death threshold claims, serious impairment of body function
threshold claims, and permanent serious disfigurement threshold
claims.
(iii) The number of third party automobile bodily injury tort
claims closed by payment to the claimant after the commencement of
litigation and a breakdown of how many of these claims were death
threshold claims, serious impairment of body function threshold
claims, and permanent serious disfigurement threshold claims.
(iv) The dollar amount paid to claimants to settle third party
automobile bodily injury tort claims before and after litigation
had been commenced and a breakdown of the dollar amounts paid for
death threshold claims, serious impairment of body function
threshold claims, and permanent serious disfigurement threshold
claims.
(v) The number and dollar amount paid or reserved for all
bodily injury claims set up or opened, indicating the number and
dollar amount of reserves for claims remaining open at the end of
the reporting period.
Enacting section 1. Sections 2107 and 2131 of the insurance
code of 1956, 1956 PA 218, MCL 500.2107 and 500.2131, are repealed.
Enacting section 2. This amendatory act does not take effect
unless all of the following bills of the 95th Legislature are
enacted into law:
(a) Senate Bill No.____ or House Bill No. 5629(request no.
01660'09 **).
(b) Senate Bill No.____ or House Bill No. 5628(request no.
01666'09 ****).
(c) Senate Bill No.____ or House Bill No. 5630(request no.
01669'09 ***).