December 1, 2009, Introduced by Reps. Valentine, Liss, Haugh, Slavens, Geiss, Huckleberry, Constan, Tlaib, Robert Jones, Durhal, Cushingberry, Womack, Young, Lemmons, Nathan, Lisa Brown, Roberts, Gonzales, Leland and Lipton and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
(MCL 500.100 to 500.8302) by adding chapter 32A.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
CHAPTER 32A
LOW-COST INSURANCE PILOT PROGRAM
Sec. 3275. As used in this chapter:
(a) "Automobile insurance" means that term as defined in
section 3303(a).
(b) "Qualified applicant" means an individual who meets all of
the following:
(i) Resides in a household with a gross annual household income
that does not exceed 250% of the federal poverty level.
(ii) Is not less than 19 years of age and has been continuously
licensed to drive an automobile for the preceding 3 years.
(iii) Has not more than 1 of either of the following, but not
both, within the preceding 3 years:
(A) A property-damage-only accident in which he or she was
substantially at-fault.
(B) An insurance eligibility point for a moving violation.
(iv) Has not, within the preceding 3 years, had a substantially
at-fault accident involving bodily injury or death.
(v) Has not had a conviction for driving under the influence.
(vi) Has not had a conviction for a moving violation in a work
zone.
(vii) Has not had on his or her motor vehicle record a felony
or misdemeanor conviction relating to the operation of a motor
vehicle.
(viii) Is not a college student claimed as a dependent of
another person for federal or state income tax purposes.
Sec. 3276. (1) The commissioner shall establish a low-cost
automobile insurance pilot program in not less than 2 or more than
4 regions in the state that satisfies all of the following:
(a) Includes not less than an entire county and may include
more than 1 county so long as the counties are contiguous.
(b) Has a population size sufficient to establish credible
results in the low-cost automobile insurance pilot program.
(c) Has average automobile insurance rates in the region that
exceed the statewide average.
(2) The commissioner, after a public hearing, shall approve or
issue a reasonable plan for the equitable apportionment among
insurers participating in the pilot program established under this
chapter of qualified applicants. The pilot program may be conducted
in conjunction with the automobile placement facility established
under chapter 33.
(3) Notwithstanding any other provision of law, the
commissioner may employ legal, actuarial, accounting, or other
counsel as he or she considers necessary to assist in his or her
responsibilities under this chapter.
Sec. 3277. A low-cost automobile insurance policy for purposes
of the pilot program established under this chapter shall have all
of the following attributes:
(a) Provide residual liability coverage as required under
section 3131.
(b) Have an initial term of 1 year, renewable on an annual
basis thereafter.
(c) Cover the individual named in the policy and any other
individual using the automobile provided the use is with his or her
permission, express or implied, and within the scope of that
permission, except that the policy shall not cover members of the
named insured's household who do not satisfy the requirements in
section 3275(b).
(d) Provide coverage for an automobile with a value, at the
time of purchase by the insured, of $20,000.00 or less, as
evidenced by the value given to the automobile by the secretary of
state in assessing vehicle registration fees.
(e) Provide personal protection insurance coverage for
allowable expenses as required under section 3107(1)(a) and (b).
(f) Provide personal protection insurance coverage for work
loss as required in section 3107(1)(b) except that the benefits
payable for work loss shall not exceed 250% of the monthly federal
poverty level for a family of 4 and the premium shall be
appropriately reduced to reflect that lower benefit.
Sec. 3278. (1) The annual rate offered initially under the
pilot program for the low-cost automobile insurance policy, until
the time that the rate is adjusted, shall not exceed $600.00.
(2) The plan shall make available to an insured under the
pilot program a premium installment option under which an insured
may pay a specified portion or portions of the low-cost automobile
insurance policy on a periodic basis. No other premium financing
arrangement is permitted.
(3) Rates for policies issued under the pilot program shall be
reviewed and revised as follows:
(a) Rates shall be sufficient to cover both losses incurred
under policies issued under the pilot program and expenses that
include, but are not limited to, all reasonable and necessary costs
of administration, underwriting, taxes, commissions, claims
adjusting, and related expenses that are incurred due to
participation in this pilot program. For purposes of this
subdivision, losses incurred mean claims paid, claims incurred and
reported, and claims incurred but not yet reported. In assessing
loss reserves, the commissioner shall only allow loss reserves that
are estimated from actual losses in the pilot program or comparable
data by a statistical agent, as adjusted to reflect coverage
provided under this pilot program.
(b) Rates shall be set so as to result in no projected subsidy
of the pilot program by those policyholders of automobile insurers
issuing policies under the pilot program who are not participants
in the pilot program.
(4) Commencing on April 1, 2010, and annually thereafter, the
participant automobile insurers shall submit the loss and expense
data, together with a proposed rate for the low-cost automobile
insurance policy for the pilot program, to the commissioner for
approval in accordance with this chapter. The commissioner shall
make a rate determination within 90 days.
Sec. 3279. (1) Application may be submitted through any
automobile insurer participating in the pilot program.
(2) The qualified applicant, in order to demonstrate financial
eligibility to purchase a low-cost automobile insurance policy
under the pilot program, shall present at the time of applying for
the policy a copy of the qualified applicant's federal or state
income tax return for the previous year or other evidence
considered reliable by the commissioner from a governmental agency
or governmental means-tested program of the qualified applicant's
gross annual household income.
(3) The qualified applicant shall certify that the
representations made in the documents submitted as proof of
financial eligibility and in the application for the low-cost
automobile insurance policy are true and correct and contain no
material misrepresentations or omissions of fact to the best
knowledge and belief of the applicant.
(4) The automobile insurer shall forward the application,
supporting documents, and the applicant's certification to the
person designated by the commissioner to review the applications.
Sec. 3280. (1) An automobile insurer shall provide to a
qualified applicant for a low-cost automobile insurance policy
under this chapter a notice relating to coverage under the policy.
The notice shall be provided in a separate document at the time of
application and include the following statement in 14-point
boldfaced type or font:
"NOTICE
INSURANCE COVERAGE PROVIDED IN THE POLICY YOU ARE BUYING
CONTAINS WORK LOSS COVERAGE WITH A REDUCED MAXIMUM.
THIS POLICY DOES NOT COVER ANY OTHER DRIVER IN YOUR HOUSEHOLD
WHO:
(A) IS UNDER 19 YEARS OF AGE.
(B) HAS LESS THAN 3 YEARS OF CONTINUOUSLY LICENSED DRIVING
EXPERIENCE.
(C) HAS MORE THAN ONE OF EITHER, OR BOTH, OF THE FOLLOWING:
(I) A PROPERTY-DAMAGE-ONLY ACCIDENT IN WHICH THE DRIVER WAS
SUBSTANTIALLY AT-FAULT.
(II) AN INSURANCE ELIGIBILITY POINT FOR A MOVING VIOLATION.
(D) HAS IN THE PREVIOUS 3 YEARS A SUBSTANTIALLY AT-FAULT
ACCIDENT INVOLVING BODILY INJURY OR DEATH.
(E) HAS A CONVICTION FOR DRIVING UNDER THE INFLUENCE.
(F) HAS A CONVICTION FOR A MOVING VIOLATION IN A WORK ZONE.
(G) HAS A FELONY OR MISDEMEANOR CONVICTION FROM A VIOLATION OF
THE VEHICLE CODE ON HIS OR HER MOTOR VEHICLE RECORD.".
(2) The obtaining of the signature of the applicant and
insured on the disclosure form specified in subsection (1) creates
a conclusive presumption that the insurer has complied with the
disclosure requirements of this section.
Sec. 3281. The sale of a low-cost automobile insurance policy
under this chapter shall not be conditioned on the purchase of any
other product or service.
Sec. 3282. (1) A low-cost automobile insurance policy issued
pursuant to the pilot program may be canceled only for the
following reasons:
(a) Nonpayment of premium.
(b) Fraud or material misrepresentation affecting the policy
or the insured.
(2) A policy is subject to nonrenewal only for the following
reasons:
(a) A substantial increase in the hazard insured against.
(b) The insured is no longer a qualified applicant.
Sec. 3283. (1) An insured under the pilot program may purchase
any other additional type of automobile insurance coverage such as
uninsured motorists coverage or collision coverage that is not
available under the low-cost automobile insurance policy.
(2) An insured under the pilot program shall not purchase or
maintain any automobile personal protection insurance coverage
other than a low-cost automobile insurance policy for any
additional vehicles in the insured's household.
(3) Not more than 2 low-cost automobile insurance policies are
permitted in an insured's household.
Sec. 3284. (1) The pilot program is authorized to commence
operations on January 1, 2010, and shall be fully operational not
later than August 1, 2010.
(2) The commissioner may issue an order or promulgate rules
under the administrative procedures act of 1969, 1969 PA 306, MCL
24.201 to 24.328, to implement the provisions of this chapter.
Sec. 3285. A low-cost automobile insurance policy issued under
the pilot program shall satisfy all financial responsibility
requirements imposed under this act.
Sec. 3286. The commissioner shall report on an annual basis to
the legislature on the status of the pilot program.
Sec. 3287. This chapter does not apply on and after January 1,
2016.
Enacting section 1. 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. 5627(request no.
01661'09 **).
(c) Senate Bill No.____ or House Bill No. 5630(request no.
01669'09 ***).