Bill Text: MI HB4425 | 2009-2010 | 95th Legislature | Introduced

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Bill Title: Insurance; no-fault; rate-making oversight and review; provide for. Amends secs. 2106, 2108, 2109, 2110, 2114 & 2127 of 1956 PA 218 (MCL 500.2106 et seq.) & adds sec. 2109a.

Spectrum: Partisan Bill (Democrat 6-0)

Status: (Introduced - Dead) 2009-02-25 - Printed Bill Filed 02/25/2009 [HB4425 Detail]

Download: Michigan-2009-HB4425-Introduced.html

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HOUSE BILL No. 4425

 

February 24, 2009, Introduced by Reps. Young, Bettie Scott, Durhal, Switalski, Robert Jones and Jackson 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, and 2127 (MCL

 

500.2106, 500.2108, 500.2109, 500.2110, 500.2114, and 500.2127) and

 

by adding section 2109a.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     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 Until January 1, 2010,

 

an insurer may use rates for automobile insurance or home insurance

 

as soon as those rates are filed. Beginning January 1, 2010,

 

automobile insurance rates are subject to section 2109a. 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. 2108. (1) On the effective date thereof, each 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 insurer may satisfy its obligation to make filings

 

under subsection (1) by becoming a member of, or a subscriber to, a

 

rating organization licensed under chapter 24 or chapter 26 which

 

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 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 sections 2109

 

and 2109a. 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. Effective January 1, 2010,

 

automobile insurance rates are also subject to section 2109a.

 

     (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) Each insurer authorized to transact automobile

 

insurance in this state shall file with the commissioner annually

 

on a date to be determined by the commissioner all of the following

 

information:

 

     (a) The total number of new claims that were submitted to the

 

insurer within the last 1-year period in each of the following

 

categories:

 

     (i) Claims for personal protection insurance benefits.

 

     (ii) Claims for property protection insurance benefits.

 

     (iii) Claims for residual bodily injury damages.

 

     (iv) Claims for uninsured motorist benefits.

 

     (v) Claims for underinsured motorist benefits.

 

     (vi) Claims for collision and comprehensive insurance benefits.

 

     (b) For each category of claims under subdivision (a), the

 

insurer shall also disclose the total amount paid by the insurer.

 

If any portion of the amount paid by the insurer was reimbursed by

 

the catastrophic claims association or other sources, those

 

reimbursements shall be reported by the insurer and then the total

 

net payments made by the insurer for each category under

 

subdivision (a) shall be stated.

 

     (c) The total amount paid by the insurer during the last 1-

 

year period on claims that were submitted to the insurer prior to

 

the last 1-year period in each of the following categories:

 

     (i) Claims for personal protection insurance benefits.

 

     (ii) Claims for property protection insurance benefits.

 

     (iii) Claims for residual bodily injury damages.

 

     (iv) Claims for uninsured motorist benefits.

 

     (v) Claims for underinsured motorist benefits.

 

     (vi) Claims for collision and comprehensive insurance benefits.

 

     (d) For each category of claims under subdivision (c), the

 

insurer shall disclose the total number of claims and the total

 

amount paid by the insurer. If any portion of the amount paid by

 

the insurer was reimbursed by the catastrophic claims association

 

or other sources, those reimbursements shall be reported by the

 

insurer and then the total net payments made by the insurer for

 

each category under subdivision (c) shall be stated.

 

     (e) The total number of new lawsuits that were filed against

 

the insurer or the insured within the last 1-year period in each of

 

the following categories:

 

     (i) Claims for personal protection insurance benefits.

 

     (ii) Claims for property protection insurance benefits.

 

     (iii) Claims for residual bodily injury damages.

 

     (iv) Claims for uninsured motorist benefits.

 

     (v) Claims for underinsured motorist benefits.

 

     (vi) Claims for collision and comprehensive insurance benefits.

 

     (f) For each category of claims under subdivision (e), the

 

insurer shall also disclose the total amount paid by the insurer to

 

settle or otherwise resolve those lawsuits as well as the total

 

amount paid by the insurer to defend those lawsuits. If any portion

 

of the amount paid by the insurer was reimbursed by the

 

catastrophic claims association or other sources, those

 

reimbursements shall be reported by the insurer and then the total

 

net payments made by the insurer for each category under

 

subdivision (e) shall be stated.

 

     (g) The total amount paid by the insurer during the last 1-

 

year period to settle or otherwise resolve lawsuits that were filed

 

against the insurer or the insured prior to the last 1-year period

 

in each of the following categories:

 

     (i) Claims for personal protection insurance benefits.

 

     (ii) Claims for property protection insurance benefits.

 

     (iii) Claims for residual bodily injury damages.

 

     (iv) Claims for uninsured motorist benefits.

 

     (v) Claims for underinsured motorist benefits.

 

     (vi) Claims for collision and comprehensive insurance benefits.

 

     (h) For each category of claims under subdivision (g), the

 

insurer shall also disclose the total number of claims and the

 

total amount paid by the insurer to settle or otherwise resolve

 

those lawsuits, as well as the total amount paid by the insurer to

 

defend those lawsuits. If any portion of the amount paid by the

 

insurer was reimbursed by the catastrophic claims association or

 

other sources, those reimbursements shall be reported by the

 

insurer and then the total net payments made by the insurer for

 

each category under subdivision (g) shall be stated.

 

     (i) The total premiums collected by the insurer during the

 

last 1-year period for each of the following coverages:

 

     (i) The total premiums collected for personal protection

 

insurance benefits.

 

     (ii) The total premiums collected for property protection

 

insurance benefits.

 

     (iii) The total premiums collected for residual liability

 

insurance coverage.

 

     (iv) The total premiums collected for collision and

 

comprehensive coverage.

 

     (v) The total premiums collected for uninsured motorist

 

coverage.

 

     (vi) The total premiums collected for underinsured motorist

 

coverage.

 

     (j) The insurer's total net profit for its most recent fiscal

 

year.

 

     (2) All information disclosed and filed with the commissioner

 

or required by subsection (1) shall be considered public

 

information and shall be made available by the commissioner for

 

inspection or photocopying by any person requesting the

 

information, subject to reasonable charges and reasonable

 

conditions established by the commissioner for the release of this

 

information.

 

     (3) An insurer authorized to transact automobile insurance in

 

this state shall not increase the base rates the insurer charges

 

for personal protection insurance benefits, property protection

 

insurance benefits, or residual liability insurance coverages,

 

unless the insurer first does each of the following:

 

     (a) The insurer files all disclosures required by subsection

 

(1) and gives notice to the public of its proposed base rate

 

increases pursuant to procedures established by the commissioner.

 

     (b) The insurer justifies the rate increase by submitting a

 

report entitled "Rate Increase Analysis" which sets forth, in plain

 

language, all reasons for the rate increase, reliable actuarial

 

support for the rate increase, and any other documentation

 

justifying the rate increase.

 

     (4) An insurer may, 90 days after submitting the filings,

 

disclosures, and other information required by subsections (1) and

 

(3), increase its rates for personal protection insurance benefits,

 

property protection insurance benefits, and residual liability

 

insurance, unless, during that 90-day period, 1 or more of the

 

following events occur:

 

     (a) The commissioner challenges the proposed rate increase.

 

     (b) A challenge to the proposed rate increase has been filed

 

by an interested person with the commissioner, pursuant to rate

 

challenge procedures established by the commissioner.

 

     (5) If the commissioner or an interested person files a

 

challenge to an insurer's proposed rate increase, the commissioner

 

shall convene a public, contested hearing, pursuant to rules and

 

procedures promulgated by the commissioner pursuant to the

 

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

 

24.328, and shall, after the hearing, approve the proposed rate

 

increase if the commissioner finds that the proposed rate increase

 

is fair and equitable in light of the compulsory insurance system

 

established by this act and the constitutional due process

 

protections that are inherent in and applicable to the compulsory

 

insurance system established by this act.

 

     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 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, 2109a, and

 

2111, 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. 2127. The commissioner may by 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, by county, are to be collected and

 

reported. Rules promulgated pursuant to this section are in

 

addition to, and do not replace, the rule and reporting

 

requirements in section 2109a.