Bill Text: MI HB5271 | 2017-2018 | 99th Legislature | Introduced

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Bill Title: Insurance; no-fault; price optimization use in determining insurance rates; prohibit. Amends secs. 2109 & 2119 of 1956 PA 218 (MCL 500.2109 & 500.2119).

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2017-11-29 - Bill Electronically Reproduced 11/28/2017 [HB5271 Detail]

Download: Michigan-2017-HB5271-Introduced.html

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HOUSE BILL No. 5271

 

 

November 28, 2017, Introduced by Reps. Moss, Rabhi, Faris, Sowerby, Chang, Hoadley, Lasinski, Cochran, Greig, Chirkun, Zemke, Wittenberg and Pagan and referred to the Committee on Insurance.

 

     A bill to amend 1956 PA 218, entitled

 

"The insurance code of 1956,"

 

by amending sections 2109 and 2119 (MCL 500.2109 and 500.2119),

 

section 2119 as amended by 2012 PA 441.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 2109. (1) All rates for automobile insurance and home

 

insurance shall be made in accordance with the following:

 

provisions:

 

     (a) Rates shall A rate must 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 To

 

be held reasonable under this subdivision, a justification shall

 

must be supported by a reasonable classification system; by sound

 

actuarial principles when if applicable; and by actual and credible

 

loss and expense statistics or, in the case of for new coverages

 

and classifications, by reasonably anticipated loss and expense

 

experience. A Subject to this subdivision, a rate is not unfairly

 

discriminatory under this subdivision 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. A rate is unfairly

 

discriminatory as to the premium charged to the risk if the rate is

 

established through or impacted by price optimization.

 

     (2) A determination concerning the existence of a reasonable

 

degree of competition with respect to under subsection (1)(a) shall

 

must 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 the

 

insurance compared to its availability in comparable past periods,

 

the underwriting return of that the insurance over a period of time

 

sufficient to assure reliability in relation to the risk associated

 

with that the insurance, and the difficulty encountered by new

 

insurers in entering the market in order to compete for the writing

 

of that the insurance.

 

     (3) By April 1, 2018, the director shall report to the

 

standing committees of the senate and house of representatives with

 

primary jurisdiction over insurance matters on the prevalence of

 

the use of price optimization in the establishment of rates to

 

which this chapter applies. The report must also include the steps

 

the director has taken to enforce this section.

 

     (4) As used in this section:

 

     (a) "Engage in activities that result in insurance policy

 

turnover" includes, but is not limited to, any of the following:

 

     (i) Shopping with other insurers for a lower premium.

 

     (ii) Canceling a policy before the expiration of the policy

 

term.

 

     (iii) Failing to renew a policy at the renewal of the policy

 

term.

 

     (iv) Complaining to the insurer or the insurer's agent or

 

representative.

 

     (b) "Price optimization" means establishing rates or varying

 

premiums at any time based on factors that are unrelated to risk of

 

loss, including, but not limited to, any of the following:

     (i) Charging each insured the highest price that the market

 

will bear.

 

     (ii) Considering the likelihood that the insured will engage

 

in activities that result in insurance policy turnover.

 

     (iii) Estimating the willingness of the insured to pay a

 

higher premium compared to other insureds.

 

     (iv) Using any measure of a consumer's or group of consumers'

 

price elasticity of demand.

 

     Sec. 2119. (1) Each An insurer subject to this chapter shall

 

put in writing all underwriting rules used by the insurer. An

 

insurer shall not transact automobile or home insurance

 

inconsistently with its underwriting rules.

 

     (2) An insurer shall apply its underwriting rules uniformly

 

and without exception throughout this state, so that every

 

applicant or insured conforming with the underwriting rules will be

 

insured or renewed, and so that every applicant or insured not

 

conforming with the underwriting rules will be refused insurance or

 

nonrenewed, when the information becomes available to the insurer.

 

     (3) An insurer with more than 1 rating plan for automobile

 

insurance contracts providing identical coverages shall not adopt

 

underwriting rules that would permit a person to be insured, for

 

automobile insurance, under more than 1 of the rating plans.

 

     (4) An insurer may establish underwriting rules for new

 

applicants that are different than rules for renewals of existing

 

insureds only if the applicants or existing insureds are not

 

eligible persons. Underwriting rules pertaining to renewals of

 

existing insureds who are not eligible persons may be based on a

contractual obligation of the insurer not to cancel or nonrenew.

 

     (5) For informational purposes, an insurer shall file with the

 

commissioner director its underwriting rules before their use in

 

this state. All The director shall make all filed underwriting

 

rules shall be available for public inspection. If the commissioner

 

director finds that an underwriting rule is inconsistent with this

 

chapter, the commissioner, director, after a hearing held under the

 

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

 

24.328, shall by order prohibit further use of the underwriting

 

rule.

 

     (6) This section does not prohibit an insurer from insuring

 

persons who are not eligible persons under underwriting rules

 

established under this section and sections 2117, 2118, and 2120.

 

     (7) An insurer shall not establish its underwriting rules

 

through price optimization as that term is defined in section 2109.