Bill Text: MI SB0286 | 2019-2020 | 100th Legislature | Introduced

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Bill Title: Insurance: no-fault; catastrophic claims association; require to disclose premium calculation information. Amends sec. 3104 of 1956 PA 218 (MCL 500.3104).

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2019-04-25 - Referred To Committee On Insurance And Banking [SB0286 Detail]

Download: Michigan-2019-SB0286-Introduced.html

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SENATE BILL No. 286

 

 

April 25, 2019, Introduced by Senator LUCIDO and referred to the Committee on Insurance and  Banking.

 

 

 

     A bill to amend 1956 PA 218, entitled

 

"The insurance code of 1956,"

 

by amending section 3104 (MCL 500.3104), as amended by 2002 PA 662.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 3104. (1) An The catastrophic claims association is

 

created as an unincorporated, nonprofit association. to be known as

 

the catastrophic claims association, hereinafter referred to as the

 

association, is created. Each insurer engaged in writing insurance

 

coverages that provide the security required by section 3101(1)

 

within in this state, as a condition of its authority to transact

 

insurance in this state, shall be a member of the association and

 

shall be is bound by the plan of operation of the association. Each

 

An insurer engaged in writing insurance coverages that provide the

 

security required by section 3103(1) within in this state, as a

 

condition of its authority to transact insurance in this state,

 

shall be is considered to be a member of the association, but only

 

for purposes of premiums under subsection (7)(d). Except as

 

expressly provided in this section, the association is not subject

 

to any laws of this state with respect to insurers, but in all

 

other respects the association is subject to the laws of this state

 

to the extent that the association would be if it were an insurer

 

organized and subsisting under chapter 50.

 

     (2) The association shall provide and each member shall accept

 

indemnification for 100% of the amount of ultimate loss sustained

 

under personal protection insurance coverages in excess of the

 

following amounts in each loss occurrence:

 

     (a) For a motor vehicle accident policy issued or renewed

 

before July 1, 2002, $250,000.00.

 

     (b) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2002 to June 30, 2003, $300,000.00.

 

     (c) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2003 to June 30, 2004, $325,000.00.

 

     (d) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2004 to June 30, 2005, $350,000.00.

 

     (e) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2005 to June 30, 2006, $375,000.00.

 

     (f) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2006 to June 30, 2007, $400,000.00.

 

     (g) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2007 to June 30, 2008, $420,000.00.

 

     (h) For a motor vehicle accident policy issued or renewed

during the period July 1, 2008 to June 30, 2009, $440,000.00.

 

     (i) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2009 to June 30, 2010, $460,000.00.

 

     (j) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2010 to June 30, 2011, $480,000.00.

 

     (k) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2011 to June 30, 2013, $500,000.00.

 

     (l) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2013 to June 30, 2015, $530,000.00.

 

     (m) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2015 to June 30, 2017, $545,000.00.

 

     (n) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2017 to June 30, 2019, $555,000.00.

 

     (o) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2019 to June 30, 2021, $580,000.00.

 

Beginning July 1, 2013, 2021, this $500,000.00 $580,000.00 amount

 

shall must be increased biennially on July 1 of each odd-numbered

 

year, for policies issued or renewed before July 1 of the following

 

odd-numbered year, by the lesser of 6% or the consumer price index,

 

Consumer Price Index, and rounded to the nearest $5,000.00. This

 

The association shall calculate this biennial adjustment shall be

 

calculated by the association by January 1 of the year of its July

 

1 effective date.

 

     (3) An insurer may withdraw from the association only upon on

 

ceasing to write insurance that provides the security required by

 

section 3101(1) in this state.

 

     (4) An insurer whose membership in the association has been

terminated by withdrawal shall continue continues to be bound by

 

the plan of operation, and upon on withdrawal, all unpaid premiums

 

that have been charged to the withdrawing member are payable as of

 

the effective date of the withdrawal.

 

     (5) An unsatisfied net liability to the association of an

 

insolvent member shall must be assumed by and apportioned among the

 

remaining members of the association as provided in the plan of

 

operation. The association has all rights allowed by law on behalf

 

of the remaining members against the estate or funds of the

 

insolvent member for sums money due the association.

 

     (6) If a member has been merged or consolidated into another

 

insurer or another insurer has reinsured a member's entire business

 

that provides the security required by section 3101(1) in this

 

state, the member and successors in interest of the member remain

 

liable for the member's obligations.

 

     (7) The association shall do all of the following on behalf of

 

the members of the association:

 

     (a) Assume 100% of all liability as provided in subsection

 

(2).

 

     (b) Establish procedures by which members shall must promptly

 

report to the association each claim that, on the basis of the

 

injuries or damages sustained, may reasonably be anticipated to

 

involve the association if the member is ultimately held legally

 

liable for the injuries or damages. Solely for the purpose of

 

reporting claims, the member shall in all instances consider itself

 

legally liable for the injuries or damages. The member shall also

 

advise the association of subsequent developments likely to

materially affect the interest of the association in the claim.

 

     (c) Maintain relevant loss and expense data relative to all

 

liabilities of the association and require each member to furnish

 

statistics, in connection with liabilities of the association, at

 

the times and in the form and detail as may be required by the plan

 

of operation.

 

     (d) In a manner provided for in the plan of operation,

 

calculate and charge to members of the association a total premium

 

sufficient to cover the expected losses and expenses of the

 

association that the association will likely incur during the

 

period for which the premium is applicable. The premium shall must

 

include an amount to cover incurred but not reported losses for the

 

period and may be adjusted for any excess or deficient premiums

 

from previous periods. Excesses or deficiencies from previous

 

periods may be fully adjusted in a single period or may be adjusted

 

over several periods in a manner provided for in the plan of

 

operation. Each member shall must be charged an amount equal to

 

that member's total written car years of insurance providing the

 

security required by section 3101(1) or 3103(1), or both, written

 

in this state during the period to which the premium applies,

 

multiplied by the average premium per car. The average premium per

 

car shall be is the total premium calculated divided by the total

 

written car years of insurance providing the security required by

 

section 3101(1) or 3103(1) written in this state of all members

 

during the period to which the premium applies. A member shall must

 

be charged a premium for a historic vehicle that is insured with

 

the member of 20% of the premium charged for a car insured with the

member. As used in this subdivision:

 

     (i) "Car" includes a motorcycle but does not include a

 

historic vehicle.

 

     (ii) "Historic vehicle" means a vehicle that is a registered

 

historic vehicle under section 803a or 803p of the Michigan vehicle

 

code, 1949 PA 300, MCL 257.803a and 257.803p.

 

     (e) Require and accept the payment of premiums from members of

 

the association as provided for in the plan of operation. The

 

association shall do either of the following:

 

     (i) Require payment of the premium in full within 45 days

 

after the premium charge.

 

     (ii) Require payment of the premiums to be made periodically

 

to cover the actual cash obligations of the association.

 

     (f) Receive and distribute all sums money required by the

 

operation of the association.

 

     (g) Establish procedures for reviewing claims procedures and

 

practices of members of the association. If the claims procedures

 

or practices of a member are considered inadequate to properly

 

service the liabilities of the association, the association may

 

undertake or may contract with another person, including another

 

member, to adjust or assist in the adjustment of claims for the

 

member on claims that create a potential liability to the

 

association and may charge the cost of the adjustment to the

 

member.

 

     (8) In addition to other powers granted to it by this section,

 

the association may do all of the following:

 

     (a) Sue and be sued in the name of the association. A judgment

against the association shall does not create any direct liability

 

against the individual members of the association. The association

 

may provide for the indemnification of its members, members of the

 

board of directors of the association, and officers, employees, and

 

other persons lawfully acting on behalf of the association.

 

     (b) Reinsure all or any portion of its potential liability

 

with reinsurers licensed to transact insurance in this state or

 

approved by the commissioner.director of the department.

 

     (c) Provide for appropriate housing, equipment, and personnel

 

as may be necessary to assure the efficient operation of the

 

association.

 

     (d) Pursuant to the plan of operation, adopt reasonable rules

 

for the administration of the association, enforce those rules, and

 

delegate authority, as the board considers necessary to assure the

 

proper administration and operation of the association consistent

 

with the plan of operation.

 

     (e) Contract for goods and services, including independent

 

claims management, actuarial, investment, and legal services, from

 

others within in or without outside of this state to assure the

 

efficient operation of the association.

 

     (f) Hear and determine complaints of a company or other

 

interested party concerning the operation of the association.

 

     (g) Perform other acts not specifically enumerated in this

 

section that are necessary or proper to accomplish the purposes of

 

the association and that are not inconsistent with this section or

 

the plan of operation.

 

     (9) A board of directors is created , hereinafter referred to

as the board, which shall be responsible for the operation of and

 

shall operate the association consistent with the plan of operation

 

and this section.

 

     (10) The plan of operation shall must provide for all of the

 

following:

 

     (a) The establishment of necessary facilities.

 

     (b) The management and operation of the association.

 

     (c) Procedures to be utilized in charging premiums, including

 

adjustments from excess or deficient premiums from prior periods.

 

     (d) Procedures governing the actual payment of premiums to the

 

association.

 

     (e) Reimbursement of each member of the board by the

 

association for actual and necessary expenses incurred on

 

association business.

 

     (f) The investment policy of the association.

 

     (g) Any other matters required by or necessary to effectively

 

implement this section.

 

     (11) Each The board shall must include members that would

 

contribute a total of not less than 40% of the total premium

 

calculated pursuant to subsection (7)(d). Each director shall be is

 

entitled to 1 vote. The initial term of office of a director shall

 

be is 2 years.

 

     (12) As part of the plan of operation, the board shall adopt

 

rules providing for the composition and term of successor boards to

 

the initial board and the terms of board members, consistent with

 

the membership composition requirements in subsections (11) and

 

(13). Terms of the directors shall must be staggered so that the

terms of all the directors do not expire at the same time and so

 

that a director does not serve a term of more than 4 years.

 

     (13) The board shall must consist of 5 directors , and the

 

commissioner director of the department, who shall be serve as an

 

ex officio, nonvoting member of the board. without vote.

 

     (14) Each director The director of the department shall be

 

appointed by the commissioner and appoint the directors. A director

 

shall serve until that member's his or her successor is selected

 

and qualified. The board shall elect the chairperson of the board.

 

shall be elected by the board. A The director of the department

 

shall fill any vacancy on the board shall be filled by the

 

commissioner consistent with as provided in the plan of operation.

 

     (15) After the board is appointed, the The board shall meet as

 

often as the chairperson, the commissioner, director of the

 

department, or the plan of operation shall require, requires, or at

 

the request of any 3 members of the board. The chairperson shall

 

retain the right to may vote on all issues. Four members of the

 

board constitute a quorum.

 

     (16) An The board shall furnish to each member an annual

 

report of the operations of the association in a form and detail as

 

may be determined by the board. shall be furnished to each member.

 

     (17) Not more than 60 days after the initial organizational

 

meeting of the board, the board shall submit to the commissioner

 

for approval a proposed plan of operation consistent with the

 

objectives and provisions of this section, which shall provide for

 

the economical, fair, and nondiscriminatory administration of the

 

association and for the prompt and efficient provision of

indemnity. If a plan is not submitted within this 60-day period,

 

then the commissioner, after consultation with the board, shall

 

formulate and place into effect a plan consistent with this

 

section.

 

     (18) The plan of operation, unless approved sooner in writing,

 

shall be considered to meet the requirements of this section if it

 

is not disapproved by written order of the commissioner within 30

 

days after the date of its submission. Before disapproval of all or

 

any part of the proposed plan of operation, the commissioner shall

 

notify the board in what respect the plan of operation fails to

 

meet the requirements and objectives of this section. If the board

 

fails to submit a revised plan of operation that meets the

 

requirements and objectives of this section within the 30-day

 

period, the commissioner shall enter an order accordingly and shall

 

immediately formulate and place into effect a plan consistent with

 

the requirements and objectives of this section.

 

     (17) (19) The proposed plan of operation or Any amendments to

 

the plan of operation of the association are subject to majority

 

approval by the board, ratified ratification by a majority of the

 

membership having a vote, with voting rights being apportioned

 

according to the premiums charged in subsection (7)(d), and are

 

subject to approval by the commissioner.director of the department.

 

     (18) (20) Upon approval by the commissioner and ratification

 

by the members of the plan submitted, or upon the promulgation of a

 

plan by the commissioner, each An insurer authorized to write

 

insurance providing the security required by section 3101(1) in

 

this state, as provided in this section, is bound by and shall

formally subscribe to and participate in the plan approved of

 

operation as a condition of maintaining its authority to transact

 

insurance in this state.

 

     (19) (21) The association is subject to all the reporting,

 

loss reserve, and investment requirements of the commissioner

 

director of the department to the same extent as would a member are

 

the members of the association.

 

     (20) (22) Premiums charged members by the association shall

 

must be recognized in the rate-making procedures for insurance

 

rates in the same manner that expenses and premium taxes are

 

recognized.

 

     (21) (23) The commissioner director of the department or an

 

authorized representative of the commissioner director of the

 

department may visit the association at any time and examine any

 

and all of the association's affairs.

 

     (22) (24) The association does not have liability for losses

 

occurring before July 1, 1978.

 

     (23) Annually, within 15 days after the association charges

 

members the total premium under subsection (7)(d), the association

 

shall disclose to the public on its website all data used in

 

computing the premium and expected losses and expenses, including

 

the amount that covers incurred but not reported losses for the

 

period and any adjustment for any excess or deficient premiums from

 

previous periods and the actuarial computation used in making these

 

determinations, including estimates and assumptions. The disclosure

 

must include, but not be limited to, all of the following:

 

     (a) The actuarial computation used in making determinations of

unpaid losses and loss adjustment expenses.

 

     (b) All documents used in establishing the following:

 

     (i) The calculation of the present value of disbursements

 

expected to be made in the ultimate settlement of the claims

 

reported.

 

     (ii) The actuarial tables used to reflect the probabilities of

 

each claimant surviving to incur the costs projected.

 

     (iii) The calculation of incurred but not reported losses.

 

     (iv) The actuarial assumptions and calculations used in

 

producing the short-term discount rate and the long-term discount

 

rate.

 

     (v) The forecasts producing the economic assumptions for claim

 

cost inflation and investment returns used.

 

     (vi) The current economic data and historical long-term

 

Consumer Price Index data for any cost component categories used in

 

producing inflation assumptions.

 

     (vii) The loss development analysis undertaken in connection

 

with the provision for unpaid losses and loss adjustment expenses.

 

     (viii) The trend analysis for both frequency and severity

 

undertaken in connection with the provision for unpaid losses and

 

loss adjustment expenses.

 

     (c) The annual actuarial evaluation used in establishing the

 

premium.

 

     (d) The annual assessment reports of members used in

 

establishing the premium.

 

     (e) The annuity model used by the opining actuary in his or

 

her actuarial opinion projecting future payment streams at the

claimant level and the mortality adjustment applied.

 

     (f) Any explanatory memorandum explaining the various

 

components of the premium and the judgments made to produce the

 

premium.

 

     (24) (25) As used in this section:

 

     (a) "Association" means the catastrophic claims association

 

created in subsection (1).

 

     (b) "Board" means the board of directors of the association

 

created in subsection (9).

 

     (c) (a) "Consumer price index" Price Index" means the

 

percentage of change in the consumer price index Consumer Price

 

Index for all urban consumers in the United States city average for

 

all items for the 24 months prior to before October 1 of the year

 

prior to before the July 1 effective date of the biennial

 

adjustment under subsection (2)(k) (2)(o) as reported by the United

 

States department Department of labor, bureau Labor, Bureau of

 

labor statistics, Labor Statistics, and as certified by the

 

commissioner.director of the department.

 

     (d) (b) "Motor vehicle accident policy" means a policy

 

providing the coverages required under section 3101(1).

 

     (e) (c) "Ultimate loss" means the actual loss amounts that a

 

member is obligated to pay and that are paid or payable by the

 

member, and do not include claim expenses. An ultimate loss is

 

incurred by the association on the date that the loss occurs.

 

     Enacting section 1. This amendatory act takes effect 90 days

 

after the date it is enacted into law.