Bill Text: MI SB0498 | 2019-2020 | 100th Legislature | Introduced
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 3-0)
Status: (Introduced - Dead) 2019-09-10 - Referred To Committee On Insurance And Banking [SB0498 Detail]
Download: Michigan-2019-SB0498-Introduced.html
SENATE BILL NO. 498
September 10, 2019, Introduced by Senators
MOSS, BRINKS and ALEXANDER and referred to the Committee on Insurance and
Banking.
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 must be made in accordance with the following: provisions:
(a) Rates shall A rate must not be excessive, inadequate, or unfairly discriminatory. A rate shall must 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 must 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, 2020, 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.
