Bill Text: MI SB1305 | 2011-2012 | 96th Legislature | Chaptered
Bill Title: Insurance; property and casualty; rating and underwriting requirements; modify. Amends secs. 2110a, 2111, 2117, 2119 & 2121 of 1956 PA 218 (MCL 500.2110a et seq.).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2012-12-31 - Assigned Pa 0441'12 With Immediate Effect [SB1305 Detail]
Download: Michigan-2011-SB1305-Chaptered.html
Act No. 441
Public Acts of 2012
Approved by the Governor
December 22, 2012
Filed with the Secretary of State
December 27, 2012
EFFECTIVE DATE: December 27, 2012
STATE OF MICHIGAN
96TH LEGISLATURE
REGULAR SESSION OF 2012
Introduced by Senator Hune
ENROLLED SENATE BILL No. 1305
AN ACT to amend 1956 PA 218, entitled “An act to revise, consolidate, and classify the laws relating to the insurance and surety business; to regulate the incorporation or formation of domestic insurance and surety companies and associations and the admission of foreign and alien companies and associations; to provide their rights, powers, and immunities and to prescribe the conditions on which companies and associations organized, existing, or authorized under this act may exercise their powers; to provide the rights, powers, and immunities and to prescribe the conditions on which other persons, firms, corporations, associations, risk retention groups, and purchasing groups engaged in an insurance or surety business may exercise their powers; to provide for the imposition of a privilege fee on domestic insurance companies and associations and the state accident fund; to provide for the imposition of a tax on the business of foreign and alien companies and associations; to provide for the imposition of a tax on risk retention groups and purchasing groups; to provide for the imposition of a tax on the business of surplus line agents; to provide for the imposition of regulatory fees on certain insurers; to provide for assessment fees on certain health maintenance organizations; to modify tort liability arising out of certain accidents; to provide for limited actions with respect to that modified tort liability and to prescribe certain procedures for maintaining those actions; to require security for losses arising out of certain accidents; to provide for the continued availability and affordability of automobile insurance and homeowners insurance in this state and to facilitate the purchase of that insurance by all residents of this state at fair and reasonable rates; to provide for certain reporting with respect to insurance and with respect to certain claims against uninsured or self-insured persons; to prescribe duties for certain state departments and officers with respect to that reporting; to provide for certain assessments; to establish and continue certain state insurance funds; to modify and clarify the status, rights, powers, duties, and operations of the nonprofit malpractice insurance fund; to provide for the departmental supervision and regulation of the insurance and surety business within this state; to provide for regulation over worker’s compensation self-insurers; to provide for the conservation, rehabilitation, or liquidation of unsound or insolvent insurers; to provide for the protection of policyholders, claimants, and creditors of unsound or insolvent insurers; to provide for associations of insurers to protect policyholders and claimants in the event of insurer insolvencies; to prescribe educational requirements for insurance agents and solicitors; to provide for the regulation of multiple employer welfare arrangements; to create an automobile theft prevention authority to reduce the number of automobile thefts in this state; to prescribe the powers and duties of the automobile theft prevention authority; to provide certain powers and duties upon certain officials, departments, and authorities of this state; to provide for an appropriation; to repeal acts and parts of acts; and to provide penalties for the violation of this act,” by amending sections 2110a, 2111, 2117, 2119, and 2121 (MCL 500.2110a, 500.2111, 500.2117, 500.2119, and 500.2121), section 2110a as added by 1996 PA 514, sections 2111, 2117, and 2121 as amended by 2002 PA 492, and section 2119 as amended by 1980 PA 461.
The People of the State of Michigan enact:
Sec. 2110a. If uniformly applied to all its insureds, an insurer may use factors in addition to those permitted by section 2111 for insurance if the plan is consistent with the purposes of this act and reflects reasonably anticipated reductions or increases in losses or expenses. This section does not affect benefits or obligations required under chapter 31. This section does not authorize an insurer to offer or prohibit an insurer from offering premium discount plans concerning any of the following:
(a) Health care services, health care providers, or health care facilities.
(b) Automobile repair providers.
(c) Materials used in the repair of an automobile.
Sec. 2111. (1) Notwithstanding any provision of this act or this chapter to the contrary, classifications and territorial base rates used by an insurer in this state with respect to automobile insurance or home insurance shall conform to the applicable requirements of this section.
(2) Classifications established under this section for automobile insurance shall be based only on 1 or more of the following factors, which shall be applied by an insurer on a uniform basis throughout this state:
(a) With respect to all automobile insurance coverages:
(i) Either the age of the driver; the length of driving experience; or the number of years licensed to operate a motor vehicle.
(ii) Driver primacy, based on the proportionate use of each vehicle insured under the policy by individual drivers insured or to be insured under the policy.
(iii) Average miles driven weekly, annually, or both.
(iv) Type of use, such as business, farm, or pleasure use.
(v) Vehicle characteristics, features, and options, such as engine displacement, ability of the vehicle and its equipment to protect passengers from injury, and other similar items, including vehicle make and model.
(vi) Daily or weekly commuting mileage.
(vii) Number of cars insured by the insurer or number of licensed operators in the household. However, number of licensed operators shall not be used as an indirect measure of marital status.
(viii) Amount of insurance.
(b) In addition to the factors prescribed in subdivision (a), with respect to personal protection insurance coverage:
(i) Earned income.
(ii) Number of dependents of income earners insured under the policy.
(iii) Coordination of benefits.
(iv) Use of a safety belt.
(c) In addition to the factors prescribed in subdivision (a), with respect to collision and comprehensive coverages:
(i) The anticipated cost of vehicle repairs or replacement, which may be measured by age, price, cost new, or value of the insured automobile, and other factors directly relating to that anticipated cost.
(ii) Vehicle make and model.
(iii) Vehicle design characteristics related to vehicle damageability.
(iv) Vehicle characteristics relating to automobile theft prevention devices.
(d) With respect to all automobile insurance coverage other than comprehensive, successful completion by the individual driver or drivers insured under the policy of an accident prevention education course that meets the following criteria:
(i) The course shall include a minimum of 8 hours of classroom instruction.
(ii) The course shall include, but not be limited to, a review of all of the following:
(A) The effects of aging on driving behavior.
(B) The shapes, colors, and types of road signs.
(C) The effects of alcohol and medication on driving.
(D) The laws relating to the proper use of a motor vehicle.
(E) Accident prevention measures.
(F) The benefits of safety belts and child restraints.
(G) Major driving hazards.
(H) Interaction with other highway users, such as motorcyclists, bicyclists, and pedestrians.
(3) Each insurer shall establish a secondary or merit rating plan for automobile insurance, other than comprehensive coverage. A secondary or merit rating plan required under this subsection shall provide for premium surcharges for any or all coverages for automobile insurance, other than comprehensive coverage, based upon any or all of the following, when that information becomes available to the insurer:
(a) Substantially at-fault accidents.
(b) Convictions for, determinations of responsibility for civil infractions for, or findings of responsibility in probate court for civil infractions for violations under chapter VI of the Michigan vehicle code, 1949 PA 300, MCL 257.601 to 257.750. However, an insured shall not be merit rated for a civil infraction under chapter VI of the Michigan vehicle code, 1949 PA 300, MCL 257.601 to 257.750, for a period of time longer than that which the secretary of state’s office carries points for that infraction on the insured’s motor vehicle record.
(4) An insurer shall not establish or maintain rates or rating classifications for automobile insurance based on sex or marital status.
(5) Notwithstanding other provisions of this chapter, automobile insurance risks may be grouped by territory.
(6) This section does not limit insurers or rating organizations from establishing and maintaining statistical reporting territories. This section does not prohibit an insurer from establishing or maintaining, for automobile insurance, a premium discount plan for senior citizens in this state who are 65 years of age or older, if the plan is uniformly applied by the insurer throughout this state. If an insurer has not established and maintained a premium discount plan for senior citizens, the insurer shall offer reduced premium rates to senior citizens in this state who are 65 years of age or older and who drive less than 3,000 miles per year, regardless of statistical data.
(7) Classifications established under this section for home insurance other than inland marine insurance provided by policy floaters or endorsements shall be based only on 1 or more of the following factors:
(a) Amount and types of coverage.
(b) Security and safety devices, including locks, smoke detectors, and similar, related devices.
(c) Repairable structural defects reasonably related to risk.
(d) Fire protection class.
(e) Construction of structure, based on structure size, building material components, and number of units.
(f) Loss experience of the insured, based on prior claims attributable to factors under the control of the insured that have been paid by an insurer. An insured’s failure, after written notice from the insurer, to correct a physical condition that presents a risk of repeated loss shall be considered a factor under the control of the insured for purposes of this subdivision.
(g) Use of smoking materials within the structure.
(h) Distance of the structure from a fire hydrant.
(i) Availability of law enforcement or crime prevention services.
(8) Notwithstanding other provisions of this chapter, home insurance risks may be grouped by territory.
(9) An insurer may use factors in addition to those permitted by this section for insurance if the plan is consistent with the purposes of this act and reflects reasonably anticipated reductions or increases in losses or expenses.
Sec. 2117. (1) As a condition of maintaining its certificate of authority, an insurer shall not refuse to insure, refuse to continue to insure, or limit the coverage available to an eligible person for home insurance, except in accordance with underwriting rules established under this section and section 2119.
(2) The underwriting rules that an insurer may establish for home insurance shall be based only on the following:
(a) Criteria identical to the standards set forth in section 2103(2).
(b) The physical condition of the property insured or to be insured, if the underwriting rules are objective, are directly related to the perils insured against, and, without regard to the age of the structure, are based on the specific provisions of a national, state, or local housing and safety code, a manufacturer’s specification, or standards of similar specificity. If an applicant or insured obtains a certificate of compliance or habitation issued by an appropriate governmental unit or agency, certifying that a building is in substantial compliance with local housing and safety codes, the certificate creates a rebuttable presumption that the dwelling meets the insurer’s underwriting rules relating to physical condition.
(c) For the renewal of a home insurance policy, the claim history of the person insured or to be insured during the 3-year period immediately preceding renewal of the policy, if that history is based on 1 or both of the following:
(i) Claim experience arising out of the insured’s negligence.
(ii) Failure by the insured, after written notice from the insurer, to correct a physical condition that is directly related to a paid claim or that presents a clear risk of a significant loss under the property or liability portions of a homeowners policy.
(d) The relationship between market value and replacement cost of a dwelling insured or to be insured for a replacement cost policy, if a repair cost policy is offered by the insurer under subsection (3).
(e) For nonrenewal of a home insurance policy, the claim history under the policy, excluding liability claims, as follows:
(i) If there has been 1 or more of the following:
(A) Three paid claims within the immediately preceding 3-year period totaling $3,000.00 or more, exclusive of weather-related claims.
(B) Three paid claims within the immediately preceding 3-year period totaling $4,000.00 or more, including weather-related claims.
(ii) A history of 3 or more paid claims within an immediately preceding 3-year period if the insurer meets all of the following:
(A) Has an underwriting rule under subparagraph (i) in effect.
(B) The underwriting rule under this subparagraph is for a paid claim history that totals not less than the amount in subparagraph (i)(A) exclusive of weather-related claims and totals not less than the amount in subparagraph (i)(B) including weather-related claims.
(C) The underwriting rule under this subparagraph applies to an insured who has had a home insurance policy with the insurer for a continuous minimum period of time as determined by the insurer that may be any period of time between 5 and 10 years.
(f) Whether the number of residences within the dwelling are inconsistent with the policy forms approved by the commissioner for the insurer.
(g) Whether a dwelling has been unoccupied for more than 60 days, if there is evidence of an intent to vacate or keep the premises vacant or unoccupied, as to the applicant or insured.
(h) The existence of an adjacent physical hazard, if the hazard presents a significant risk of loss directly related to the perils insured or to be insured against for which a rate surcharge is not applicable. For purposes of this subdivision only, residential property or traffic patterns shall not be considered to cause a significant risk of loss. Nonrenewals based upon an adjacent physical hazard shall be due to a change in the hazard from that which existed at the original date of issuance of the policy.
(i) The failure of the insured or applicant to purchase an amount of insurance in excess of 80% of the replacement cost of the property to be insured under a replacement cost policy, if both of the following conditions are met:
(i) The purchase of an amount of insurance in excess of 80% of the replacement cost is a condition for sale of the policy.
(ii) The insurer offers in this state at least 1 form of a replacement cost policy for which the insurer requires only a minimum amount of insurance equal to 80% of the replacement cost of the dwelling as a condition of purchase.
(j) One or more incidents involving a threat, harassment, or physical assault by the insured or applicant for insurance on an insurer employee, agent, or agent employee while acting within the scope of his or her employment, if a report of the incident was filed with an appropriate law enforcement agency.
(3) If an insurer establishes an underwriting rule based on the relationship between the market value and replacement cost under subsection (2)(d), both of the following apply to the repair cost policy:
(a) The insurer shall offer the repair cost policy with deductibles, terms and conditions, perils insured against, and types and amounts of coverage, which are substantially equivalent to the deductibles, terms and conditions, perils insured against, and types and amounts of coverage provided by the replacement cost policy of the insurer, at least equivalent to the HO-2 form replacement cost policy filed and in effect in this state for the principal rating organization as of October 1, 1979.
(b) The insurer shall not use an underwriting rule based on the relationship between the market value and replacement cost for the repair cost policy.
(4) The rates of an insurer for a repair cost policy shall be established so that the premium for a repair cost policy shall not exceed 105% of the premium for an amount of insurance equal to 80% of the replacement cost of the dwelling under the equivalent replacement cost policy described in subsection (3)(a). Premiums for dwellings with identical replacement costs shall vary on a schedule determined by the insurer in accordance with the market value of the dwellings.
(5) Off-premises claims may be aggregated for the purposes of subsection (2)(e), irrespective of the location of the insured dwelling. All claims other than off-premises losses used in a determination for purposes of subsection (2)(e) shall be aggregated only as to an insured dwelling. The minimum dollar amounts prescribed in subsection (2)(e)(i) shall be adjusted on January 1, 2006, and on January 1 of every sixth year thereafter to reflect the aggregate annual average percentage change in the consumer price index since the previous adjustment, rounded to the nearest hundred dollars. As used in this subsection, “consumer price index” means the consumer price index for all urban consumers in the U.S. city average, as most recently reported by the United States department of labor, bureau of labor statistics, and after certification by the commissioner in an administrative bulletin.
Sec. 2119. (1) Each 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 its underwriting rules before their use in this state. All filed underwriting rules shall be available for public inspection. If the commissioner finds that an underwriting rule is inconsistent with this chapter, the commissioner, 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.
Sec. 2121. (1) If an insurer uses an inspection of a dwelling to determine whether the insured or applicant is an eligible person for home insurance, criteria for selecting dwellings for inspection shall not be based on race, color, creed, marital status, sex, national origin, residence, age, disability, or lawful occupation.
(2) If an insurer establishes an inspection program that provides for inspection of a portion of its existing business on a periodic basis, the inspection program shall not be based on any of the criteria in subsection (1).
(3) Criteria for selecting dwellings for inspection shall be filed with the commissioner for informational purposes only. The commissioner, after a hearing held pursuant to the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, shall disapprove the further use of inspection criteria if the commissioner finds that the criteria are inconsistent with this chapter.
(4) There is no civil liability, other than contractual liability, if applicable, on the part of, and a cause of action of any nature does not arise against, the commissioner, an insurer, an inspection bureau, an authorized representative, agent, employee, or affiliate of the commissioner, an insurer, or an inspection bureau, or any licensed insurance agent for acts or omissions related solely to the physical condition of the property in an inspection conducted for insurance purposes under this chapter.
This act is ordered to take immediate effect.
Secretary of the Senate
Clerk of the House of Representatives
Approved
Governor
