Bill Text: MI HB4972 | 2009-2010 | 95th Legislature | Introduced

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Bill Title: Insurance; essential; requirement for finding reasonable degree of competition; eliminate. Amends secs. 2109, 2115, 2403 & 2603 of 1956 PA 218 (MCL 500.2109 et seq.).

Spectrum: Partisan Bill (Democrat 6-0)

Status: (Introduced - Dead) 2009-05-20 - Printed Bill Filed 05/20/2009 [HB4972 Detail]

Download: Michigan-2009-HB4972-Introduced.html

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HOUSE BILL No. 4972

 

May 19, 2009, Introduced by Reps. Lipton, Constan, Liss, Young, Kennedy and Barnett and referred to the Committee on Insurance.

 

     A bill to amend 1956 PA 218, entitled

 

"The insurance code of 1956,"

 

by amending sections 2109, 2115, 2403, and 2603 (MCL 500.2109,

 

500.2115, 500.2403, and 500.2603), section 2115 as amended by 1980

 

PA 461 and section 2403 as amended by 1993 PA 200.

 

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 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

 

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. 2115. (1) If as As part of a decision in a proceeding

 

under section 2114, or in a separate proceeding on the

 

commissioner's own motion, held pursuant to Act No. 306 of the

 

Public Acts of 1969, as amended, the commissioner finds that a

 

reasonable degree of competition does not exist on a statewide

 

basis with respect to automobile insurance or home insurance, the

 

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

 

24.328, the commissioner shall by may order require each an

 

automobile or home insurer which transacts that type of insurance

 

in this state to comply with the provisions of chapter 24 or 26, as

 

the case may be. , with respect to that insurance which was the

 

subject of the commissioner's finding. The order shall take effect

 

not less than 90 nor more than 150 days after the order is issued.

 

On or after the effective date of an order issued under this

 

subsection, none of the provisions of this chapter shall be is

 

applicable to the insurance which that was the subject of the

 

order.

 

     (2) After an order issued pursuant to subsection (1) has been

 

in effect for 1 year, if the commissioner has reason to believe

 

that there would be a reasonable degree of price competition for

 

the type of insurance affected by the order, the commissioner, on

 

his or her own motion, or if, upon the petition of an insurer or a

 

resident of this state, there is a showing that there is reason to

 

believe that there would be a reasonable degree of price

 

competition for that type of insurance, the commissioner shall may

 

hold a hearing 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, to determine if a reasonable degree of price

 

competition would exist if whether the order were no longer issued

 

under subsection (1) should remain in effect. The hearing shall be

 

held upon not less than 20 days' written notice to each insurer

 

subject to the order under subsection (1) and upon not less than 20

 

days' notice in not less than 3 newspapers of general circulation

 

within this state.

 

     (3) If the commissioner finds after the hearing that a

 

reasonable degree of price competition would exist, an order issued

 

under subsection (1) should not remain in effect, the commissioner

 

shall by order state when, not less than 90 nor more than 150 days

 

after issuance of a new order, the preceding order under subsection

 

(1) will no longer be effective. On and after the effective date of

 

an order issued under this subsection, the provisions of this

 

chapter shall be applicable to the type of insurance which that was

 

the subject of the order under subsection (1).

 

     Sec. 2403. (1) All rates shall be made in accordance with this

 

section and all of the following:

 

     (a) Due consideration shall be given to past and prospective

 

loss experience within and outside this state; to catastrophe

 

hazards; 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; to

 

underwriting practice, judgment, and to all other relevant factors

 

within and outside this state. For worker's compensation insurance,

 

in determining the reasonableness of the margin for underwriting

 

profit and contingencies, consideration shall be given to all

 

after-tax investment profit or loss from unearned premium and loss

 

reserves attributable to worker's compensation insurance, as well

 

as the factors used to determine the amount of reserves. For all

 

other kinds of insurance to which this chapter applies, all factors

 

to which due consideration is given under this subdivision shall be

 

treated in a manner consistent with the laws of this state that

 

existed on December 28, 1981.

 

     (b) 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.

 

     (c) Risks may be grouped by classifications for the

 

establishment of rates and minimum premiums. Classification rates

 

may be modified to produce rates for individual risks in accordance

 

with rating plans that measure variations in hazards, expense

 

provisions, or both. The rating plans may measure any differences

 

among risks that may have a probable effect upon losses or expenses

 

as provided for in subdivision (a).

 

     (d) 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 with respect to

 

the classification, kind, or type of risks to which the rate is

 

applicable. Except as otherwise provided in this subdivision, 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 coverage

 

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 the

 

insurance through ordinary methods. For commercial liability

 

insurance a rate shall not be held to be inadequate unless the

 

rate, after consideration of investment income and marketing

 

programs and underwriting programs, is unreasonably low for the

 

insurance coverage provided and is insufficient to sustain

 

projected losses and expenses; or unless the rate is unreasonably

 

low for the insurance coverage 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 the insurance through ordinary methods.

 

As used in this subdivision, "commercial liability insurance" means

 

insurance that provides indemnification for commercial, industrial,

 

professional, or business liabilities. For worker's compensation

 

insurance provided by an insurer that is controlled by a nonprofit

 

health care corporation formed pursuant to the nonprofit health

 

care corporation reform act, Act No. 350 of the Public Acts of

 

1980, being sections 550.1101 to 550.1704 of the Michigan Compiled

 

Laws 1980 PA 350, MCL 550.1101 to 550.1704, a rate shall not be

 

held to be inadequate unless the rate is unreasonably low for the

 

insurance coverage provided. 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 the rate reflects differences in

 

expenses for individuals or risks with similar anticipated losses,

 

or because the rate reflects differences in losses for individuals

 

or risks with similar expenses. Rates are not unfairly

 

discriminatory if they are averaged broadly among persons insured

 

on a group, franchise, blanket policy, or similar basis.

 

     (2) Except to the extent necessary to meet the provisions of

 

subsection (1)(d), uniformity among insurers in any matters within

 

the scope of this section is neither required nor prohibited.

 

     Sec. 2603. (1) All rates shall be made in accordance with the

 

following provisions:

 

     (a) Due consideration shall be given to past and prospective

 

loss experience within and outside this state; to catastrophe

 

hazards; 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; and to

 

all other relevant factors within and outside this state. In the

 

case of fire insurance rates, consideration also shall be given to

 

the experience of the fire insurance business during a period of

 

not less than the most recent 5-year period for which that

 

experience is available.

 

     (b) 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.

 

     (c) Risks may be grouped by classifications for the

 

establishment of rates and minimum premiums. Classification rates

 

may be modified to produce rates for individual risks in accordance

 

with rating plans which that measure variations in hazards, expense

 

provisions, or both. The rating plans may measure any differences

 

among risks that may have a probable effect upon losses or expenses

 

as provided for in subdivision (a).

 

     (d) 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 with respect to

 

the classification, kind, or type of risks to which the rate is

 

applicable. 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 the

 

insurance through ordinary methods. 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 the rate

 

reflects differences in expenses for individuals or risks with

 

similar anticipated losses, or because the rate reflects

 

differences in losses for individuals or risks with similar

 

expenses. Rates are not unfairly discriminatory if they are

 

averaged broadly among persons insured on a group, franchise,

 

blanket policy, or similar basis.

 

     (2) Except to the extent necessary to meet the provisions of

 

subsection (1)(d), uniformity among insurers in any matters within

 

the scope of this section is neither required nor prohibited.