Bill Text: MI HB5147 | 2013-2014 | 97th Legislature | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Insurance; insurers; variable life and annuity products approved by the securities and exchange commission to meet form requirements; allow. Amends sec. 2236 of 1956 PA 218 (MCL 500.2236) & repeals sec. 2206 of 1956 PA 218 (MCL 500.2206).

Spectrum: Bipartisan Bill

Status: (Passed) 2014-06-04 - Assigned Pa 140'14 [HB5147 Detail]

Download: Michigan-2013-HB5147-Introduced.html

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HOUSE BILL No. 5147

 

November 13, 2013, Introduced by Reps. Goike, Leonard, Glardon, Hovey-Wright, Segal and Cochran and referred to the Committee on Insurance.

 

     A bill to amend 1956 PA 218, entitled

 

"The insurance code of 1956,"

 

by amending section 2236 (MCL 500.2236), as amended by 2002 PA 664;

 

and to repeal acts and parts of acts.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 2236. (1) A basic insurance policy form or annuity

 

contract form shall not be issued or delivered to any person in

 

this state, and an insurance or annuity application form if a

 

written application is required and is to be made a part of the

 

policy or contract, a printed rider or indorsement form or form of

 

renewal certificate, and a group certificate in connection with the

 

policy or contract, shall not be issued or delivered to a person in

 

this state, until a copy of the form is filed with the insurance

 

bureau department of insurance and financial services and approved

 

by the commissioner director of the department of insurance and

 

financial services as conforming with the requirements of this act

 

and not inconsistent with the law. Failure of the commissioner

 

director of the department of insurance and financial services to

 

act within 30 days after submittal constitutes approval. All such

 

forms, A form described in this section, except policies a policy

 

of disability insurance as defined in section 3400, shall must be

 

plainly printed with type size not less than 8-point unless the

 

commissioner director of the department of insurance and financial

 

services determines that portions of such a the form printed with

 

type less than 8-point is not deceptive or misleading.

 

     (2) An insurer may satisfy its obligations to make form

 

filings by becoming a member of, or a subscriber to, a rating

 

organization , licensed under section 2436 or 2630 , which that

 

makes such those filings and by filing with the commissioner

 

director of the department of insurance and financial services a

 

copy of its authorization of the rating organization to make the

 

filings on its behalf. Every member of or subscriber to a rating

 

organization shall adhere to the form filings made on its behalf by

 

the organization except that an insurer may file with the

 

commissioner director of the department of insurance and financial

 

services a substitute form, and thereafter if a subsequent form

 

filing by the rating organization affects the use of the substitute

 

form, the insurer shall review its use and notify the commissioner

 

director of the department of insurance and financial services

 

whether to withdraw its substitute form.

 

     (3) Beginning January 1, 1992, the commissioner director of

 

the department of insurance and financial services shall not

 

approve a form filed pursuant to under this section providing for

 

or relating to an insurance policy or an annuity contract for

 

personal, family, or household purposes if the form fails to obtain

 

the following readability score or meet the other requirements of

 

this subsection, as applicable:

 

     (a) The readability score for a form for which approval is

 

required by this section shall must not be less than 45, as

 

determined by the method provided in subdivisions (b) and (c).

 

     (b) The readability score for a form shall be determined as

 

follows:

 

     (i) For a form containing not more than 10,000 words, the

 

entire form shall be analyzed. For a form containing more than

 

10,000 words, not less than two 200-word samples per page shall be

 

analyzed instead of the entire form. The samples shall must be

 

separated by at least 20 printed lines.

 

     (ii) Count the number of words and sentences in the form or

 

samples and divide the total number of words by the total number of

 

sentences. Multiply this quotient by a factor of 1.015.

 

     (iii) Count the total number of syllables in the form or samples

 

and divide the total number of syllables by the total number of

 

words. Multiply this quotient by a factor of 84.6. As used in this

 

subparagraph, "syllable" means a unit of spoken language consisting

 

of 1 or more letters of a word as indicated by an accepted

 

dictionary. If the dictionary shows 2 or more equally acceptable

 

pronunciations of a word, the pronunciation containing fewer

 

syllables may be used.

 

     (iv) Add the figures obtained in subparagraphs (ii) and (iii) and

 

subtract this sum from 206.835. The figure obtained equals the

 

readability score for the form.

 

     (c) For the purposes of subdivision (b)(ii) and (iii), the

 

following procedures shall be used:

 

     (i) A contraction, hyphenated word, or numbers and letters when

 

separated by spaces shall be is counted as 1 word.

 

     (ii) A unit of words ending with a period, semicolon, or colon,

 

but excluding headings and captions, shall be is counted as 1

 

sentence.

 

     (d) In determining the readability score, the method provided

 

in subdivisions (b) and (c):

 

     (i) Shall be applied to an insurance policy form or an annuity

 

contract, together with a rider or indorsement form usually

 

associated with such an the insurance policy form or annuity

 

contract.

 

     (ii) Shall not be applied to words or phrases that are defined

 

in an insurance policy form, an annuity contract, or riders,

 

indorsements, or group certificates pursuant to under an insurance

 

policy form or annuity contract.

 

     (iii) Shall not be applied to language specifically agreed upon

 

through collective bargaining or required by a collective

 

bargaining agreement.

 

     (iv) Shall not be applied to language that is prescribed by

 

state or federal statute or by rules or regulations promulgated

 

pursuant to under a state or federal statute.

 

     (e) Each The form for which approval is required by this

 

section shall must contain both of the following:

 

     (i) Topical captions.

 

     (ii) An identification of exclusions.

 

     (f) Each insurance policy and annuity contract that has more

 

than 3,000 words printed on not more than 3 pages of text or that

 

has more than 3 pages of text regardless of the number of words

 

shall must contain a table of contents. This subdivision does not

 

apply to indorsements.

 

     (g) Each rider or indorsement form that changes coverage shall

 

must do all of the following:

 

     (i) Contain a properly descriptive title.

 

     (ii) Reproduce either the entire paragraph or the provision as

 

changed.

 

     (iii) Be accompanied by an explanation of the change.

 

     (h) If a computer system approved by the commissioner director

 

of the department of insurance and financial services calculates

 

the readability score of a form as being in compliance with this

 

subsection, the form is considered in compliance with the

 

readability score requirements of this subsection.

 

     (i) A variable life product or variable annuity product

 

approved by the United States securities and exchange commission

 

for sale in this state is compliant with this section.

 

     (4) After January 1, 1992, any change or addition to a policy

 

or annuity contract form for personal, family, or household

 

purposes, whether by indorsement, rider, or otherwise, or a change

 

or addition to a rider or indorsement form to such the policy or

 

annuity contract form, which policy or annuity contract form has

 

not been previously approved under subsection (3), shall be

 

submitted for approval pursuant to under subsection (3).

 

     (5) Upon written notice to the insurer, the commissioner

 

director of the department of insurance and financial services may

 

disapprove, withdraw approval or prohibit the issuance,

 

advertising, or delivery of any form to any person in this state if

 

it the form violates any provisions of this act, or contains

 

inconsistent, ambiguous, or misleading clauses, or contains

 

exceptions and conditions that unreasonably or deceptively affect

 

the risk purported to be assumed in the general coverage of the

 

policy. The notice shall must specify the objectionable provisions

 

or conditions and state the reasons for the commissioner's director

 

of the department of insurance and financial services' decision. If

 

the form is legally in use by the insurer in this state, the notice

 

shall must give the effective date of the commissioner's director

 

of the department of insurance and financial services' disapproval,

 

which shall not be less than 30 days subsequent to after the

 

mailing or delivery of the notice to the insurer. If the form is

 

not legally in use, then disapproval shall be is effective

 

immediately.

 

     (6) If a form is disapproved or approval is withdrawn under

 

the provisions of this act, the insurer is entitled upon demand to

 

a hearing before the commissioner director of the department of

 

insurance and financial services or a deputy commissioner director

 

of the department of insurance and financial services within 30

 

days after the notice of disapproval or of withdrawal of approval.

 

After the hearing, the commissioner director of the department of

 

insurance and financial services shall make findings of fact and

 

law, and either affirm, modify, or withdraw his or her original

 

order or decision.

 

     (7) Any issuance, use, or delivery by an insurer of any form

 

without the prior approval of the commissioner director of the

 

department of insurance and financial services as required by

 

subsection (1) or after withdrawal of approval as provided by

 

subsection (5) constitutes is a separate violation for which the

 

commissioner director of the department of insurance and financial

 

services may order the imposition of a civil penalty of $25.00 for

 

each offense, but not to exceed the maximum penalty of $500.00 for

 

any 1 series of offenses relating to any 1 basic policy form, which

 

penalty may be recovered by the attorney general as provided in

 

section 230.

 

     (8) The filing requirements of this section do not apply to

 

any of the following:

 

     (a) Insurance against loss of or damage to any of the

 

following:

 

     (i) Imports, exports, or domestic shipments.

 

     (ii) Bridges, tunnels, or other instrumentalities of

 

transportation and communication.

 

     (iii) Aircraft and attached equipment.

 

     (iv) Vessels and watercraft under construction or owned by or

 

used in a business or having a straight-line hull length of more

 

than 24 feet.

 

     (b) Insurance against loss resulting from liability, other

 

than worker's compensation or employers' liability arising out of

 

the ownership, maintenance, or use of any of the following:

 

     (i) Imports, exports, or domestic shipments.

 

     (ii) Aircraft and attached equipment.

 

     (iii) Vessels and watercraft under construction or owned by or

 

used in a business or having a straight-line hull length of more

 

than 24 feet.

 

     (c) Surety bonds other than fidelity bonds.

 

     (d) Policies, riders, indorsements, or forms of unique

 

character designed for and used with relation to insurance upon a

 

particular subject, or that relate to the manner of distribution of

 

benefits or to the reservation of rights and benefits under life or

 

disability insurance policies and are used at the request of the

 

individual policyholder, contract holder, or certificate holder.

 

Beginning September 1, 1968, the commissioner director of the

 

department of insurance and financial services by order may exempt

 

from the filing requirements of this section and sections 2242,

 

3606, and 4430 for so long as he or she considers proper any

 

insurance document or form, except that portion of the document or

 

form that establishes a relationship between group disability

 

insurance and personal protection insurance benefits subject to

 

exclusions or deductibles pursuant to under section 3109a, as

 

specified in the order to which this section is not practicably may

 

not be applied, or the filing and approval of which are considered

 

unnecessary for the protection of the public. Insurance documents

 

or forms providing medical payments or income replacement benefits,

 

except that portion of the document or form that establishes a

 

relationship between group disability insurance and personal

 

protection insurance benefits subject to exclusions or deductibles

 

pursuant to under section 3109a, exempt by order of the

 

commissioner director of the department of insurance and financial

 

services from the filing requirements of this section and sections

 

2242 and 3606 are considered approved by the commissioner director

 

of the department of insurance and financial services for purposes

 

of section 3430.

 

     (e) Insurance that meets both of the following:

 

     (i) Is sold to an exempt commercial policyholder.

 

     (ii) Contains a prominent disclaimer that states "This policy

 

is exempt from the filing requirements of section 2236 of the

 

insurance code of 1956, 1956 PA 218, MCL 500.2236." or words that

 

are substantially similar.

 

     (9) As used in this section and sections 2401 and 2601,

 

"exempt commercial policyholder" means an insured that purchases

 

the insurance for other than personal, family, or household

 

purposes.

 

     (10) Every order made by the commissioner director of the

 

department of insurance and financial services under the provisions

 

of this section is subject to court review as provided in section

 

244.

 

     Enacting section 1. Section 2206 of the insurance code of

 

1956, 1956 PA 218, MCL 500.2206, is repealed.