January 25, 2005, Introduced by Senator THOMAS and referred to the Committee on Banking and Financial Institutions.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 2106 and 2109 (MCL 500.2106 and 500.2109) and
by adding section 2107a.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2106. Except as specifically provided in this chapter,
the
provisions of chapter 24 and chapter 26 shall do not
apply to
automobile
insurance and home insurance. An insurer may use rates
for
automobile insurance or home insurance as soon as those rates
are
filed shall not use rates for automobile insurance
and home
insurance until those rates have been approved by the commissioner.
To
the extent that other provisions of this code act
are
inconsistent
with the provisions of this chapter, this chapter
shall
govern governs
with respect to automobile insurance and home
insurance.
Sec. 2107a. (1) By not later than 1 year after the effective
date of this section and annually thereafter, each insurer subject
to this chapter shall file base rates for automobile insurance and
home insurance and shall make filings that conform to this act as
amended by the amendatory act that added this section.
(2) The commissioner shall review a filing submitted under
subsection (1) and shall approve or disapprove the filing within 60
days after its submission.
(3) If a filing is disapproved under subsection (2), the
insurer, within 30 days of the order of disapproval, shall make a
revised filing with the commissioner. The revised filing is subject
to review under this chapter in the same manner as an original
filing made under this chapter.
Sec. 2109. (1) If an automobile insurer or home insurer
proposes an increase in its base rates in a filing under section
2107a, the insurer shall provide facts to the commissioner that
were relied upon by the insurer to support the insurer's request
for an increase in base rates. 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.
(3) The commissioner shall not approve a rate increase for
automobile insurance or home insurance unless the commissioner
determines that the facts received from the insurer under
subsection (1) justify a rate increase. The commissioner shall not
approve a rate increase by examining actuarial data from a line
other than the insurer's automobile insurance line or home
insurance line, as applicable, or if the insurer fails to file the
facts required by subsection (1).