January 22, 2008, Introduced by Senators SCOTT, JACOBS, CLARK-COLEMAN, ANDERSON, BRATER, THOMAS, GLEASON, SCHAUER, SWITALSKI, BASHAM, HUNTER, CHERRY and CLARKE and referred to the Committee on Economic Development and Regulatory Reform.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending section 2109 (MCL 500.2109).
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.
Enacting section 1. This amendatory act does not take effect
unless all of the following bills of the 94th Legislature are
enacted into law:
(a) Senate Bill No. 1024.
(b) Senate Bill No. 1025.
(c) Senate Bill No. 1026.