HOUSE BILL No. 4738 May 8, 2001, Introduced by Reps. Hale, Bogardus, Clark, Minore, Waters, Hardman, Phillips, McConico, Lipsey, Daniels, Garza, Thomas, Schermesser, Dennis, Rison, Quarles and Stallworth and referred to the Committee on Insurance and Financial Services. A bill to amend 1956 PA 218, entitled "The insurance code of 1956," by amending sections 2021, 2105, 2106, 2107, 2108, 2109, 2110, 2111, 2114, 2118, 2120, 2127, 2236, 2400, 2406, 2430, 2436, 2438, 2458, 2462, 2472, 2600, 2606, 2608, 2616, 2628, 2630, 2636, 2652, 2654, 2664, 2930, 3020, 3321, and 3340 (MCL 500.2021, 500.2105, 500.2106, 500.2107, 500.2108, 500.2109, 500.2110, 500.2111, 500.2114, 500.2118, 500.2120, 500.2127, 500.2236, 500.2400, 500.2406, 500.2430, 500.2436, 500.2438, 500.2458, 500.2462, 500.2472, 500.2600, 500.2606, 500.2608, 500.2616, 500.2628, 500.2630, 500.2636, 500.2652, 500.2654, 500.2664, 500.2930, 500.3020, 500.3321, and 500.3340), section 2021 as added and sec- tion 2436 as amended by 1982 PA 7, section 2111 as amended by 1996 PA 98, section 2118 as amended by 1988 PA 43, section 2120 as amended by 1984 PA 350, sections 2236 and 2406 as amended by 03489'01 DKH 2 1993 PA 200, section 2400 as amended by 1982 PA 8, section 2458 as amended by 1988 PA 262, section 3020 as amended by 1998 PA 410, and section 3340 as amended by 1986 PA 10, and by adding sections 2026a, 2094, 2103a, 2106a, 2107a, 2109a, 2109b, 2111c, 2128, 2128a, 2128b, 2128c, 2128d, 2128e, 2128f, and 3105a; and to repeal acts and parts of acts. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 2021. An unfair method of competition and an unfair or 2 deceptive act or practice in the business of insurance includes 3 failure by a rating organization and an insurerwhich makes its4own rates,within a reasonable time after receiving written 5 request therefor and upon payment ofsuchA reasonable charge 6 as it may make, to furnish toanyAN insured affected by a rate 7 made by it, or to the INSURED'S authorized representative,of8such insured,all pertinent information tosuchTHE rate. 9 SEC. 2026A. (1) IT IS AN UNFAIR METHOD OF COMPETITION AND 10 AN UNFAIR OR DECEPTIVE ACT OR PRACTICE IN THE BUSINESS OF INSUR- 11 ANCE FOR A PRIVATE PASSENGER NONFLEET AUTOMOBILE INSURER OR THE 12 INSURER'S AGENT TO SOLICIT, OFFER, PAY, OR RECEIVE A KICKBACK OR 13 BRIBE IN CONNECTION WITH THE PROCESS OF ADJUSTING, RESOLVING, 14 DENYING, OR LITIGATING A CLAIM FOR AUTOMOTIVE REPAIR. 15 (2) AN INSURER OR AN INSURER'S AGENT WHO VIOLATES THIS SEC- 16 TION IS GUILTY OF A FELONY PUNISHABLE BY IMPRISONMENT FOR NOT 17 LESS THAN 1 YEAR OR MORE THAN 5 YEARS, OR A FINE OF NOT MORE THAN 18 $50,000.00, OR BOTH, AND IN ADDITION, THE INSURER IS SUBJECT TO 19 THE CERTIFICATE OF AUTHORITY REVOCATION PROCEEDINGS OF THIS 20 CHAPTER. 03489'01 3 1 SEC. 2094. AN INDIVIDUAL THREATENED WITH INJURY OR INJURED 2 DIRECTLY OR INDIRECTLY BY A PRIVATE PASSENGER NONFLEET AUTOMOBILE 3 INSURER'S VIOLATION OF ANY PROVISION OF THIS CHAPTER MAY BRING AN 4 ACTION FOR APPROPRIATE INJUNCTIVE OR OTHER EQUITABLE RELIEF 5 AGAINST IMMEDIATE IRREPARABLE HARM, ACTUAL DAMAGES SUSTAINED BY 6 REASON OF A VIOLATION OF THIS CHAPTER, AND, AS DETERMINED BY THE 7 COURT, INTEREST ON THE DAMAGES FROM THE DATE OF THE COMPLAINT, 8 TAXABLE COSTS, AND REASONABLE ATTORNEY'S FEES. THIS REMEDY IS IN 9 ADDITION TO ANY OTHER REMEDY AND PENALTY PROVISIONS PROVIDED BY 10 THIS CHAPTER. 11 SEC. 2103A. AS USED IN THIS CHAPTER: 12 (A) "GROUP AUTOMOBILE INSURANCE" MEANS AUTOMOBILE INSURANCE 13 COVERING NOT LESS THAN 25 ELIGIBLE EMPLOYEES OR MEMBERS, WITH OR 14 WITHOUT THEIR ELIGIBLE DEPENDENTS, WRITTEN UNDER A MASTER POLICY 15 ISSUED TO AND ENDORSED BY A GOVERNMENTAL CORPORATION, UNIT, 16 AGENCY, OR DEPARTMENT, OR TO A CORPORATION, PARTNERSHIP, INDIVID- 17 UAL EMPLOYER, OR AN ASSOCIATION, UPON APPLICATION OF AN EXECUTIVE 18 OFFICER OR TRUSTEE OF THE ASSOCIATION HAVING A CONSTITUTION OR 19 BYLAWS, AND FORMED IN GOOD FAITH FOR PURPOSES OTHER THAN THAT OF 20 OBTAINING INSURANCE. 21 (B) "TOTAL RETURN RATING" MEANS THE CONSIDERATION OF TOTAL 22 REVENUE AND AVAILABLE ASSETS OF THE INSURER, INCLUDING, BUT NOT 23 LIMITED TO, INVESTMENT INCOME, CAPITAL AND SURPLUS, UNDERWRITING 24 AND OPERATING PROFITS, PREMIUM REVENUE, AND ALL OTHER RESERVES. 25 Sec. 2105. (1)NoA policy of automobile insurance or 26 home insurance shall NOT be offered, bound, made, issued, 27 delivered or renewed in this state on and after January 1, 1981, 03489'01 4 1 except in conformity with this chapter. This chaptershall2 DOES not apply to policies of automobile insurance or home insur- 3 ance offered, bound, made, issued, delivered or renewed in this 4 state before January 1, 1981. 5 (2) This chaptershallDOES not apply to insurance written 6 on a group, franchise,blanket policy,or similar basiswhich7 THAT offers home insuranceor automobile insuranceto all mem- 8 bers of the group, franchise plan, or blanket coverage who are 9 eligible persons. 10 Sec. 2106. Except as specifically provided in this chapter, 11 the provisions of chapter 24 and chapter 26shallDO not apply 12 to automobile insurance and home insurance. An insurer may use 13 rates forautomobile insurance orhome insurance as soon as 14 those rates are filed. AN INSURER SHALL NOT USE RATES FOR AUTO- 15 MOBILE INSURANCE UNTIL THOSE RATES HAVE BEEN APPROVED BY THE 16 COMMISSIONER. To the extent that other provisions of thiscode17 ACT are inconsistent with the provisions of this chapter, this 18 chaptershall governGOVERNS with respect to automobile insur- 19 ance and home insurance. 20 SEC. 2106A. TO BE AUTHORIZED TO WRITE GROUP AUTOMOBILE 21 INSURANCE IN THIS STATE, AN INSURER SHALL OFFER THE GROUP COVER- 22 AGE TO EVERY ELIGIBLE PERSON IN THE GROUP IN A UNIFORM MANNER AND 23 SHALL FOLLOW THE RATE-MAKING, UNDERWRITING, AND OTHER APPLICABLE 24 PROVISIONS OF THIS ACT. 25 Sec. 2107. (1) On or before September 1, 1980, each insurer 26 subject to this chapter shall make filings in accordance with 27 this chapter forautomobile insurance,home insurance, or03489'01 5 1both,to be effective not later than January 1, 1981norOR 2 earlier than November 1, 1980. 3 (2) With regard to a filing submitted under subsection (1), 4 the commissioner shall conduct a review of the filing on an 5 informal basis, and a dispute with regard to that filing shall 6 not be considered a contested case underAct No. 306 of the7Public Acts of 1969, as amendedTHE ADMINISTRATIVE PROCEDURES 8 ACT OF 1969, 1969 PA 306, MCL 24.201 TO 24.328. A filing not 9 disapproved within 60 days after its submission shall be consid- 10 ered approved. 11 (3) A filing approved or considered approved under subsec- 12 tion (2)shall beIS exempt from any further proceedings what- 13 soever under this chapter until July 1, 1981. 14 (4) If a filing is disapproved under subsection (2), the 15 insurer, within 30 days of the order of disapproval, shall make a 16 revised filing with the commissioner. The revised filing shall 17 take effect on January 1, 1981 andshall beIS subject to 18 review under this chapter on or after January 1, 1981 in the same 19 manner as subsequent filings made under this chapter. 20 SEC. 2107A. (1) BY NOT LATER THAN 1 YEAR AFTER THE EFFEC- 21 TIVE DATE OF THIS SECTION AND ANNUALLY THEREAFTER, EACH INSURER 22 SUBJECT TO THIS CHAPTER SHALL FILE BASE RATES FOR AUTOMOBILE 23 INSURANCE AND SHALL MAKE FILINGS THAT CONFORM TO THIS ACT AS 24 AMENDED BY THE 2001 AMENDATORY ACT THAT ADDED THIS SECTION. 25 (2) THE COMMISSIONER SHALL REVIEW A FILING SUBMITTED UNDER 26 SUBSECTION (1) AND SHALL APPROVE OR DISAPPROVE THE FILING WITHIN 27 60 DAYS AFTER ITS SUBMISSION. 03489'01 6 1 (3) A FILING APPROVED UNDER SUBSECTION (2) SHALL NOT BE 2 REVISED FOR 12 MONTHS AFTER THE EFFECTIVE DATE OF THE FILING 3 UNLESS THE REVISION MEETS EITHER OF THE FOLLOWING: 4 (A) LOWERS THE PRICE OF THE COVERAGE. 5 (B) IS IN RESPONSE TO A RULING OR DECISION BY THE COMMIS- 6 SIONER, THE COURT, OR A HEARING OFFICER. 7 (4) A RULE CHANGE OR OTHER CHANGE FILED WITH THE COMMIS- 8 SIONER THAT RESULTS IN A CHANGE IN THE COST OF COVERAGE IS CON- 9 SIDERED A REVISION IN A RATE FILING UNDER THIS SECTION. 10 (5) IF A FILING IS DISAPPROVED UNDER SUBSECTION (2), THE 11 INSURER, WITHIN 30 DAYS OF THE ORDER OF DISAPPROVAL, SHALL MAKE A 12 REVISED FILING WITH THE COMMISSIONER. THE REVISED FILING IS 13 SUBJECT TO REVIEW UNDER THIS CHAPTER IN THE SAME MANNER AS AN 14 ORIGINAL FILING MADE UNDER THIS CHAPTER. 15 Sec. 2108. (1)OnEXCEPT AS PROVIDED IN SECTION 2107A, ON 16 the effective date thereof, each insurer shall file with the com- 17 missioner every manual of classification, every manual of rules 18 and rates, every rating plan, and every modification of a manual 19 of classification, manual of rules and rates, or a rating plan 20whichTHAT it proposes to use for automobile insurance and home 21 insurance. Each filing shall state the character and extent of 22 the coverage contemplated. Each insurer subject to this chapter 23 who maintains rates in any part of this state shall at all times 24 maintain rates in effect for all eligible persons meeting the 25 underwriting criteria of the insurer. 26 (2)AnEXCEPT FOR FILINGS CONCERNING RATES, AN insurer may 27 satisfy its obligation to make filingsunder subsection (1)by 03489'01 7 1 becoming a member of, or a subscriber to, a LICENSED rating 2 organizationlicensed under chapter 24 or chapter 26 whichTHAT 3 makesthosefilings, and by filing with the commissioner a copy 4 of its authorization of the rating organization to makethose5 filings on its behalf. Nothing contained in this chapter shall 6 be construed as requiring any insurer to become a member of or a 7 subscriber to any rating organization. Insurers may file and use 8 deviations from filings made on their behalf, which deviations 9shall beARE subject to the provisions of this chapter. 10 (3) Each filing shall be accompanied by a certification by 11 or on behalf of the insurer that, to the best of its information 12 and belief, the filing conforms to the requirements of this 13 chapter. 14 (4) Each filing shall include information that supports the 15 filing with respect to the requirements ofsectionSECTIONS 16 2109 AND 2109A. The information may include 1 or more of the 17 following: 18 (a) The experience or judgment of the insureror rating19organizationmaking the filing. 20 (b) The interpretation of the insureror rating21organizationof any statistical data it relies upon. 22 (c) The experience of other insurers.or rating23organizations.24 (d) Any other relevant information. 25 (5) A filing and any accompanying information shall be open 26 to public inspection upon filing. 03489'01 8 1 (6) An insurer shall not make, issue, or renew a contract or 2 policy except in accordance with filingswhichTHAT are in 3 effect for the insurer pursuant to this chapter. 4 Sec. 2109. (1) All rates forautomobile insurance and5 home insurance shall be made in accordance with the following 6 provisions: 7 (a) Rates shall not be excessive, inadequate, or unfairly 8 discriminatory. A rate shall not be held to be excessive unless 9 the rate is unreasonably high for the insurance coverage provided 10 and a reasonable degree of competition does not exist for the 11 insurance to which the rate is applicable. 12 (b) A rate shall not be held to be inadequate unless the 13 rate is unreasonably low for the insurance coverage provided and 14 the continued use of the rate endangers the solvency of the 15 insurer; or unless the rate is unreasonably low for the insurance 16 provided and the use of the rate has or will have the effect of 17 destroying competition among insurers, creating a monopoly, or 18 causing a kind of insurance to be unavailable to a significant 19 number of applicants who are in good faith entitled to procure 20 that insurance through ordinary methods. 21 (c) A rate for a coverage is unfairly discriminatory in 22 relation to another rate for the same coverage if the differen- 23 tial between the rates is not reasonably justified by differences 24 in losses, expenses, or both, or by differences in the uncer- 25 tainty of loss, for the individuals or risks to which the rates 26 apply. A reasonable justification shall be supported by a 27 reasonable classification system; by sound actuarial principles 03489'01 9 1 when applicable; and by actual and credible loss and expense 2 statistics or, in the case of new coverages and classifications, 3 by reasonably anticipated loss and expense experience. A rate is 4 not unfairly discriminatory because it reflects differences in 5 expenses for individuals or risks with similar anticipated 6 losses, or because it reflects differences in losses for individ- 7 uals or risks with similar expenses. 8 (2) A determination concerning the existence of a reasonable 9 degree of competition with respect to subsection (1)(a) shall 10 take into account a reasonable spectrum of relevant economic 11 tests, including the number of insurers actively engaged in writ- 12 ing the insurance in question, the present availability of such 13 insurance compared to its availability in comparable past peri- 14 ods, the underwriting return of that insurance over a period of 15 time sufficient to assure reliability in relation to the risk 16 associated with that insurance, and the difficulty encountered by 17 new insurers in entering the market in order to compete for the 18 writing of that insurance. 19 SEC. 2109A. (1) ALL RATES FOR AUTOMOBILE INSURANCE SHALL BE 20 REVIEWED BY THE COMMISSIONER BY EXAMINING THE INSURER'S REPORT 21 PREPARED PURSUANT TO SECTION 2128 AND SHALL BE MADE IN ACCORDANCE 22 WITH TOTAL RETURN RATING AND THE FOLLOWING PROVISIONS: 23 (A) RATES SHALL NOT BE EXCESSIVE, INADEQUATE, OR UNFAIRLY 24 DISCRIMINATORY. A RATE SHALL NOT BE APPROVED BY THE COMMISSIONER 25 UNLESS IT IS ACTUARIALLY JUSTIFIED BASED UPON THE INFORMATION 26 RECEIVED PURSUANT TO SECTION 2128. 03489'01 10 1 (B) A RATE SHALL NOT BE HELD TO BE INADEQUATE UNLESS THE 2 RATE, AFTER CONSIDERATION OF INVESTMENT INCOME AND SURPLUS, IS 3 UNREASONABLY LOW FOR THE INSURANCE COVERAGE PROVIDED AND IS 4 INSUFFICIENT TO SUSTAIN PROJECTED LOSSES AND EXPENSES; OR UNLESS 5 THE RATE IS UNREASONABLY LOW FOR THE INSURANCE PROVIDED AND THE 6 USE OF THE RATE HAS OR WILL HAVE THE EFFECT OF DESTROYING COMPE- 7 TITION AMONG INSURERS, CREATING A MONOPOLY, OR CAUSING A KIND OF 8 INSURANCE TO BE UNAVAILABLE TO A SIGNIFICANT NUMBER OF APPLICANTS 9 WHO ARE IN GOOD FAITH ENTITLED TO PROCURE THAT INSURANCE THROUGH 10 ORDINARY METHODS. 11 (C) A RATE FOR A COVERAGE IS UNFAIRLY DISCRIMINATORY IN 12 RELATION TO ANOTHER RATE FOR THE SAME COVERAGE IF THE DIFFEREN- 13 TIAL BETWEEN THE RATES IS NOT REASONABLY JUSTIFIED BY DIFFERENCES 14 IN LOSSES, EXPENSES, OR BOTH, OR BY DIFFERENCES IN THE UNCER- 15 TAINTY OF LOSS, FOR THE INDIVIDUALS OR RISKS TO WHICH THE RATES 16 APPLY. A REASONABLE JUSTIFICATION SHALL BE SUPPORTED BY A REA- 17 SONABLE CLASSIFICATION SYSTEM; BY SOUND ACTUARIAL PRINCIPLES WHEN 18 APPLICABLE; AND BY ACTUAL AND CREDIBLE LOSS AND EXPENSE STATIS- 19 TICS OR, IN THE CASE OF NEW COVERAGES AND CLASSIFICATIONS, BY 20 REASONABLY ANTICIPATED LOSS AND EXPENSE EXPERIENCE. A RATE IS 21 NOT UNFAIRLY DISCRIMINATORY BECAUSE IT REFLECTS DIFFERENCES IN 22 EXPENSES FOR INDIVIDUALS OR RISKS WITH SIMILAR ANTICIPATED 23 LOSSES, OR BECAUSE IT REFLECTS DIFFERENCES IN LOSSES FOR INDIVID- 24 UALS OR RISKS WITH SIMILAR EXPENSES. 25 (2) THE COMMISSIONER SHALL NOT APPROVE A RATE INCREASE FOR 26 AUTOMOBILE INSURANCE UNLESS THE COMMISSIONER DETERMINES THAT THE 27 DATA RECEIVED FROM THE REPORT PREPARED PURSUANT TO SECTION 2128 03489'01 11 1 JUSTIFIES A RATE INCREASE. THE COMMISSIONER SHALL NOT APPROVE A 2 RATE INCREASE BY EXAMINING ACTUARIAL DATA FROM A LINE OTHER THAN 3 THE INSURER'S AUTOMOBILE INSURANCE LINE OR IF THE INSURER FAILS 4 TO FILE THE DATA REQUIRED BY SECTION 2128. THE COMMISSIONER 5 SHALL NOT APPROVE A RATE INCREASE IF THE COMMISSIONER FINDS THE 6 INSURER'S ADMINISTRATIVE EXPENSES TO BE EXCESSIVE. 7 (3) EACH INSURER SHALL SUBMIT ANNUALLY TO THE COMMISSIONER A 8 COMPLETE BREAKDOWN OF LITIGATION COSTS ASSOCIATED WITH FIRST AND 9 THIRD PARTY AUTOMOBILE INSURANCE CLAIMS THAT HAVE BEEN RECEIVED 10 OR ARE IN THE PROCESS OF BEING LITIGATED AND OF AMOUNTS RESERVED 11 TO BE USED FOR THOSE EXPENSES. THE COMMISSIONER SHALL NOT 12 APPROVE A RATE IF THE ADMINISTRATIVE COSTS ASSOCIATED WITH THE 13 LITIGATION OF FIRST PARTY CLAIMS EXCEED 1% OF THE ADMINISTRATIVE 14 COSTS ASSOCIATED WITH THE LITIGATION OF THIRD PARTY CLAIMS. EACH 15 AUTOMOBILE INSURANCE INSURER'S TOTAL ADMINISTRATIVE EXPENSES 16 SHALL BE ALLOCATED TO EACH TERRITORY ACCORDING TO THE INSURER'S 17 PROPORTIONATE SHARE OF PREMIUM WRITTEN IN EACH TERRITORY. EACH 18 PREMIUM CHARGED WITHIN EACH TERRITORY SHALL CONTAIN AN EQUAL 19 SHARE OF THE ADMINISTRATIVE EXPENSE FOR THE TERRITORY. RATES 20 SHALL BE FILED AND CHARGED UNDER THIS SECTION SO THAT EACH AUTO- 21 MOBILE INSURANCE PREMIUM INCLUDES AN EQUAL SHARE OF EACH 22 INSURER'S OVERALL ADMINISTRATIVE EXPENSE. 23 SEC. 2109B. (1) IF THE COMMISSIONER DETERMINES THAT ANY 24 PERSON OR ORGANIZATION HAS VIOLATED THE AUTOMOBILE RATE-MAKING OR 25 UNDERWRITING PROVISIONS OF THIS CHAPTER, THE COMMISSIONER MAY 26 ISSUE A CEASE AND DESIST ORDER AND ORDER THE PERSON OR 27 ORGANIZATION TO PAY A CIVIL FINE OF NOT MORE THAN $500.00 FOR 03489'01 12 1 EACH VIOLATION AND A CIVIL FINE OF NOT MORE THAN $5,000.00 FOR 2 EACH WILLFUL VIOLATION. A DEFAULT IN THE PAYMENT OF A CIVIL FINE 3 UNDER THIS SECTION MAY BE REMEDIED BY ANY MEANS AUTHORIZED UNDER 4 THE REVISED JUDICATURE ACT OF 1961, 1961 PA 236, MCL 600.101 TO 5 600.9948. A CIVIL FINE COLLECTED PURSUANT TO THIS SUBSECTION 6 SHALL BE USED FOR THE OPERATION OF THE AUTOMOBILE INSURANCE DATA 7 COLLECTION AGENCY CREATED IN SECTION 2128E. 8 (2) IF THE COMMISSIONER FINDS THAT A VIOLATION OF THE AUTO- 9 MOBILE RATE-MAKING OR UNDERWRITING PROVISIONS OF THIS CHAPTER HAS 10 OCCURRED AND THAT THE VIOLATION HAS RESULTED IN AN INCREASE IN 11 AUTOMOBILE INSURANCE PREMIUMS OR A DECREASE IN BENEFITS, THE COM- 12 MISSIONER SHALL ORDER THE INSURER TO RETURN THE PREMIUM OR THE 13 AMOUNT OF BENEFITS THAT SHOULD HAVE BEEN PAID, ALONG WITH AN 14 INTEREST CHARGE OF 12% PER ANNUM TO BE APPLIED FROM THE TIME THE 15 PREMIUM WAS COLLECTED OR THE BENEFIT WAS DUE OR WOULD HAVE BEEN 16 DUE TO THE CONSUMER. 17 (3) THE COMMISSIONER MAY SUSPEND THE LICENSE OF AN INSURER 18 THAT FAILS TO COMPLY WITH THE COMMISSIONER'S ORDER TO CORRECT A 19 VIOLATION OF THIS CHAPTER. 20 Sec. 2110. (1) In developing and evaluating rates pursuant 21 to the standards prescribed insectionSECTIONS 2109 AND 2109A, 22 due consideration shall be given to past and prospective loss 23 experience within and outside this state, to catastrophe hazards, 24 if any; to a reasonable margin for underwriting profit and con- 25 tingencies; to dividends, savings, or unabsorbed premium deposits 26 allowed or returned by insurers to their policyholders, members, 27 or subscribers; to past and prospective expenses, both 03489'01 13 1 countrywide and those specially applicable to this state 2 exclusive of assessments under thiscodeACT; to assessments 3 under thiscodeACT; to underwriting practice and judgment; and 4 to all other relevant factors within and outside this state. 5 (2) The systems of expense provisions included in the rates 6 for use by any insurer or group of insurers may differ from those 7 of other insurers or groups of insurers to reflect the require- 8 ments of the operating methods of the insurer or group with 9 respect to any kind of insurance, or with respect to any subdivi- 10 sion or combination thereof for which subdivision or combination 11 separate expense provisions are applicable. 12 (3) Risks may be grouped by classifications for the estab- 13 lishment of rates and minimum premiums. The classifications may 14 measure differences in losses, expenses, or both. 15 Sec. 2111. (1) Notwithstanding any provision of this act 16 and this chapter to the contrary, classifications and territorial 17 base rates used by any insurer in this state with respect to 18automobile insurance orhome insurance AND CLASSIFICATIONS USED 19 BY AN INSURER WITH RESPECT TO AUTOMOBILE INSURANCE shall conform 20 to the applicable requirements of this section. 21 (2) Classifications established pursuant to this section for 22 automobile insurance shall be based only upon 1 or more of the 23 following factors, which shall be applied by an insurer on a uni- 24 form basis throughout the state: 25 (a) With respect to all automobile insurance coverages: 03489'01 14 1 (i) Either the age of the driver; the length of driving 2 experience; or the number of years licensed to operate a motor 3 vehicle. 4 (ii) Driver primacy, based upon the proportionate use of 5 each vehicle insured under the policy by individual drivers 6 insured or to be insured under the policy. 7 (iii) Average miles driven weekly, annually, or both. 8 (iv) Type of use, such as business, farm, or pleasure use. 9 (v) Vehicle characteristics, features, and options, such as 10 engine displacement, ability of vehicle and its equipment to pro- 11 tect passengers from injury and other similar items, including 12 vehicle make and model. 13 (vi) Daily or weekly commuting mileage. 14 (vii) Number of cars insured by the insurer or number of 15 licensed operators in the household. However, number of licensed 16 operators shall not be used as an indirect measure of marital 17 status. 18 (viii) Amount of insurance. 19 (b) In addition to the factors prescribed in subdivision 20 (a), with respect to personal protection insurance coverage: 21 (i) Earned income. 22 (ii) Number of dependents of income earners insured under 23 the policy. 24 (iii) Coordination of benefits. 25 (iv) Use of a safety belt. 26 (v) THE WAIVER OF COVERAGE FOR WORK LOSS BENEFITS UNDER 27 SECTION 3107. 03489'01 15 1 (c) In addition to the factors prescribed in subdivision 2 (a), with respect to collision and comprehensive coverages: 3 (i) The anticipated cost of vehicle repairs or replacement, 4 which may be measured by age, price, cost new, or value of the 5 insured automobile, and other factors directly relating to that 6 anticipated cost. 7 (ii) Vehicle make and model. 8 (iii) Vehicle design characteristics related to vehicle 9 damageability. 10 (iv) Vehicle characteristics relating to automobile theft 11 prevention devices. 12 (d) With respect to all automobile insurance coverage other 13 than comprehensive, successful completion by the individual 14 driver or drivers insured under the policy of an accident preven- 15 tion education course that meets the following criteria: 16 (i) The course shall include a minimum of 8 hours of class- 17 room instruction. 18 (ii) The course shall include, but not be limited to, a 19 review of all of the following: 20 (A) The effects of aging on driving behavior. 21 (B) The shapes, colors, and types of road signs. 22 (C) The effects of alcohol and medication on driving. 23 (D) The laws relating to the proper use of a motor vehicle. 24 (E) Accident prevention measures. 25 (F) The benefits of safety belts and child restraints. 26 (G) Major driving hazards. 03489'01 16 1 (H) Interaction with other highway users such as 2 motorcyclists, bicyclists, and pedestrians. 3 (3) Each insurer shall establish a secondary or merit rating 4 plan for automobile insurance, other than comprehensive 5 coverage. A secondary or merit rating plan required under this 6 subsection shall provide for premium surcharges for any or all 7 coverages for automobile insurance, other than comprehensive cov- 8 erage, based upon any or all of the following, when that informa- 9 tion becomes available to the insurer: 10 (a) Substantially at-fault accidents. 11 (b) Convictions for, determinations of responsibility for 12 civil infractions for, or findings of responsibility in probate 13 court for civil infractions for, violations under chapter VI of 14Act No. 300 of the Public Acts of 1949, being sections 257.60115to 257.750 of the Michigan Compiled LawsTHE MICHIGAN VEHICLE 16 CODE, 1949 PA 300, MCL 257.601 TO 257.750. However, beginning 90 17 days after the effective date of this sentence, an insured shall 18 not be merit rated for a civil infraction under chapter VI of 19Act No. 300 of the Public Acts of 1949THE MICHIGAN VEHICLE 20 CODE, 1949 PA 300, MCL 257.601 TO 257.750, for a period of time 21 longer than that which the secretary of state's office carries 22 points for that infraction on the insured's motor vehicle 23 record. 24 (4) An insurer shall not establish or maintain rates or 25 rating classifications for automobile insurance based upon sex or 26 marital status. 03489'01 17 1 (5) Notwithstanding other provisions of this chapter, 2 automobile insurance risksmaySHALL be grouped by territory AS 3 PRESCRIBED BY THE COMMISSIONER. THE COMMISSIONER SHALL ESTABLISH 4 UNIFORM TERRITORIAL RATING TO BE USED BY ALL AUTOMOBILE INSURANCE 5 INSURERS DOING BUSINESS IN THE STATE. TERRITORIAL BOUNDARIES 6 SHALL BE BASED ON OBJECTIVE CRITERIA, INCLUDING TRAFFIC PATTERNS, 7 AND SHALL BE RELATED TO THE DRIVING ENVIRONMENT INCLUDING, BUT 8 NOT LIMITED TO, DENSITY OF TRAFFIC, REGULARITY OF TRAFFIC FLOW, 9 TRAFFIC ROUTE SIZE, AND TYPES OF ROADWAY. A TERRITORY SHALL NOT 10 INCLUDE LESS THAN 1 COUNTY AND MAY INCLUDE MORE THAN 1 COUNTY. 11 AN INSURER SHALL NOT CHARGE A TERRITORIAL BASE RATE FOR AN AUTO- 12 MOBILE INSURANCE POLICY UNLESS THE TERRITORIAL RATING SCHEME USED 13 BY THE INSURER HAS BEEN APPROVED BY THE COMMISSIONER. AN INSURER 14 SHALL ESTABLISH 1 ACTUARIALLY SOUND BASE RATE FOR EACH PRESCRIBED 15 TERRITORY WHICH BASE RATE SHALL BE APPROVED BY THE COMMISSIONER 16 PURSUANT TO THIS CHAPTER. 17 (6) This section shall not be construed as limiting insurers 18 or rating organizations from establishing and maintaining statis- 19 tical reporting territories. This section shall not be construed 20 to prohibit an insurer from establishing or maintaining, for 21 automobile insurance, a premium discount plan for senior citizens 22 in this state who are 65 years of age or older, if the plan is 23 uniformly applied by the insurer throughout this state. If an 24 insurer has not established and maintained a premium discount 25 plan for senior citizens, the insurer shall offer reduced premium 26 rates to senior citizens in this state who are 65 years of age or 03489'01 18 1 older and who drive less than 3,000 miles per year, regardless of 2 statistical data. 3 (7) Classifications established pursuant to this section for 4 home insurance other than inland marine insurance provided by 5 policy floaters or endorsements shall be based only upon 1 or 6 more of the following factors: 7 (a) Amount and types of coverage. 8 (b) Security and safety devices, including locks, smoke 9 detectors, and similar, related devices. 10 (c) Repairable structural defects reasonably related to 11 risk. 12 (d) Fire protection class. 13 (e) Construction of structure, based on structure size, 14 building material components, and number of units. 15 (f) Loss experience of the insured, based upon prior claims 16 attributable to factors under the control of the insured that 17 have been paid by an insurer. 18 (g) Use of smoking materials within the structure. 19 (h) Distance of the structure from a fire hydrant. 20 (i) Availability of law enforcement or crime prevention 21 services. 22 (8) Notwithstanding other provisions of this chapter, home 23 insurance risks may be grouped by territory. 24 (9) An insurer may utilize factors in addition to those 25 specified in this section, if the commissioner finds, after a 26 hearing held pursuant to the administrative procedures act of 27 1969,Act No. 306 of the Public Acts of 1969, being sections03489'01 19 124.201 to 24.328 of the Michigan Compiled Laws1969 PA 306, MCL 2 24.201 TO 24.328, that the factors would encourage innovation, 3 would encourage insureds to minimize the risks of loss from haz- 4 ards insured against, and would be consistent with the purposes 5 of this chapter. 6 (10) The commissioner shall report in writing to the senate 7 and house of representatives standing committees of insurance 8 issues by January 1, 2000 of the effect that the amendatory act 9 that added this subsection has had on automobile and home insur- 10 ance premiums in this state. 11 SEC. 2111C. (1) BY NOT LATER THAN 1 YEAR AFTER THE EFFEC- 12 TIVE DATE OF THIS SECTION, EACH AUTOMOBILE INSURANCE INSURER 13 SHALL FILE BASE RATES FOR AUTOMOBILE INSURANCE THAT CONFORM TO 14 THIS ACT AS AMENDED BY THE 2001 AMENDATORY ACT THAT ADDED THIS 15 SECTION AND, FOR EACH UNIFORM TERRITORY, REFLECT A REDUCTION THAT 16 IS AT LEAST AN OVERALL 20% REDUCTION FROM THE AGGREGATE RATES 17 PREVIOUSLY CHARGED IN THE TERRITORY BY THE 10 AUTOMOBILE INSUR- 18 ANCE INSURERS HAVING THE GREATEST MARKET SHARE IN THE STATE BASED 19 ON RATES IN EFFECT AS OF MAY 1, 2000. THE COMMISSIONER SHALL 20 REQUIRE A RATE REDUCTION TO THIS LEVEL UNLESS THE INSURER, AFTER 21 CONFORMING FULLY WITH ALL OF THE PROVISIONS OF THIS ACT, CAN 22 DEMONSTRATE THAT A DIFFERENT RATE LEVEL IS ACTUARIALLY ESSENTIAL 23 PURSUANT TO SECTION 2109A. 24 (2) BY NOT LATER THAN 1 YEAR AFTER THE EFFECTIVE DATE OF 25 THIS SECTION, EACH AUTOMOBILE INSURANCE INSURER WHO DID NOT WRITE 26 AUTOMOBILE INSURANCE IN THIS STATE ON MAY 1, 2000 SHALL FILE BASE 27 RATES FOR AUTOMOBILE INSURANCE THAT DO NOT EXCEED THE WEIGHTED 03489'01 20 1 AVERAGE OF THE BASE RATES FILED ON MAY 1, 2000 BY THE 10 LARGEST 2 AUTOMOBILE INSURANCE INSURERS BY MARKET SHARE. 3 (3) ASSESSMENTS FOR THE MICHIGAN CATASTROPHIC CLAIMS ASSOCI- 4 ATION, AUTOMOBILE THEFT PREVENTION AUTHORITY, AND THE MICHIGAN 5 AUTOMOBILE INSURANCE PLACEMENT FACILITY SHALL NOT BE CONSIDERED 6 IN ACHIEVING THE REDUCTION REQUIRED BY SUBSECTIONS (1) AND (2). 7 Sec. 2114. (1) A person or organization aggrieved with 8 respect to any filingwhichTHAT is in effect andwhichTHAT 9 affects the person or organization may make written application 10 to the commissioner for a hearing on the filing. However, the 11 insurer or rating organizationwhichTHAT made the filing shall 12 not be authorized to proceed under this subsection. The applica- 13 tion shall specify the grounds to be relied upon by the 14 applicant. If the commissioner finds that the application is 15 made in good faith, that the applicant would be so aggrieved if 16 the grounds specified are established, or that the grounds speci- 17 fied otherwise justify holding a hearing, the commissioner, not 18 more than 30 days after receipt of the application, shall hold a 19 hearing in accordance withAct No. 306 of the Public Acts of201969, as amendedTHE ADMINISTRATIVE PROCEDURES ACT OF 1969, 1969 21 PA 306, MCL 24.201 TO 24.328, upon not less than 10 days' written 22 notice to the applicant, the insurer, and the rating organization 23 which made the filing. 24 (2) If after hearing initiated under subsection (1) or upon 25 the commissioner's own motion pursuant toAct No. 306 of the26Public Acts of 1969, as amendedTHE ADMINISTRATIVE PROCEDURES 27 ACT OF 1969, 1969 PA 306, MCL 24.201 TO 24.328, the commissioner 03489'01 21 1 finds that a filing does not meet the requirements of sections 2 2109, 2109A, and 2111, the commissioner shall issue an order 3 stating the specific reasons for that finding. The order shall 4 state when, within a reasonable time after issuance of the order, 5 the filing shall be considered no longer effective. A copy of 6 the order shall be sent to the applicant, if any, and to each 7 insurer and rating organization subject to the order. The order 8 shall not affect a contract or policy made or issued before the 9 date the filing becomes ineffective, as indicated in the 10 commissioner's order. 11 Sec. 2118. (1) As a condition of maintaining its certifi- 12 cate of authority, an insurer shall not refuse to insure, refuse 13 to continue to insure, or limit coverage available to an eligible 14 person for automobile insurance, except in accordance with under- 15 writing rules established pursuant to this section and sections 16 2119 and 2120. 17 (2) The underwriting ruleswhichTHAT an insurer may 18 establish for automobile insurance shall be based only on the 19 following: 20 (a) Criteria identical to the standards set forth in section 21 2103(1). 22 (b) The insurance eligibility point accumulation in excess 23 of the amounts established by section 2103(1) of a member of the 24 household of the eligible person insured or to be insured, if the 25 member of the household usually accounts for 10% or more of the 26 use of a vehicle insured or to be insured. For purposes of this 27 subdivision, a person who is the principal driver for 1 03489'01 22 1 automobile insurance policy shall be rebuttably presumed not to 2 usually account for more than 10% of the use of other vehicles of 3 the household not insured under the policy of that person. 4 (c) With respect to a vehicle insured or to be insured, sub- 5 stantial modifications from the vehicle's original manufactured 6 state for purposes of increasing the speed or acceleration capa- 7 bilities of the vehicle. 8(d) Failure by the person to provide proof that insurance9required by section 3101 was maintained in force with respect to10any vehicle which was both owned by the person and driven or11moved by the person or by a member of the household of the person12during the 6-month period immediately preceding application.13Such proof shall take the form of a certification by the person14on a form provided by the insurer that the vehicle was not driven15or moved without maintaining the insurance required by section163101 during the 6-month period immediately preceding17application.18 (D)(e)Type of vehicle insured or to be insured, based on 19 1 of the following, without regard to the age of the vehicle: 20 (i) The vehicle is of limited production or of custom 21 manufacture. 22 (ii) The insurer does not have a rate lawfully in effect for 23 the type of vehicle. 24 (iii) The vehicle represents exposure to extraordinary 25 expense for repair or replacement under comprehensive or colli- 26 sion coverage. 03489'01 23 1 (E)(f)Use of a vehicle insured or to be insured for 2 transportation of passengers for hire, for rental purposes, or 3 for commercial purposes. Rules under this subdivision shall not 4 be based on the use of a vehicle for volunteer or charitable pur- 5 poses or for which reimbursement for normal operating expenses is 6 received. 7 (F)(g)Payment of a minimum deposit at the time of appli- 8 cation or renewal, not to exceed the smallest deposit required 9 under an extended payment or premium finance plan customarily 10 used by the insurer. 11 (G)(h)For purposes of requiring comprehensive deducti- 12 bles of not more than $150.00, or of refusing to insure if the 13 person refuses to accept a required deductible, the claim 14 experience of the person with respect to comprehensive coverage. 15 (H)(i)Total abstinence from the consumption of alcoholic 16 beverages exceptwhenIF such beverages are consumed as part of 17 a religious ceremony. However, an insurer shall not utilize an 18 underwriting rule based on this subdivision unless the insurer 19 has been authorized to transact automobile insurance in this 20 state prior to January 1, 1981, and has consistently utilized 21 such an underwriting rule as part of the insurer's automobile 22 insurance underwriting since being authorized to transact automo- 23 bile insurance in this state. 24 Sec. 2120. (1) Affiliated insurers may establish underwrit- 25 ing rules so that each affiliate will provide automobile insur- 26 ance only to certain eligible persons. This subsection shall 27 apply only if an eligible person can obtain automobile insurance 03489'01 24 1 from 1 of the affiliates. The underwriting rules shall be in 2 compliance with this section, sectionAND SECTIONS 2118,3 andsection2119. 4 (2) An insurer may establish separate rating plans so that 5 certain eligible persons are provided automobile insurance under 6 1 rating plan and other eligible persons are provided automobile 7 insurance under another rating plan. This subsection shall apply 8 only if all eligible persons can obtain automobile insurance 9 under a rating plan of the insurer. Underwriting rules consis- 10 tent with this section, sectionAND SECTIONS 2118,and 11section2119 shall be established to define the rating plan 12 applicable to each eligible person. 13 (3) Underwriting rules under this section shall be based 14 only on the following: 15 (a) With respect to a vehicle insured or to be insured, sub- 16 stantial modifications from the vehicle's original manufactured 17 state for purposes of increasing the speed or acceleration capa- 18 bilities of the vehicle. 19(b) Failure of the person to provide proof that insurance20required by section 3101 was maintained in force with respect to21any vehicle owned and operated by the person or by a member of22the household of the person during the 6-month period immediately23preceding application or renewal of the policy. Such proof shall24take the form of a certification by the person that the required25insurance was maintained in force for the 6-month period with26respect to such vehicle.03489'01 25 1 (B)(c)For purposes of insuring persons who have refused 2 a deductible lawfully required under section2118(2)(h)3 2118(2)(G), the claim experience of the person with respect to 4 comprehensive coverage. 5 (C)(d)Refusal of the person to pay a minimum deposit 6 required under section2118(2)(g)2118(2)(F). 7 (D)(e)A person's insurance eligibility point accumula- 8 tion under section 2103(1)(h), or the total insurance eligibility 9 point accumulation of all persons who account for 10% or more of 10 the use of 1 or more vehicles insured or to be insured under the 11 policy. 12 (E)(f)The type of vehicle insured or to be insured as 13 provided in section2118(2)(e)2118(2)(D). 14 Sec. 2127. The commissioner may by rule prospectively 15 require insurers, rating organizations, and advisory organiza- 16 tions to collect and report dataonlyto the extent necessary 17 to monitor and evaluate the automobile and home insurance markets 18 in this state. The commissioner shall authorize the use of sam- 19 pling techniques in each instance where sampling is practicable 20 and consistent with the purposes for which the data, by county, 21 are to be collected and reported. RULES PROMULGATED PURSUANT TO 22 THIS SECTION ARE IN ADDITION TO, AND DO NOT REPLACE, THE REPORT- 23 ING REQUIREMENTS IN SECTION 2128. 24 SEC. 2128. BY APRIL 1 OF EACH YEAR, EACH INSURER WHO ISSUES 25 AUTOMOBILE INSURANCE IN THIS STATE SHALL FILE WITH THE COMMIS- 26 SIONER AND WITH THE AUTOMOBILE INSURANCE DATA COLLECTION AGENCY 27 CREATED IN SECTION 2128E ON FORMS PRESCRIBED BY THE AUTOMOBILE 03489'01 26 1 INSURANCE DATA COLLECTION AGENCY, THE FOLLOWING AUTOMOBILE 2 INSURANCE DATA, BY TERRITORY, FOR THE PRIOR CALENDAR YEAR: 3 (A) WITH RESPECT TO PERSONAL PROTECTION INSURANCE COVERAGE: 4 (i) THE NUMBER OF CLAIMS FOR PERSONAL PROTECTION INSURANCE 5 BENEFITS FOR WHICH PAYMENT IS MADE. 6 (ii) THE NUMBER OF CLAIMS FOR PERSONAL PROTECTION INSURANCE 7 BENEFITS THAT ARE CLOSED WITHOUT PAYMENT. 8 (iii) THE NUMBER OF CLAIMS FOR PERSONAL PROTECTION INSURANCE 9 BENEFITS THAT INVOLVE SOME FORM OF LITIGATION AND ARE CLOSED 10 WITHOUT PAYMENT. 11 (iv) THE NUMBER OF CLAIMS FOR PERSONAL PROTECTION INSURANCE 12 BENEFITS THAT INVOLVE LITIGATION AND FOR WHICH PAYMENT IS MADE 13 AFTER LITIGATION COMMENCES, INCLUDING THE LENGTH OF TIME BETWEEN 14 THE FILING OF THE CLAIM AND THE FIRST PAYMENT. 15 (v) THE AMOUNT OF INTEREST CHARGES PAID ON CLAIMS FOR PER- 16 SONAL PROTECTION INSURANCE BENEFITS AND THE NUMBER OF CASES FOR 17 WHICH INTEREST CHARGES HAVE BEEN PAID. 18 (vi) THE LITIGATION COSTS FOR CLAIMS FOR PERSONAL PROTECTION 19 INSURANCE BENEFITS. 20 (vii) THE NUMBER OF CASES GOING TO VERDICT AND THE AMOUNT OF 21 THE VERDICT IN THOSE CASES WHERE AN AWARD IS MADE. 22 (viii) THE NUMBER OF VERDICTS OF NO CAUSE OF ACTION. 23 (ix) THE NUMBER OF CASES WHERE ATTORNEY FEES ARE PAID, THE 24 TOTAL AMOUNT OF ATTORNEY FEES PAID, AND THE AMOUNT OF ATTORNEY 25 FEES PAID FOR EACH CASE WHERE FEES WERE PAID. 26 (B) WITH RESPECT TO PROPERTY PROTECTION INSURANCE COVERAGE: 03489'01 27 1 (i) THE NUMBER OF THIRD PARTY AUTOMOBILE BODILY INJURY TORT 2 CLAIMS CLOSED BY PAYMENT TO THE CLAIMANT BEFORE THE COMMENCEMENT 3 OF LITIGATION AND A BREAKDOWN OF HOW MANY OF THESE CLAIMS WERE 4 DEATH THRESHOLD CLAIMS, SERIOUS IMPAIRMENT OF BODY FUNCTION 5 THRESHOLD CLAIMS, AND PERMANENT SERIOUS DISFIGUREMENT THRESHOLD 6 CLAIMS. 7 (ii) THE NUMBER OF THIRD PARTY AUTOMOBILE BODILY INJURY TORT 8 CLAIM LAWSUITS FILED, AND A BREAKDOWN OF HOW MANY WERE FILED FOR 9 DEATH THRESHOLD CLAIMS, SERIOUS IMPAIRMENT OF BODY FUNCTION 10 THRESHOLD CLAIMS, AND PERMANENT SERIOUS DISFIGUREMENT THRESHOLD 11 CLAIMS. 12 (iii) THE NUMBER OF THIRD PARTY AUTOMOBILE BODILY INJURY 13 TORT CLAIMS CLOSED BY PAYMENT TO THE CLAIMANT AFTER THE COMMENCE- 14 MENT OF LITIGATION AND A BREAKDOWN OF HOW MANY OF THESE CLAIMS 15 WERE DEATH THRESHOLD CLAIMS, SERIOUS IMPAIRMENT OF BODY FUNCTION 16 THRESHOLD CLAIMS, AND PERMANENT SERIOUS DISFIGUREMENT THRESHOLD 17 CLAIMS. 18 (iv) THE DOLLAR AMOUNT PAID TO CLAIMANTS TO SETTLE THIRD 19 PARTY AUTOMOBILE BODILY INJURY TORT CLAIMS BEFORE AND AFTER LITI- 20 GATION HAD BEEN COMMENCED AND A BREAKDOWN OF THE DOLLAR AMOUNTS 21 PAID FOR DEATH THRESHOLD CLAIMS, SERIOUS IMPAIRMENT OF BODY FUNC- 22 TION THRESHOLD CLAIMS, AND PERMANENT SERIOUS DISFIGUREMENT 23 THRESHOLD CLAIMS. 24 (v) THE NUMBER AND DOLLAR AMOUNT PAID OR RESERVED FOR ALL 25 BODILY INJURY CLAIMS SET UP OR OPENED, INDICATING THE NUMBER AND 26 DOLLAR AMOUNT OF RESERVES FOR CLAIMS REMAINING OPEN AT THE END OF 27 THE REPORTING PERIOD. 03489'01 28 1 SEC. 2128A. EACH AUTOMOBILE INSURANCE INSURER WRITING 2 AUTOMOBILE INSURANCE IN THIS STATE SHALL FILE ANNUALLY BY APRIL 1 3 WITH THE COMMISSIONER A CERTIFIED AUDIT OF THE INSURER'S BOOKS 4 AND RECORDS PREPARED BY AN INDEPENDENT CERTIFIED PUBLIC 5 ACCOUNTANT. 6 SEC. 2128B. (1) BY JANUARY 15, 2003 AND EVERY 2 YEARS 7 THEREAFTER, THE COMMISSIONER SHALL ISSUE A PRELIMINARY REPORT 8 DETAILING THE STATE OF COMPETITION OR AVAILABILITY IN THE AUTOMO- 9 BILE INSURANCE MARKET ON A STATEWIDE BASIS AND DELINEATING SPE- 10 CIFIC CLASSIFICATIONS, KINDS OR TYPES OF INSURANCE, IF ANY, WHERE 11 COMPETITION OR AVAILABILITY DOES NOT EXIST AND SHALL HOLD A 12 PUBLIC HEARING ON THE REPORT. THE REPORT SHALL BE BASED ON RELE- 13 VANT ECONOMIC TESTS, INCLUDING BUT NOT LIMITED TO THOSE IN SUB- 14 SECTION (3). THE FINDINGS IN THE REPORT SHALL NOT BE BASED ON 15 ANY SINGLE MEASURE OF COMPETITION, BUT APPROPRIATE WEIGHT SHALL 16 BE GIVEN TO ALL MEASURES OF COMPETITION. THE REPORT SHALL 17 INCLUDE A CERTIFICATION OF WHETHER OR NOT COMPETITION OR AVAIL- 18 ABILITY EXISTS. A PERSON WHO DISAGREES WITH THE REPORT AND FIND- 19 INGS OF THE COMMISSIONER MAY REQUEST A CONTESTED HEARING PURSUANT 20 TO THE ADMINISTRATIVE PROCEDURES ACT OF 1969, 1969 PA 306, MCL 21 24.201 TO 24.328, NOT LATER THAN 60 DAYS AFTER ISSUANCE OF THE 22 TENTATIVE REPORT. 23 (2) BY AUGUST 1, 2003 AND EVERY 2 YEARS THEREAFTER, THE COM- 24 MISSIONER SHALL ISSUE A FINAL REPORT THAT SHALL INCLUDE A FINAL 25 CERTIFICATION OF WHETHER OR NOT A REASONABLE DEGREE OF COMPETI- 26 TION OR AVAILABILITY EXISTS IN THE AUTOMOBILE INSURANCE MARKET ON 27 A STATEWIDE BASIS AND IF COMPETITION OR AVAILABILITY DOES NOT 03489'01 29 1 EXIST, A PLAN TO CREATE COMPETITION OR AVAILABILITY. THE FINAL 2 REPORT AND CERTIFICATION SHALL BE SUPPORTED BY SUBSTANTIAL 3 EVIDENCE. 4 (3) FOR PURPOSES OF DETERMINING WHETHER COMPETITION OR 5 AVAILABILITY EXISTS IN THE AUTOMOBILE INSURANCE MARKET, ALL OF 6 THE FOLLOWING SHALL BE CONSIDERED BY THE COMMISSIONER: 7 (A) THE EXTENT TO WHICH ANY INSURER CONTROLS THE AUTOMOBILE 8 INSURANCE MARKET OR ANY PORTION OF THAT MARKET. WITH RESPECT TO 9 COMPETITION ON A STATEWIDE BASIS, AN INSURER SHALL NOT BE CONSID- 10 ERED TO CONTROL THE AUTOMOBILE INSURANCE MARKET UNLESS IT HAS 11 MORE THAN A 15% MARKET SHARE. 12 (B) WHETHER THE TOTAL NUMBER OF INSURERS WRITING AUTOMOBILE 13 INSURANCE IN THIS STATE IS SUFFICIENT TO PROVIDE MULTIPLE OPTIONS 14 AND ADEQUATE SERVICE TO INDIVIDUALS. 15 (C) THE DISPARITY AMONG AUTOMOBILE INSURANCE RATES AND CLAS- 16 SIFICATIONS TO THE EXTENT THAT SUCH CLASSIFICATIONS RESULT IN 17 RATE DIFFERENTIALS. 18 (D) THE AVAILABILITY OF AUTOMOBILE INSURANCE TO INDIVIDUALS 19 IN ALL GEOGRAPHIC AREAS OF THE STATE. 20 (E) THE RESIDUAL MARKET SHARE. 21 (F) THE OVERALL RATE LEVEL. 22 (G) ANY OTHER FACTORS THE COMMISSIONER CONSIDERS RELEVANT. 23 (4) A PLAN TO CREATE COMPETITION OR AVAILABILITY SHALL ONLY 24 RELATE TO THOSE GEOGRAPHIC AREAS, CLASSIFICATIONS, OR KINDS OR 25 TYPES OF RISKS WHERE COMPETITION OR AVAILABILITY HAS BEEN CERTI- 26 FIED NOT TO EXIST. THE PLAN MAY INCLUDE METHODS DESIGNED TO 27 CREATE COMPETITION OR AVAILABILITY AS THE COMMISSIONER CONSIDERS 03489'01 30 1 NECESSARY, AND MAY PROVIDE FOR THE COMMISSIONER TO DO 1 OR MORE 2 OF THE FOLLOWING: 3 (A) AUTHORIZE, BY ORDER, JOINT UNDERWRITING ACTIVITIES IN A 4 MANNER SPECIFIED IN THE COMMISSIONER'S ORDER. 5 (B) MODIFY THE RATE APPROVAL PROCESS IN A MANNER TO INCREASE 6 COMPETITION OR AVAILABILITY WHILE AT THE SAME TIME PROVIDING FOR 7 REASONABLY TIMELY RATE APPROVALS. MODIFICATIONS UNDER THIS SUB- 8 DIVISION SHALL NOT AFFECT THE REQUIREMENTS OF SECTIONS 2106 AND 9 2107A. 10 (C) ORDER EXCESS PROFITS REGULATION. EXCESS PROFITS REGULA- 11 TION AUTHORIZED BY THIS SUBDIVISION SHALL BE BASED UPON RULES 12 PROMULGATED PURSUANT TO THE ADMINISTRATIVE PROCEDURES ACT OF 13 1969, 1969 PA 306, MCL 24.201 TO 24.328. EXCESS PROFITS SHALL 14 INCLUDE BOTH UNDERWRITING PROFITS AND ALL AFTER-TAX INVESTMENT OR 15 INVESTMENT PROFIT OR LOSS FROM UNEARNED PREMIUMS AND LOSS 16 RESERVES ATTRIBUTABLE TO AUTOMOBILE INSURANCE. THE COMMISSIONER, 17 PURSUANT TO EXCESS PROFITS REGULATION, MAY ESTABLISH FORMS FOR 18 THE REPORTING OF FINANCIAL DATA BY THE INSURER. 19 (D) ESTABLISH AND REQUIRE AUTOMOBILE INSURANCE RATES, BY 20 ORDER, THAT INSURERS SHALL USE AS A CONDITION OF MAINTAINING 21 THEIR CERTIFICATE OF AUTHORITY. THE ORDER SETTING THE RATES 22 SHALL TAKE EFFECT NOT LESS THAN 90 DAYS OR MORE THAN 150 DAYS 23 AFTER THE ORDER IS ISSUED. 24 (E) ESTABLISH AND IMPLEMENT A PLAN TO ASSIST IN INFORMING 25 CONSUMERS OF HOW TO OBTAIN AUTOMOBILE INSURANCE AT THE MOST 26 FAVORABLE RATES AND HOW TO OBTAIN BENEFITS FOR WHICH THEY ARE 27 ELIGIBLE. THE PLAN MAY INCLUDE THE USE OF TOLL-FREE TELEPHONE 03489'01 31 1 NUMBERS FOR USE BY AUTOMOBILE INSURANCE CONSUMERS AND MAY PROVIDE 2 FOR THE DISTRIBUTION OF INFORMATION TO LOCAL UNITS OF 3 GOVERNMENT. 4 (5) THE REPORTS AND CERTIFICATIONS REQUIRED UNDER SUBSEC- 5 TIONS (1) AND (2) SHALL BE FORWARDED TO THE GOVERNOR, THE CLERK 6 OF THE HOUSE, THE SECRETARY OF THE SENATE, AND ALL THE MEMBERS OF 7 THE HOUSE OF REPRESENTATIVES AND SENATE STANDING COMMITTEES ON 8 INSURANCE ISSUES. 9 SEC. 2128C. (1) EACH INSURER WRITING 7% OR MORE OF THE 10 AUTOMOBILE INSURANCE IN THIS STATE SHALL GEOGRAPHICALLY MARKET 11 AUTOMOBILE INSURANCE PROPORTIONATE TO THE NUMBER OF REGISTERED 12 VEHICLES IN EACH AREA OF THE STATE. BEGINNING 1 YEAR AFTER THE 13 EFFECTIVE DATE OF THIS SECTION, EACH INSURER WRITING 7% OR MORE 14 OF THE AUTOMOBILE INSURANCE IN THIS STATE SHALL SUBMIT ANNUALLY 15 TO THE COMMISSIONER A MARKETING PLAN INDICATING THE NUMBER OF 16 AGENTS THAT MARKET FOR THE INSURER AND THE LOCATION OF THEIR 17 OFFICES. THE COMMISSIONER SHALL DETERMINE THE ADEQUACY OF EACH 18 INSURER'S MARKETING PLAN. 19 (2) IF THE COMMISSIONER, AFTER REVIEWING AN AUTOMOBILE 20 INSURER'S MARKETING PLAN, FINDS THE PLAN IS NOT IN COMPLIANCE 21 WITH SUBSECTION (1), THE COMMISSIONER SHALL NOTIFY THE INSURER IN 22 WRITING OF THE INSURER'S FAILURE TO COMPLY WITH THE LAW, SHALL 23 RECOMMEND REVISIONS TO THE INSURER'S PLAN, AND SHALL REQUIRE THAT 24 A REVISED PLAN BE RESUBMITTED WITHIN 30 DAYS. THE COMMISSIONER 25 SHALL APPROVE OR DISAPPROVE AN INSURER'S MARKETING PLAN OR REVI- 26 SIONS TO THE PLAN WITHIN 30 DAYS AFTER THE COMMISSIONER'S RECEIPT 27 OF THE PLAN OR THE REVISED PLAN. 03489'01 32 1 (3) IF THE COMMISSIONER FINDS THAT AN AUTOMOBILE INSURANCE 2 INSURER HAS WILLFULLY VIOLATED THE PROVISIONS OF THIS SECTION, 3 THE COMMISSIONER MAY SUSPEND OR REVOKE THE INSURER'S LICENSE TO 4 DO BUSINESS AND MAY ORDER THE INSURER TO PAY A CIVIL FINE OF NOT 5 MORE THAN $10,000.00 FOR EACH VIOLATION. 6 (4) IF THE COMMISSIONER FINDS THAT AN AUTOMOBILE INSURANCE 7 INSURER HAS FAILED TO FILE A MARKETING PLAN COMPLYING WITH THIS 8 SECTION, HAS FAILED TO REVISE A PLAN PURSUANT TO THE 9 COMMISSIONER'S FINDING, OR HAS CONSISTENTLY FAILED TO SUBMIT AN 10 ACCEPTABLE MARKETING PLAN, THE COMMISSIONER MAY SUSPEND OR REVOKE 11 THE INSURER'S LICENSE TO DO BUSINESS AND MAY ORDER THE INSURER TO 12 PAY A CIVIL FINE OF NOT MORE THAN $2,000.00 FOR EACH OCCURRENCE. 13 (5) THE COMMISSIONER SHALL NOTIFY EACH AUTOMOBILE INSURANCE 14 INSURER LICENSED IN THIS STATE OF THE MARKETING PLAN FILING 15 REQUIREMENT. 16 SEC. 2128D. (1) IF THE COMMISSIONER FINDS, AFTER A HEARING 17 HELD PURSUANT TO THE ADMINISTRATIVE PROCEDURES ACT OF 1969, 1969 18 PA 306, MCL 24.201 TO 24.328, THAT ACCESS TO A REASONABLY COMPET- 19 ITIVE AND CONVENIENT AUTOMOBILE INSURANCE MARKET IN THIS STATE IS 20 LACKING FOR CERTAIN CONSUMERS, THE COMMISSIONER MAY ORDER THE 21 MICHIGAN AUTOMOBILE INSURANCE PLACEMENT FACILITY TO DEVELOP A 22 MARKET ACCESS PLAN, SUBJECT TO THE COMMISSIONER'S APPROVAL, TO 23 ASSURE THAT THOSE CONSUMERS HAVE REASONABLE AND CONVENIENT ACCESS 24 TO THE MICHIGAN AUTOMOBILE INSURANCE PLACEMENT FACILITY AND COM- 25 PETITIVE INSURANCE MARKETS IN THIS STATE. 26 (2) IF A MARKET ACCESS PLAN UNDER SUBSECTION (1) IS NOT 27 SUBMITTED WITHIN 30 DAYS AFTER THE DATE OF THE COMMISSIONER'S 03489'01 33 1 ORDER, OR IF THE PLAN DOES NOT MEET THE COMMISSIONER'S APPROVAL, 2 THE COMMISSIONER SHALL DEVELOP A MARKET ACCESS PLAN AND ORDER ITS 3 IMPLEMENTATION BY THE MICHIGAN AUTOMOBILE INSURANCE PLACEMENT 4 FACILITY UNTIL SUCH TIME THAT A PLAN ESTABLISHED BY THE MICHIGAN 5 AUTOMOBILE INSURANCE PLACEMENT FACILITY IS APPROVED BY THE 6 COMMISSIONER. 7 SEC. 2128E. (1) THERE IS CREATED AN AUTOMOBILE INSURANCE 8 DATA COLLECTION AGENCY TO ADMINISTER THE AUTOMOBILE INSURANCE 9 DATA COLLECTION REQUIREMENTS OF THIS ACT. THE GOVERNING BOARD OF 10 THE AUTOMOBILE INSURANCE DATA COLLECTION AGENCY SHALL BE COMPOSED 11 OF THE COMMISSIONER AND 8 MEMBERS APPOINTED BY THE COMMISSIONER 12 AS FOLLOWS: 13 (A) TWO PERSONS WHO REPRESENT A PRIVATE AUTOMOBILE INSURANCE 14 INSURER NOT HOLDING MORE THAN 15% OF THE STATE'S OVERALL MARKET 15 SHARE AT THE TIME ITS REPRESENTATIVE SERVES ON THE BOARD. 16 (B) TWO PERSONS WHO REPRESENT THE GENERAL PUBLIC OF THIS 17 STATE. 18 (C) ONE PERSON WHO IS A LICENSED MEDICAL PROFESSIONAL IN 19 THIS STATE AND WHO DOES NOT OWN ANY PORTION OF AN AUTOMOBILE 20 INSURANCE INSURER OR MANAGE DIRECTLY OR INDIRECTLY AN AUTOMOBILE 21 INSURANCE INSURER'S AFFAIRS. 22 (D) ONE PERSON WHO IS A LICENSED ATTORNEY IN THIS STATE, WHO 23 DOES NOT OWN ANY PORTION OF AN AUTOMOBILE INSURANCE INSURER OR 24 MANAGE DIRECTLY OR INDIRECTLY AN AUTOMOBILE INSURANCE INSURER'S 25 AFFAIRS, AND WHO HAS AT LEAST 5 YEARS OF EXPERIENCE IN AUTOMOBILE 26 ACCIDENT RELATED LITIGATION. 03489'01 34 1 (E) ONE PERSON WHO IS AN INDEPENDENT INSURANCE AGENT. 2 (F) ONE PERSON WHO HAS AT LEAST 10 YEARS OF DATA PROCESSING 3 EXPERIENCE IN A COMBINATION OF HARDWARE ACQUISITION AND SOFTWARE 4 DEVELOPMENT. 5 (2) A MEMBER OF THE GOVERNING BOARD OF THE AUTOMOBILE INSUR- 6 ANCE DATA COLLECTION AGENCY SHALL SERVE FOR A TERM OF 2 YEARS. 7 (3) THE AUTOMOBILE INSURANCE DATA COLLECTION AGENCY, UNDER 8 THE DIRECTION AND CONTROL OF THE COMMISSIONER AND SUBJECT TO THE 9 COMMISSIONER'S APPROVAL, SHALL HAVE THE FOLLOWING DUTIES: 10 (A) PRESCRIBE RATE FILING FORMS AND DATA COLLECTION FORMS 11 AND ESTABLISH UNIFORM DATA REPORTING REQUIREMENTS NECESSARY TO 12 SATISFY THE PROVISIONS OF THIS CHAPTER. 13 (B) ANALYZE REPORTED DATA, ANALYZE AUTOMOBILE INSURANCE 14 INSURERS' RATE-MAKING DATA, AND REPORT THESE FINDINGS TO THE COM- 15 MISSIONER, AND COLLECT AND ANALYZE OTHER PERTINENT DATA AT THE 16 COMMISSIONER'S REQUEST. 17 (C) PREPARE REPORTS ON AUTOMOBILE INSURANCE AS REQUESTED BY 18 THE COMMISSIONER. 19 (D) ESTABLISH UNIFORM CLASSIFICATION SYMBOLS OR OTHER UNI- 20 FORM DESIGNATIONS FOR USE BY AUTOMOBILE INSURANCE INSURERS TO 21 ESTABLISH RISK ASSOCIATED WITH EACH TYPE OF VEHICLE TO BE 22 INSURED. 23 (E) IN A UNIFORM MANNER, GATHER ALL DATA NECESSARY TO ACCOM- 24 PLISH TOTAL RETURN RATE-MAKING. INFORMATION SHALL BE GATHERED 25 THAT ENABLES THE COMMISSIONER TO ASSESS AN INSURER'S ACTUAL LOSS 26 EXPERIENCE, LEVEL OF PROFIT, INTEREST INCOME, METHOD FOR 27 ASSESSING ANTICIPATED LOSSES, PARTICULAR APPLICATION OF LOSS 03489'01 35 1 TREND FACTORS, PURE PREMIUM, FREQUENCY OF LOSSES BASED ON THE 2 NUMBER OF VEHICLES INSURED, AND THE LOSS COSTS AND FREQUENCY OF 3 LOSSES ASSOCIATED WITH THE COMPONENT PARTS OF EACH ASPECT OF COV- 4 ERAGE, INCLUDING, BUT NOT LIMITED TO, MEDICAL, WAGE-LOSS, 5 REPLACEMENT SERVICES, SURVIVORS BENEFITS, DEATH BENEFIT, COLLI- 6 SION COVERAGE, COMPREHENSIVE COVERAGE WITH THEFT REPORTED AS A 7 SEPARATE COMPONENT, BODILY INJURY OR LIABILITY COVERAGE REPORTED 8 BY POLICY LIMITS, PROPERTY PROTECTION, AND ALL OTHER BENEFITS 9 BEING MARKETED BY THE INSURER. 10 (F) GATHER DETAILED DATA ABOUT INSURERS' ADMINISTRATIVE 11 EXPENSES AND THEIR RELATIONSHIP TO THE PREMIUM CHARGED, INCLUDING 12 COSTS FOR EACH TYPE OF LITIGATION ASSOCIATED WITH AUTOMOBILE 13 INSURANCE CLAIMS RESOLUTION, SALARIES, FRINGE BENEFITS, COMMIS- 14 SIONS, AND COSTS ASSOCIATED WITH OVERHEAD AND OTHER FIXED COSTS. 15 (G) REQUIRE EACH INSURER TO LIST THE ITEMS THAT ARE USED TO 16 COMPOSE A BASE RATE AND REQUIRE EACH INSURER TO EXPLAIN THE 17 APPLICATIONS OF BASE RATES. 18 (H) ESTABLISH FORMS TO ENABLE THE COLLECTION OF DATA SUFFI- 19 CIENT TO PERMIT THE COMMISSIONER TO DETERMINE THAT ALL ASPECTS OF 20 AUTOMOBILE INSURANCE RATE-MAKING ARE ACTUARIALLY SOUND AND THAT 21 AUTOMOBILE INSURANCE RATES ARE NOT EXCESSIVE OR DISCRIMINATORY. 22 (I) REQUIRE THE REPORTING OF ALL AUTOMOBILE INSURANCE CLAIMS 23 COSTS AND THE FREQUENCY OF EACH TYPE OF LOSS AND PROVIDE THE COM- 24 MISSIONER WITH THIS DATA. 25 (J) COLLECT ALL AUTOMOBILE INSURANCE RATE-MAKING DATA AND 26 EVALUATE THIS DATA BY DETERMINING ITS ACTUARIAL SOUNDNESS AND BY 03489'01 36 1 MAKING COMPARISONS BASED ON STATEWIDE UNIFORM RATING TERRITORIES 2 AS ESTABLISHED BY THIS ACT. 3 (K) ENSURE THAT ALL NECESSARY DATA ARE COLLECTED AND ANA- 4 LYZED IN A MANNER THAT COMPLIES WITH THE PROVISIONS OF THIS 5 CHAPTER. 6 (l) SUBJECT TO THE APPROVAL OF THE COMMISSIONER, DESIGNATE 1 7 ADVISORY ORGANIZATION FOR THE PURPOSE OF IMPLEMENTING ITS DATA 8 COLLECTION PLAN AND THE COMPILATION OF RATE-MAKING AND OTHER 9 FINANCIAL DATA FROM AUTOMOBILE INSURANCE INSURERS. THE DESIG- 10 NATED ADVISORY ORGANIZATION SHALL REPORT ITS FINDINGS TO THE 11 AUTOMOBILE INSURANCE DATA COLLECTION AGENCY, WHICH SHALL REPORT 12 TO THE COMMISSIONER. 13 (M) REPORT TO THE COMMISSIONER ANY KNOWN VIOLATION OF THIS 14 ACT. 15 (N) COMPLETE ANY OTHER TASK REQUIRED TO SATISFY THE PROVI- 16 SIONS OF THIS ACT AS REQUESTED BY THE COMMISSIONER. 17 (4) THE COMMISSIONER SHALL MAKE RECOMMENDATIONS TO THE LEG- 18 ISLATURE ANNUALLY REGARDING THE ADEQUACY OF STATUTORY UNDERWRIT- 19 ING AND RATE-MAKING PROVISIONS BASED UPON THE INFORMATION GATH- 20 ERED AND ANALYZED BY THE AUTOMOBILE INSURANCE DATA COLLECTION 21 AGENCY AND ANY OTHER INFORMATION THAT THE COMMISSIONER CONSIDERS 22 APPROPRIATE. 23 SEC. 2128F. (1) PRIOR TO APRIL 1, 2002, AND PRIOR TO APRIL 1 24 OF EACH YEAR THEREAFTER, EACH INSURER ENGAGED IN WRITING INSUR- 25 ANCE COVERAGES THAT PROVIDE THE SECURITY REQUIRED BY SECTION 26 3101(1) WITHIN THIS STATE, AS A CONDITION OF ITS AUTHORITY TO 27 TRANSACT INSURANCE IN THIS STATE, SHALL PAY TO THE AUTOMOBILE 03489'01 37 1 INSURANCE DATA COLLECTION AGENCY AN ASSESSMENT EQUAL TO $1.00 2 MULTIPLIED BY THE INSURER'S TOTAL EARNED CAR YEARS OF INSURANCE 3 PROVIDING THE SECURITY REQUIRED BY SECTION 3101(1) WRITTEN IN 4 THIS STATE DURING THE IMMEDIATELY PRECEDING CALENDAR YEAR. 5 (2) MONEY RECEIVED PURSUANT TO SUBSECTION (1), AND ALL OTHER 6 MONEY RECEIVED BY THE AUTOMOBILE INSURANCE DATA COLLECTION 7 AGENCY, SHALL BE SEGREGATED AND PLACED IN A FUND TO BE KNOWN AS 8 THE DATA COLLECTION FUND. THE DATA COLLECTION FUND SHALL BE 9 ADMINISTERED BY THE AUTOMOBILE INSURANCE DATA COLLECTION AGENCY. 10 (3) MONEY IN THE DATA COLLECTION FUND SHALL BE USED TO PAY 11 THE COSTS OF ADMINISTRATION OF THE AUTOMOBILE INSURANCE DATA COL- 12 LECTION AGENCY AND SHALL NOT BE CONSIDERED STATE MONEY. 13 Sec. 2236. (1) A basic insurance policy form or annuity 14 contract form shall not be issued or delivered to any person in 15 this state, and an insurance or annuity application form if a 16 written application is required and is to be made a part of the 17 policy or contract, a printed rider or indorsement form or form 18 of renewal certificate, and a group certificate in connection 19 with the policy or contract, shall not be issued or delivered to 20 a person in this state, until a copy of the form is filed with 21 the insurance bureau and approved by the commissioner as conform- 22 ing with the requirements of this act and not inconsistent with 23 the law. Failure of the commissioner to act within 30 days after 24 submittalshall constituteCONSTITUTES approval. All such 25 forms, except policies of disability insurance as defined in 26 section 3400, shall be plainly printed with type size not less 27 than 8-point unless the commissioner determines that portions of 03489'01 38 1 such a form printed with type less than 8-point is not deceptive 2 or misleading. 3 (2)AnEXCEPT FOR FILINGS CONCERNING RATES, AN insurer may 4 satisfy its obligations to make form filings by becoming a member 5 of, or a subscriber to, a rating organization, licensed under 6 section 2436 or 2630, which makessuchFORM filings and by 7 filing with the commissioner a copy of its authorization of the 8 rating organization to make the filings on its behalf. Every 9 member of or subscriber to a rating organization shall adhere to 10 the form filings made on its behalf by the organization except 11 that an insurer may file with the commissioner a substitute form, 12 and thereafter if a subsequent form filing by the rating organi- 13 zation affects the use of the substitute form, the insurer shall 14 review its use and notify the commissioner to withdraw its sub- 15 stitute form. 16 (3) Beginning January 1, 1992, the commissioner shall not 17 approve a form filed pursuant to this section providing for or 18 relating to an insurance policy or an annuity contract for per- 19 sonal, family, or household purposes if the form fails to obtain 20 the readability score or meet the other requirements of this sub- 21 section, as applicable: 22 (a) The readability score for a form for which approval is 23 required by this section shall not be less than 45, as determined 24 by the method provided in subdivisions (b) and (c). 25 (b) The readability score for a form shall be determined as 26 follows: 03489'01 39 1 (i) For a form containing not more than 10,000 words, the 2 entire form shall be analyzed. For a form containing more than 3 10,000 words, not less than two 200-word samples per page shall 4 be analyzed instead of the entire form. The samples shall be 5 separated by at least 20 printed lines. 6 (ii) Count the number of words and sentences in the form or 7 samples and divide the total number of words by the total number 8 of sentences. Multiply this quotient by a factor of 1.015. 9 (iii) Count the total number of syllables in the form or 10 samples and divide the total number of syllables by the total 11 number of words. Multiply this quotient by a factor of 84.6. As 12 used in this subparagraph, "syllable" means a unit of spoken lan- 13 guage consisting of 1 or more letters of a word as indicated by 14 an accepted dictionary. If the dictionary shows 2 or more 15 equally acceptable pronunciations of a word, the pronunciation 16 containing fewer syllables may be used. 17 (iv) Add the figures obtained in subparagraphs (ii) and 18 (iii) and subtract this sum from 206.835. The figure obtained 19 equals the readability score for the form. 20 (c) For the purposes of subdivision (b)(ii) and (iii), the 21 following procedures shall be used: 22 (i) A contraction, hyphenated word, or numbers and letters 23 when separated by spaces shall be counted as 1 word. 24 (ii) A unit of words ending with a period, semicolon, or 25 colon, but excluding headings and captions, shall be counted as 1 26 sentence. 03489'01 40 1 (d) In determining the readability score, the method 2 provided in subdivisions (b) and (c): 3 (i) Shall be applied to an insurance policy form or an annu- 4 ity contract, together with a rider or indorsement form usually 5 associated with such an insurance policy form or annuity 6 contract. 7 (ii) Shall not be applied to words or phrases that are 8 defined in an insurance policy form, an annuity contract, or 9 riders, indorsements, or group certificates pursuant to an insur- 10 ance policy form or annuity contract. 11 (iii) Shall not be applied to language specifically agreed 12 upon through collective bargaining or required by a collective 13 bargaining agreement. 14 (iv) Shall not be applied to language that is prescribed by 15 state or federal statute or by rules or regulations promulgated 16 pursuant to a state or federal statute. 17 (e) Each form for which approval is required by this section 18 shall contain both of the following: 19 (i) Topical captions. 20 (ii) An identification of exclusions. 21 (f) Each insurance policy and annuity contract that has more 22 than 3,000 words printed on not more than 3 pages of text or that 23 has more than 3 pages of text regardless of the number of words 24 shall contain a table of contents. This subdivision does not 25 apply to indorsements. 26 (g) Each rider or indorsement form that changes coverage 27 shall do all of the following: 03489'01 41 1 (i) Contain a properly descriptive title. 2 (ii) Reproduce either the entire paragraph or the provision 3 as changed. 4 (iii) Be accompanied by an explanation of the change. 5 (h) If a computer system approved by the commissioner calcu- 6 lates the readability score of a form as being in compliance with 7 this subsection, the form is considered in compliance with the 8 readability score requirements of this subsection. 9 (4) After January 1, 1992, any change or addition to a 10 policy or annuity contract form for personal, family, or house- 11 hold purposes, whether by indorsement, rider, or otherwise, or a 12 change or addition to a rider or indorsement form to such policy 13 or annuity contract form, which policy or annuity contract form 14 has not been previously approved under subsection (3), shall be 15 submitted for approval pursuant to subsection (3). 16 (5) Upon written notice to the insurer, the commissioner may 17 disapprove, withdraw approval, or prohibit the issuance, 18 advertising, or delivery of any form to any person in this state 19 if it violates any provisions of this act, or contains inconsis- 20 tent, ambiguous, or misleading clauses, or contains exceptions 21 and conditions that unreasonably or deceptively affect the risk 22 purported to be assumed in the general coverage of the policy. 23 The notice shall specify the objectionable provisions or condi- 24 tions and state the reasons for the commissioner's decision. If 25 the form is legally in use by the insurer in this state, the 26 notice shall give the effective date of the commissioner's 27 disapproval, which shall not be less than 30 dayssubsequent to03489'01 42 1 AFTER the mailing or delivery of the notice to the insurer. If 2 the form is not legally in use, then disapproval shall be effec- 3 tive immediately. 4 (6) If a form is disapproved or approval is withdrawn under 5 the provisions of this act, the insurer shall be entitled upon 6 demand to a hearing before the commissioner or a deputy commis- 7 sioner within 30 days after the notice of disapproval or of with- 8 drawal of approval; and after the hearing, the commissioner shall 9 make findings of fact and law, and either affirm, modify, or 10 withdraw his or her original order or decision. 11 (7) Any issuance, use, or delivery by an insurer of any form 12 without the prior approval of the commissioner as required by 13 subsection (1) or after withdrawal of approval as provided by 14 subsection (5) constitutes a separate violation for which the 15 commissioner may order the imposition of a civil penalty of 16 $25.00 for each offense, but not to exceed the maximum penalty of 17 $500.00 for any 1 series of offenses relating to any 1 basic 18 policy form, which penalty may be recovered by the attorney gen- 19 eral as provided in section 230. 20 (8) The filing requirements of this section shall not apply 21 to: 22 (a) Insurance against loss of or damage to: 23 (i) Imports, exports, or domestic shipments. 24 (ii) Bridges, tunnels, or other instrumentalities of trans- 25 portation and communication. 26 (iii) Aircraft and attached equipment. 03489'01 43 1 (iv) Vessels and watercraft under construction or owned by 2 or used in a business or having a straight-line hull length of 3 more than 24 feet. 4 (b) Insurance against loss resulting from liability, other 5 than worker's compensation or employers' liability arising out of 6 the ownership, maintenance, or use of: 7 (i) Imports, exports, or domestic shipments. 8 (ii) Aircraft and attached equipment. 9 (iii) Vessels and watercraft under construction or owned by 10 or used in a business or having a straight-line hull length of 11 more than 24 feet. 12 (c) Surety bonds other than fidelity bonds. 13 (d) Policies, riders, indorsements, or forms of unique char- 14 acter designed for and used with relation to insurance upon a 15 particular subject, or which relate to the manner of distribution 16 of benefits or to the reservation of rights and benefits under 17 life or disability insurance policies and are used at the request 18 of the individual policyholder, contract holder, or certificate 19 holder. Beginning September 1, 1968, the commissioner by order 20 may exempt from the filing requirements of this section and 21 sections 2242, 3606, and 4430 for so long as he or she considers 22 proper any insurance document or form, except that portion of the 23 document or form that establishes a relationship between group 24 disability insurance and personal protection insurance benefits 25 subject to exclusions or deductibles pursuant to section 3109a, 26 as specified in the order to which this section practicably may 27 not be applied, or the filing and approval of which are 03489'01 44 1 considered unnecessary for the protection of the public. 2 Insurance documents or forms providing medical payments or income 3 replacement benefits, except that portion of the document or form 4 that establishes a relationship between group disability insur- 5 ance and personal protection insurance benefits subject to exclu- 6 sions or deductibles pursuant to section 3109a, exempt by order 7 of the commissioner from the filing requirements of this section 8 and sections 2242 and 3606 are considered approved by the commis- 9 sioner for purposes of section 3430. 10 (9) Every order made by the commissioner under the provi- 11 sions of this sectionshall beIS subject to court review as 12 provided in section 244. 13 Sec. 2400. (1)Except with respect to worker's compensa-14tion insurance, theTHE purpose of this chapter is to promote 15 the public welfare by regulating insurance rates to the end that 16 they shall not be excessive, inadequate, or unfairly discrimina- 17 tory, and toauthorize andregulate cooperative action among 18 insurers in rate-making andin othermatters within the scope 19 of the insurance code. Nothing in this chapter is intended(1)20 to prohibit or discourage reasonable competition., or (2) to21prohibit, or encourage except to the extent necessary to accom-22plish the aforementioned purpose, uniformity in insurance rates,23rating systems, rating plans, or practices. (2) With respect to24worker's compensation insurance, theTHE purposes of this chap- 25 terareALSO INCLUDE: 03489'01 45 1 (a)To protectPROTECTING policyholders and the public 2 against the adverse effects of excessive, inadequate, or unfairly 3 discriminatory rates. 4 (b)To promotePROMOTING price competition among insurers 5writing worker's compensation insuranceso as to encourage 6 rateswhichTHAT will result in the lowest possible rates con- 7 sistent withthebenefitsestablished in the worker's disabil-8ity compensation act of 1969, Act No. 317 of the Public Acts of91969, as amended, being sections 418.101 to 418.941 of the10Michigan Compiled Laws,and with maintaining the solvency of 11 insurers. 12 (c)To providePROVIDING regulatory controls and other 13 activity in the absence of competition. 14 (d)To improveIMPROVING the availability, fairness, and 15 reliability ofworker's compensationinsurance. 16 (2) ANTITRUST PROVISIONS IN THIS CHAPTER ARE NOT EXCLUSIVE 17 AND OTHER PROVISIONS PROVIDED BY LAW MAY APPLY. 18 (3) This chapter shall be liberally interpreted to carry 19 into effect the provisions of this section. 20 Sec. 2406. (1) Except for worker's compensation insurance, 21everyEACH insurer shall file with the commissioner every 22 manual of classification, every manual of rules and rates, every 23 rating plan, and every modification of any of the foregoing that 24 it proposes to use. Everysuchfiling shall state the proposed 25 effective datethereofOF THE FILING and shall indicate the 26 character and extent of the coverage contemplated. If a filing 27 is not accompanied by the information upon which the insurer 03489'01 46 1 supports the filing, and the commissioner does not have 2 sufficient information to determine whether the filing meets the 3 requirements of this chapter, the commissioner shall within 10 4 days of the filing give written notice to the insurer to furnish 5 the informationupon which itTHAT supports the filing. The 6 information furnished in support of a filing may include the 7 experience or judgment of the insureror rating organization8 making the filing, its interpretation of any statistical data it 9 relies upon, the experience of other insurers,or rating10organizations,or any other relevant factors. A filing and any 11 supporting information shall be open to public inspection after 12 the filing becomes effective. 13 (2) Except for worker's compensation insurance AND FOR FIL- 14 INGS CONCERNING RATES, an insurer may satisfy its obligation to 15 makesuchfilings by becoming a member of, or a subscriber to, 16 a licensed rating organization that makessuchfilings, and by 17 filing with the commissioner a copy of its authorization of the 18 rating organization to makesuchfilings on its behalf. 19 Nothing contained in this chapter shall be construed as requiring 20 any insurer to become a member of or a subscriber to any rating 21 organization. 22 (3) For worker's compensation insurance in this state the 23 insurer shall file with the commissioner all rates and rating 24 systems.Every insurer that insures worker's compensation in25this state on the effective date of this subsection shall file26the rates not later than the effective date of this subsection.03489'01 47 1 (4) Except as provided in subsection (3) and as otherwise 2 provided in this subsection, the rates and rating systems for 3 worker's compensation insurance shall be filed not later than the 4 date the rates and rating systems are to be effective. However, 5 if the insurer providing worker's compensation insurance is con- 6 trolled by a nonprofit health care corporationformed pursuant7toOPERATING UNDER the nonprofit health care corporation reform 8 act,Act No. 350 of the Public Acts of 1980, being9sections 550.1101 to 550.1704 of the Michigan Compiled Laws1980 10 PA 350, MCL 550.1101 TO 550.1704, the rates and rating systems 11 that it proposes to use shall be filed with the commissioner not 12 less than 45 days before the effective date of the filing. These 13 filings shall be considered to meet the requirements of this 14 chapter unless and until the commissioner disapproves a filing 15 pursuant to section 2418 or 2420. 16 (5) Each filing under subsections (3) and (4) shall be 17 accompanied by a certification by the insurer that, to the best 18 of its information and belief, the filing conforms to the 19 requirements of this chapter. 20 (6) AS A CONDITION OF MAINTAINING ITS CERTIFICATE OF AUTHOR- 21 ITY, AN INSURER SHALL NOT DO ANY OF THE FOLLOWING: 22 (A) HAVE ANY RATES FILED ON ITS BEHALF IN THIS STATE BY A 23 RATING ORGANIZATION. 24 (B) SHARE INFORMATION WITH ANY OTHER INSURER OR RATING 25 ORGANIZATION CONCERNING ESTABLISHING RATES OR RATING SYSTEMS. 03489'01 48 1 (C) AGREE WITH ANY OTHER INSURER OR RATING ORGANIZATION TO 2 ADHERE TO OR USE ANY RATE, RATING PLAN, RATING SCHEDULE, RATING 3 RULE, OR UNDERWRITING RULE IN THIS STATE. 4 (D) MAKE AVAILABLE TO ANY OTHER INSURER OR RATING ORGANIZA- 5 TION INFORMATION ON ACTUARIAL PROJECTIONS, TRENDING FACTORS, 6 PROFITS, OR EXPENSES EXCEPT LOSS ADJUSTMENT EXPENSES. 7 Sec. 2430. (1) In lieu of the filing requirements of this 8 chapter and as an alternative method of filing,anyAN insurer 9or rating organizationmay file with the commissioneranyA 10 manual of classification, rules, or rates, any rating plan and 11 every modification of any of the foregoingwhichTHAT it pro- 12 poses to use, the filing to indicate the character and extent of 13 the coverage contemplated. IN LIEU OF THE FILING REQUIREMENTS OF 14 THIS CHAPTER AND AS AN ALTERNATIVE METHOD OF FILING, A RATING 15 ORGANIZATION MAY FILE WITH THE COMMISSIONER FOR AN INSURER A 16 MANUAL OF CLASSIFICATION, RULES, AND EVERY MODIFICATION OF ANY OF 17 THE FOREGOING, THE FILING TO INDICATE THE CHARACTER AND EXTENT OF 18 THE COVERAGE CONTEMPLATED. Everysuchfiling under this section 19 shall state the effective datethereofOF THE FILING, shall 20 take effect onsaidTHAT date, shall not be subject to any 21 waiting period requirements, and shall bedeemedCONSIDERED to 22 meet the requirements of section 2403(1)(d).(rate standards).23 A filing and any supporting information shall be open to public 24 inspection, if the filing is not disapproved. 25 (2) At any time within1530 days from and after the date 26 ofany suchA filing UNDER SUBSECTION (1), the commissioner may 27 give written notice to the insureror rating organization03489'01 49 1 makingsuchTHE filing, specifying in what respect and to what 2 extent he OR SHE contendssuchTHE filing fails to comply with 3 the requirements of section 2403(1)(d) and fixing a date for 4 hearing not less than 10 days from the date of THE mailing of 5suchTHE notice. AtsuchTHE hearing, the factors specified 6 in section 2406(1) shall be considered. If the commissioner 7 after hearing finds that the filing does not comply with the pro- 8 visions of this chapter, he OR SHE may issuehisAN order 9 determiningwhereinWHERE and to what extentsuchTHE filing 10 isdeemed to beimproper and fixing a date,thereafter,11 within a reasonable time, after whichsuchTHE filing shall no 12 longer be effective.AnyAN order of disapproval under this 13 section must be entered within 30 days of the date of the filing 14 affected. 15 (3)In the event that noIF A notice of hearingshall be16 IS NOT issued within 15 days from the date ofany suchA filing 17 UNDER SUBSECTION (1), the filing shall bedeemedCONSIDERED to 18 be approved. IfsuchTHE filingshall beIS disapproved, the 19 insuring provisions ofanyA contract or policy issued prior to 20 the time the order becomes effective shall not be affected. But 21 if the commissioner disapprovessuchTHE filing as not being in 22 compliance with section 2403(1)(d),(rate standards),he OR SHE 23 may order an adjustment of the premium to be made with the poli- 24 cyholder either by refund or collection of additional premium, if 25 the amount is substantial and equals or exceeds the cost of 26 making the adjustment. The commissioner may thereafter review 27 any such filing in the manner provided in sections 2418 and 2420, 03489'01 50 1 but if so reviewed, no adjustment of premium may be ordered. 2Sections 2406 (2) (filing may be made by rating organization),32408 (1) (commissioner shall review filing as soon as reasonably4possible), and 2412 (insurer must adhere to filing) shall be5 SECTIONS 2406(2), 2408(1), AND 2412 ARE applicable to filings 6 made under this section. 7 Sec. 2436. (1) A corporation, an association, a partner- 8 ship, or an individual, whether located within or outside this 9 state, maymake application toAPPLY WITH the commissioner for 10 a license as a rating organization to makerates andinsurance 11 contract forms for the kinds of insurance or subdivisions there- 12 of, except for worker's compensation insurance, as are specified 13 in its application and shall file with the application all of the 14 following: 15 (a) A copy of its constitution, its articles of agreement or 16 association, or its certificate of incorporation, and of its 17 bylaws and rules governing the conduct of its business. 18 (b) A list of its members and subscribers. 19 (c) The name and address of a resident of this state upon 20 whom notices or orders of the commissioner or process affecting 21 the rating organization may be served. 22 (d) A statement of its qualifications as a rating 23 organization. 24 (2) If the commissioner finds that the applicant is compe- 25 tent, trustworthy, and otherwise qualified to act as a rating 26 organization and that its constitution, articles of agreement or 27 association, or certificate of incorporation, and its bylaws and 03489'01 51 1 rules governing the conduct of its business conform to the 2 requirements of law, he or she shall issue a license specifying 3 the kinds of insurance or subdivisions thereof for which the 4 applicant is authorized to act as a rating organization. Every 5 application shall be granted or denied in whole or in part by the 6 commissioner within 60 days of the date of its filing with the 7 commissioner. 8 (3) The fee for the license shall be $25.00 which shall be 9 in lieu of all other fees, licenses, or taxes imposed by the 10 state or any political subdivision of the state. 11 (4) Licenses issued pursuant to this section shall remain in 12 force for 3 years from date of issuance unless suspended or 13 revoked by the commissioner, after hearing upon notice, pursuant 14 to section 2478,in the eventIF the rating organization ceases 15 to meet the requirements of this section. 16 (5) Every rating organization shall notify the commissioner 17 promptly of every change in any of the following: 18 (a) Its constitution, its articles of agreement or associa- 19 tion, or its certificate of incorporation, and its bylaws and 20 rules governing the conduct of its business. 21 (b) Its list of members and subscribers. 22 (c) The name and address of the resident of this state des- 23 ignated by it upon whom notices or orders of the commissioner or 24 process affecting the rating organization may be served. 25 Sec. 2438. (1) Subject to REASONABLE rules and regulations 26which have beenapproved by the commissioner,as reasonable,27 each rating organization shall permitanyAN insurer, not a 03489'01 52 1 member, to be a subscriber to its rating services for any kind of 2 insurance or subdivisionthereofOF INSURANCE for which it is 3 authorized to act as a rating organization. Notice of proposed 4 changes insuchTHE rules and regulations shall be given to 5 subscribers. Each rating organization shall furnish itsrating6 services without discrimination to its members and subscribers. 7 (2) The reasonableness of any rule or regulation in its 8 application to subscribers, or the refusal of any rating organi- 9 zation to admit an insurer as a subscriber,shall,at the 10 request ofanyA subscriber orany suchinsurer, SHALL be 11 reviewed by the commissioner at a hearing held upon at least 10 12 days' written notice tosuchTHE rating organization and to 13suchTHE subscriber or insurer. If the commissioner finds that 14suchTHE rule or regulation is unreasonable in its application 15 to subscribers, he OR SHE shall order thatsuchTHE rule or 16 regulationshallIS notbeapplicable to subscribers. 17 (3) If the rating organization fails to grant or reject an 18 insurer's application for subscribership within 30 days after it 19 was made, the insurer may request a review by the commissioner as 20 if the application had been rejected. If the commissioner finds 21 that the insurer has been refused admittance to the rating organ- 22 ization as a subscriber without justification,heTHE 23 COMMISSIONER shall order the rating organization to admit the 24 insurer as a subscriber. IfheTHE COMMISSIONER finds that the 25 action of the rating organization was justified,heTHE 26 COMMISSIONER shall make an order affirming its action. 03489'01 53 1 Sec. 2458.Every rating organization and everyEACH 2 insurer,which makes its own rates shall,within a reasonable 3 time after receiving written request therefor and upon payment of 4suchA reasonable charge as it may make, SHALL furnish toany5 AN insured affected by a rate made by it, or to the INSURED'S 6 authorized representative,of the insured,all pertinent infor- 7 mation as to the rate.Every rating organization and every8 EACH insurerwhich makes its own ratesshall provide within 9 this state reasonable meanswhereby anyFOR A person aggrieved 10 by the application ofitsTHE INSURER'S rating systemmayTO 11 be heard, in person or by his or her authorized representative, 12 on his or her written request to review the manner in which the 13 rating system has been applied in connection with the insurance 14 afforded to him or her. If therating organization orinsurer 15 fails to grant or reject the request within 30 days after it is 16 made, the applicant may proceed in the same manner as if his or 17 her application had been rejected.AnyA party affected by the 18 action of therating organization orinsurer on SUCH A request 19 may APPEAL, within 30 days after written notice of the action, 20appealto the commissioner, who, after a hearing held upon not 21 less than 10 days' written notice to the appellant and to the 22rating organization orinsurer, may affirm or reverse the 23 action. A person who requests a hearing before the commissioner 24 pursuant to this section may be represented at the hearing by an 25 attorney. A person, other than an individual, that requests a 26 hearing before the commissioner pursuant to this section may also 27 be represented by an officer or employee of that person. An 03489'01 54 1 individual who requests a hearing before the commissioner 2 pursuant to this section may also be represented by a relative of 3 the individual. 4 Sec. 2462. (1) Every group, association, or other organiza- 5 tion of insurers, whether located within or outside this state, 6 which assists insurerswhich make their own filings or rating7organizationsin rate making, by the collection and furnishing 8 of loss or expense statistics,or by the submission of9recommendations,but which does not make filings under this 10 chapter, shall be known as an advisory organization. 11 (2) Every advisory organization shall file with the commis- 12 sioner ALL OF THE FOLLOWING: 13 (a) A copy of its constitution, its articles of agreement or 14 association or its certificate of incorporation and of its 15 bylaws, rules, and regulations governing its activities.,16 (b) A list of its members.,17 (c) The name and address of a resident of this state upon 18 whom notices or orders of the commissioner or process issued at 19 his direction may be served., and20 (d) An agreement that the commissioner may examinesuch21 THE advisory organization in accordance with the provisions of 22 section 2468. 23 (3) If, after a hearing, the commissioner finds that the 24 furnishing ofsuchinformation or assistance involves any act 25 or practicewhichTHAT is unfair or unreasonable or otherwise 26 inconsistent with the provisions of this chapter, he OR SHE may 27 issue a written order specifying in what respectssuchTHE act 03489'01 55 1 or practice is unfair or unreasonable or otherwise inconsistent 2 with the provisions of this chapter, and requiring the discon- 3 tinuance ofsuchTHE act or practice. 4 (4)NoAN insurerwhich makes its own filings nor any5rating organizationshall NOT support its filings by statistics 6or adopt rate making recommendations,furnished to it by an 7 advisory organizationwhichTHAT has not complied with this 8 section or with an order of the commissioner involvingsuchTHE 9 statisticsor recommendationsissued under subsection (3).of10this section.If the commissioner findssuchTHE insureror11rating organizationto be in violation of this subsection he OR 12 SHE may issue an order requiring the discontinuance ofsuchTHE 13 violation. 14 Sec. 2472. (1) The commissioner shall promulgate reasonable 15 rules and statistical plans, reasonably adapted to each of the 16 rating systems on file with him OR HER, which may be modified 17 from time to time and which shall be used thereafter to the 18 extent applicable to its particular rating system or systems, by 19 each insurer in the recording and reporting of its loss and coun- 20 trywide expense experience, in order that the experience of all 21 insurers may be made available at least annually insuchA form 22 and detail as may be necessary to aidhimTHE COMMISSIONER in 23 determining whether rating systems comply with the standards set 24 forth in section 2403.SuchTHE rules and plans may also pro- 25 vide for the recording and reporting of expense experience items 26whichTHAT are specially applicable to this state and are not 27 susceptible of determination by a prorating of countrywide 03489'01 56 1 expense experience. In promulgatingsuchrules and plans, the 2 commissioner shall give due consideration to the rating systems 3 on file with him OR HER and, in order thatsuchTHE rules and 4 plans may be as uniform as is practicable among the several 5 states, to the rules and to the form of the plans used forsuch6 rating systems in other states.NoAN insurer shall NOT be 7 required to record or report its loss experience on a classifica- 8 tion basis that is inconsistent with the rating system filed by 9 it.and noAN insurer shall NOT be required to record or 10 report its loss or expense experience on any basis or statistical 11 plan that differs from that which is regularly employed and main- 12 tained in the usual course ofsuchTHE insurer's business, or 13 to any rating organization or agency of which it is not a member 14 or subscriber. The commissioner may designate 1 or more rating 15 organizations or other agencies to assist him OR HER in gathering 16 such experience and making compilations thereof, andsuchTHE 17 compilations shall be made available, subject to reasonable rules 18 promulgated by the commissioner, to insurers and rating 19 organizations. 20 (2) Reasonable rules and plans may be promulgated by the 21 commissioner for the interchange of data necessary for the appli- 22 cation of rating plans. 23 (3) In order to further uniform administration of rate regu- 24 latory laws, the commissioner andeveryEACH insurerand25rating organizationmay exchange information and experience data 26 with insurance supervisory officials, insurers and rating27organizationsin other states and may consult with them with 03489'01 57 1 respect torate making andthe application of rating systems. 2 IN ADDITION, EACH INSURER AND EACH RATING ORGANIZATION MAY 3 EXCHANGE HISTORICAL LOSS DATA. 4 Sec. 2600. (1) The purpose of this chapter is to promote 5 the public welfare by regulating insurance rates to the end that 6 they shall not be excessive, inadequate, or unfairly discrimina- 7 tory, and toauthorize andregulate cooperative action among 8 insurers in rate making and in other matters within the scope of 9 the insurance code. Nothing in this chapter is intended(1)to 10 prohibit or discourage reasonable competition., or (2) to pro-11hibit, or encourage except to the extent necessary to accomplish12the aforementioned purpose, uniformity in insurance rates, rating13systems, rating plans or practices.14 (2) Conformity with this chapter shall not bedeemed to be15 CONSIDERED a violation of section 2075.(compacts to restrain16competition prohibited)ANTITRUST PROVISIONS ARE NOT EXCLUSIVE 17 AND OTHER PROVISIONS PROVIDED BY LAW MAY APPLY. 18 (3) This chapter shall be liberally interpreted to carry 19 into effect the provisions of this section. 20 Sec. 2606. (1)EveryEACH insurer shall file with the 21 commissioner, except as to inland marine risks which by general 22 custom of the business are not written according to manual rates 23 or rating plans, every manual, minimum, class rate, rating sched- 24 ule or rating plan, and every other rating rule, and every modi- 25 fication of any of the foregoingwhichTHAT it proposes to 26 use. Everysuchfiling shall state the proposed effective date 03489'01 58 1thereofOF THE FILING, and shall indicate the character and 2 extent of the coverage contemplated. 3 (2)WhenIF a filing is not accompanied by the information 4 upon which the insurer supportssuchTHE filing, and the com- 5 missioner does not have sufficient information to determine 6 whethersuchTHE filing meets the requirements of this chapter, 7heTHE COMMISSIONER shall requiresuchTHE insurer to furnish 8 the information upon which it supportssuchTHE filing andin9such eventthe waiting period shall commence as of the date 10suchTHE information is furnished. The information furnished 11 in support of a filing may include(a)the experience or judg- 12 ment of the insureror rating organizationmaking the filing, 13(b)its interpretation of any statistical data it relies upon, 14(c)the experience of other insurers,or rating15organizations,or(d)any other relevant factors. 16 (3) A filing and any supporting information shall be open to 17 public inspection after the filing becomes effective. 18(4) Specific inland marine rates on risks specially rated,19made by a rating organization, shall be filed with the20commissioner.21 (4)(5) AnEXCEPT FOR FILINGS CONCERNING RATES, AN insurer 22 may satisfy its obligation to makesuchfilings by becoming a 23 member of, or a subscriber to, a licensed rating organization 24whichTHAT makessuchfilings, and by filing with the commis- 25 sioner a copy of its authorization of the rating organization to 26 makesuchfilings on its behalf. Nothing contained in this 03489'01 59 1 chapter shall be construed as requiring any insurer to become a 2 member of or a subscriber to any rating organization. 3 (5) AS A CONDITION OF MAINTAINING ITS CERTIFICATE OF AUTHOR- 4 ITY, AN INSURER SHALL NOT DO ANY OF THE FOLLOWING: 5 (A) HAVE ANY RATES FILED ON ITS BEHALF IN THIS STATE BY A 6 RATING ORGANIZATION. 7 (B) SHARE INFORMATION WITH ANY OTHER INSURER OR RATING 8 ORGANIZATION CONCERNING ESTABLISHING RATES OR RATING SYSTEMS. 9 (C) AGREE WITH ANY OTHER INSURER OR RATING ORGANIZATION TO 10 ADHERE TO OR USE ANY RATE, RATING PLAN, RATING SCHEDULE, RATING 11 RULE, OR UNDERWRITING RULE IN THIS STATE. 12 (D) MAKE AVAILABLE TO ANY OTHER INSURER OR RATING ORGANIZA- 13 TION INFORMATION ON ACTUARIAL PROJECTIONS, TRENDING FACTORS, 14 PROFITS, OR EXPENSES EXCEPT LOSS ADJUSTMENT EXPENSES. 15 Sec. 2608. (1) The commissioner shall review filings as 16 soon as reasonably possible after they have been made in order to 17 determine whether they meet the requirements of this chapter. 18 (2)Subject to the exception specified in subsection (3) of19this section, eachEACH filing shall be on file for a waiting 20 period of 15 days before it becomes effective, which period may 21 be extended by the commissioner for an additional period not to 22 exceed 15 days ifheTHE COMMISSIONER gives written notice 23 withinsuchTHE waiting period to the insurer or rating organi- 24 zationwhichTHAT made the filing that he OR SHE needs such 25 additional time for the consideration ofsuchTHE filing. Upon 26 written application bysuchTHE insurer or rating organization, 27 the commissioner may authorize a filingwhichTHAT he OR SHE 03489'01 60 1 has reviewed to become effective before the expiration of the 2 waiting period or any extensionthereofOF THE WAITING PERIOD. 3 A filing shall bedeemedCONSIDERED to meet the requirements of 4 this chapter unless disapproved by the commissioner within the 5 waiting period or any extensionthereofOF THE WAITING PERIOD. 6(3) Specific inland marine rates on risks specially rated7by a rating organization shall become effective when filed and8shall be deemed to meet the requirements of this chapter until9such time as the commissioner reviews the filing and so long10thereafter as the filing remains in effect.11 Sec. 2616.(1)If within the waiting period or any exten- 12 sionthereofOF THE WAITING PERIOD as provided in section 13 2608(2), the commissioner finds that a filing does not meet the 14 requirements of this chapter, he OR SHE shall send to the insurer 15 or rating organizationwhichTHAT madesuchTHE filing,16 written notice of disapproval ofsuchTHE filing specifying 17therein in what respects he finds suchHOW THE filing fails to 18 meet the requirements of this chapter and stating thatsuchTHE 19 filing shall not become effective. 20(2) If within 30 days after a specific inland marine rate21on a risk specially rated by a rating organization, subject to22section 2608 (3) has become effective, the commissioner finds23that such filing does not meet the requirements of this chapter,24he shall send to the rating organization which made such filing25written notice of disapproval of such filing specifying therein26in what respects he finds that such filing fails to meet the27requirements of this chapter and stating when, within a03489'01 61 1reasonable period thereafter, such filing shall be deemed no2longer effective. Said disapproval shall not affect any contract3made or issued prior to the expiration of the period set forth in4said notice.5 Sec. 2628. (1) In lieu of the filing requirements of this 6 chapter and as an alternative method of filing,anyAN insurer 7or rating organizationmay file with the commissioneranyA 8 manual of classification, rules, or rates, any rating plan and 9 every modification of any of the foregoingwhichTHAT it pro- 10 poses to use, the filing to indicate the character and extent of 11 the coverage contemplated. IN LIEU OF THE FILING REQUIREMENTS OF 12 THIS CHAPTER AND AS AN ALTERNATIVE METHOD OF FILING, A RATING 13 ORGANIZATION MAY FILE WITH THE COMMISSIONER FOR AN INSURER A 14 MANUAL OF CLASSIFICATION, RULES, AND EVERY MODIFICATION OF ANY OF 15 THE FOREGOING, THE FILING TO INDICATE THE CHARACTER AND EXTENT OF 16 THE COVERAGE CONTEMPLATED. Everysuchfiling under this section 17 shall state the effective datethereofOF THE FILING, shall 18 take effect onsaidTHAT date, shall not be subject to any 19 waiting period requirements, and shall bedeemedCONSIDERED to 20 meet the requirements ofsubdivision (d) of subsection (1) of21section 2603 (rate standards)SECTION 2603(1)(D). A filing and 22 any supporting information shall be open to public inspection, if 23 the filing is not disapproved. 24 (2) At any time within 15 days from and after the date of 25any suchA filing UNDER SUBSECTION (1), the commissioner may 26 give written notice to the insureror rating organization27 makingsuchTHE filing, specifying in what respect and to what 03489'01 62 1 extent he OR SHE contendssuchTHE filing fails to comply with 2 the requirements ofsubdivision (d) of subsection (1) of section32603SECTION 2603(1)(D) and fixing a date for hearing not less 4 than 10 days from the date of THE mailing ofsuchTHE notice. 5 AtsuchTHE hearing, the factors specified insubsection (2)6of section 2606SECTION 2606(2) shall be considered. If the 7 commissioner after hearing finds that the filing does not comply 8 with the provisions of this chapter, he OR SHE may issuehisAN 9 order determiningwhereinWHERE and to what extentsuchTHE 10 filing isdeemed to beimproper and fixing a date, 11thereafter,within a reasonable time, after whichsuchTHE 12 filing shall no longer be effective.AnyAN order of disap- 13 proval under this section must be entered within 30 days of the 14 date of the filing affected. 15 (3)In the event that noIF A notice of hearingshall be16 IS NOT issued within 15 days from the date ofany suchA filing 17 UNDER SUBSECTION (1), the filing shall bedeemedCONSIDERED to 18 be approved. IfsuchTHE filingshall beIS disapproved, the 19 insuring provisions ofanyA contract or policy issued prior to 20 the time the order becomes effective shall not be affected. But 21 if the commissioner disapprovessuchTHE filing as not being in 22 compliance withsubdivision (d) of subsection (1) of section232603 (rate standards)SECTION 2603(1)(D), he OR SHE may order an 24 adjustment of the premium to be made with the policyholder either 25 by refund or collection of additional premium, if the amount is 26 substantial and equals or exceeds the cost of making the 27 adjustment. The commissioner may thereafter review any such 03489'01 63 1 filing in the manner provided in sections 2618 and 2620, but if 2 so reviewed, no adjustment of premium may be ordered. 3Subsection (5) of section 2606 (filing may be made by rating4organization), subsection (1) of section 2608 (commissioner shall5review filing as soon as reasonably possible), and 2612 (insurer6must adhere to filing) shall beSECTIONS 2606(4), 2608(1), AND 7 2612 ARE applicable to filings made under this section. 8 Sec. 2630. (1) A corporation, an unincorporated associa- 9 tion, a partnership, or an individual, whether located within or 10 outside this state, maymake application toAPPLY WITH the com- 11 missioner for license as a rating organization to makerates12andinsurance contract forms forsuchTHE kinds of insurance, 13 or subdivision or class of risk or a part or combination thereof 14 as are specified in its application and shall filetherewith15 WITH THE APPLICATION ALL OF THE FOLLOWING: 16 (a) A copy of its constitution, its articles of agreement or 17 association or its certificate of incorporation, andofits 18 bylaws and rules governing the conduct of its business. 19 (b) A list of its members and subscribers. 20 (c) The name and address of a resident of this state upon 21 whom notices or orders of the commissioner or process affecting 22suchTHE rating organization may be served. 23 (d) A statement of its qualifications as a rating 24 organization. 25 (2) If the commissioner finds that the applicant is compe- 26 tent, trustworthy, and otherwise qualified to act as a rating 27 organization and that its constitution, articles of agreement or 03489'01 64 1 association, or certificate of incorporation, and its bylaws and 2 rules governing the conduct of its business conform to the 3 requirements of law, he OR SHE shall issue a license specifying 4 the kinds of insurance, or subdivision or class of risk or part 5 or combination thereof for which the applicant is authorized to 6 act as a rating organization. Everysuch applicationAPPLICANT 7 shall be granted or denied in whole or in part by the commis- 8 sioner within 60 days of the date of its filing withhimTHE 9 COMMISSIONER. 10 (3) Licenses issued pursuant to this section shall remain in 11 effect for 3 years unless sooner suspended or revoked by the 12 commissioner. 13 (4) The fee fortheA licenseshall beUNDER THIS SEC- 14 TION IS $25.00. 15 (5)LicensesA LICENSE issued pursuant to this section may 16 be suspended or revoked by the commissioner, after hearing upon 17 notice,in the eventIF the rating organization ceases to meet 18 the requirements of this section. 19 (6) Every rating organization shall notify the commissioner 20 promptly of every change in ANY OF THE FOLLOWING: 21 (a)itsITS constitution, its articles of agreement or 22 association, or its certificate of incorporation, and its bylaws 23 and rules governing the conduct of its business.,24 (b)itsITS list of members and subscribers.and25 (c)theTHE name and address of the resident of this state 26 designated by it upon whom notices or orders of the commissioner 03489'01 65 1 or process affectingsuchTHE rating organization may be 2 served. 3 Sec. 2636. (1) Subject to REASONABLE rules and regulations 4which have beenapproved by the commissioner,as reasonable,5 each rating organization shall permitanyAN insurer, not a 6 member, to be a subscriber to its rating services for any kind of 7 insurance, subdivision, or class of risk or a part or combination 8 thereof for which it is authorized to act as a rating 9 organization. Notice of proposed changes insuchTHE rules and 10 regulations shall be given to subscribers. Each rating organiza- 11 tion shall furnish itsratingservices without discrimination 12 to its members and subscribers. 13 (2) The reasonableness of any rule or regulation in its 14 application to subscribers, or the refusal of any rating organi- 15 zation to admit an insurer as a subscriber,shall,at the 16 request ofanyA subscriber orany suchinsurer, SHALL be 17 reviewed by the commissioner at a hearing held upon at least 10 18 days' written notice tosuchTHE rating organization and to 19suchTHE subscriber or insurer. If the commissioner finds that 20suchTHE rule or regulation is unreasonable in its application 21 to subscribers, he OR SHE shall order thatsuchTHE rule or 22 regulationshallIS notbeapplicable to subscribers. 23 (3) If the rating organization fails to grant or reject an 24 insurer's application for subscribership within 30 days after it 25 was made, the insurer may request a review by the commissioner as 26 if the application had been rejected. If the commissioner finds 27 that the insurer has been refused admittance to the rating 03489'01 66 1 organization as a subscriber without justification,heTHE 2 COMMISSIONER shall order the rating organization to admit the 3 insurer as a subscriber. IfheTHE COMMISSIONER finds that the 4 action of the rating organization was justified,heTHE 5 COMMISSIONER shall make an order affirming its action. 6 Sec. 2652.Every rating organization and every insurer7which makes its own rates shallEACH INSURER, within a reason- 8 able time after receiving written request therefor and upon pay- 9 ment ofsuchA reasonable charge as it may make, SHALL furnish 10 toanyAN insured affected by a rate made by it, or to the 11 INSURED'S authorized representative,of such insured,all per- 12 tinent information as tosuchTHE rate.Every rating organi-13zation and every insurer which makes its own ratesEACH INSURER 14 shall provide within this state reasonable meanswhereby any15 FOR A person aggrieved by the application ofitsTHE INSURER'S 16 rating systemmayTO be heard, in person or by his OR HER 17 authorized representative, on his OR HER written request to 18 review the manner in whichsuchTHE rating system has been 19 applied in connection with the insurance afforded him OR HER. If 20 therating organization orinsurer fails to grant or reject 21suchTHE request within 30 days after it is made, the applicant 22 may proceed in the same manner as if his OR HER application had 23 been rejected.AnyA party affected by the action ofsuch24rating organization or suchAN insurer on such A request may 25 APPEAL, within 30 days after written notice ofsuchTHE action, 26appealto the commissioner, who, after a hearing held upon not 27 less than 10 days' written notice to the appellant and tosuch03489'01 67 1rating organization orTHE insurer, may affirm or reversesuch2 THE action. 3 Sec. 2654. (1) Every group, association, or other organiza- 4 tion of insurers, whether located within or outside this state, 5whichTHAT assists insurerswhich make their own filings or6rating organizationsin rate making, by the collection and fur- 7 nishing of loss or expense statistics,or by the submission of8recommendations,but which does not make filings under this 9 chapter, shall be known as an advisory organization. 10 (2) Every advisory organization shall file with the 11 commissioner: 12 (a) A copy of its constitution, its articles of agreement or 13 association or its certificate of incorporation, andofits 14 bylaws, rules, and regulations governing its activities.,15 (b) A list of its members.,16 (c) The name and address of a resident of this state upon 17 whom notices or orders of the commissioner or process issued at 18 his OR HER direction may be served., and19 (d) An agreement that the commissioner may examinesuch20 THE advisory organization in accordance with the provisions of 21 section 2662. 22 (3) If, after a hearing, the commissioner finds that the 23 furnishing ofsuchinformation or assistance involves any act 24 or practicewhichTHAT is unfair or unreasonable or otherwise 25 inconsistent with the provisions of this chapter, he OR SHE may 26 issue a written order specifying in what respectssuchTHE act 27 or practice is unfair or unreasonable or otherwise inconsistent 03489'01 68 1 with the provisions of this chapter, and requiring the 2 discontinuance ofsuchTHE act or practice. 3 (4)NoAN insurerwhich makes its own filings nor any4rating organizationshall NOT support its filings by statistics 5or adopt rate making recommendations,furnished to it by an 6 advisory organizationwhichTHAT has not complied with this 7 section or with an order of the commissioner involvingsuchTHE 8 statisticsor recommendationsissued under subsection (3).of9this section.If the commissioner findssuchTHE insureror10rating organizationto be in violation of this subsection, he OR 11 SHE may issue an order requiring the discontinuance ofsuchTHE 12 violation. 13 Sec. 2664. (1) The commissioner shall promulgate reasonable 14 rules and statistical plans, reasonably adapted to each of the 15 rating systems on file with him OR HER, which may be modified 16 from time to time and which shall be used thereafter by each 17 insurer in the recording and reporting of its loss and country- 18 wide expense experience, in order that the experience of all 19 insurers may be made available at least annually in such form and 20 detail as may be necessary to aidhimTHE COMMISSIONER in 21 determining whether rating systems comply with the standards set 22 forth in section 2603.SuchTHE rules and plans may also pro- 23 vide for the recording and reporting of expense experience items 24whichTHAT are specially applicable to this state and are not 25 susceptible of determination by a prorating of countrywide 26 expense experience. In promulgatingsuchrules and plans, the 27 commissioner shall give due consideration to the rating systems 03489'01 69 1 on file with him OR HER and, in order thatsuchTHE rules and 2 plans may be as uniform as is practicable among the several 3 states, to the rules and to the form of the plans used forsuch4 rating systems in other states.NoAN insurer shall NOT be 5 required to record or report its loss experience on a classifica- 6 tion basis that is inconsistent with the rating system filed by 7 it. The commissioner may designate 1 or more rating organiza- 8 tions or other agencies to assist him OR HER in gathering such 9 experience and making compilations thereof, andsuchTHE compi- 10 lations shall be made available, subject to reasonable rules 11 promulgated by the commissioner, to insurers and rating 12 organizations. 13 (2) Reasonable rules and plans may be promulgated by the 14 commissioner for the interchange of data necessary for the appli- 15 cation of rating plans. 16 (3) In order to further uniform administration of rate regu- 17 latory laws, the commissioner andeveryEACH insurerand18rating organizationmay exchange information and experience data 19 with insurance supervisory officials, insurers and rating20organizationsin other states and may consult with them with 21 respect torate making andthe application of rating systems. 22 IN ADDITION, EACH INSURER AND EACH RATING ORGANIZATION MAY 23 EXCHANGE HISTORICAL LOSS DATA. 24 Sec. 2930.(1) The premium for basic property insurance of25any risk by the pool shall be equal to the rate for identical26insurance established by the principal rating organization for27identical insurance within this state plus a uniform surcharge03489'01 70 1approved by the commissioner. (2)The pool shall establish 2 rates for any basic property insurance.which is without rates3established by a principal rating organization or which the pool,4with the approval of the commissioner, determines should be oth-5erwise rated in order to better effectuate the purposes of this6chapter.The pool shall file with the commissioner for his or 7 her approval each rate and each policy form to be issued by it. 8 The pool, acting as agent for participating members, shall file 9 policy forms for basic property insurance to be issued by partic- 10 ipating members under the provisions of this chapter. Rates and 11 policy forms shall be filed in accordance with such provisions of 12 this chapter as the commissioner designates. 13 Sec. 3020. (1) A policy of casualty insurance, except 14 worker's compensation and mortgage guaranty insurance, including 15 all classes of motor vehicle coverage, shall not be issued or 16 delivered in this state by an insurer authorized to do business 17 in this state for which a premium or advance assessment is 18 charged, unless the policy contains the following provisions: 19 (a) That the policy may be canceled at any time at the 20 request of the insured, in which case the insurer shall refund 21 the excess of paid premium or assessment above the pro rata rates 22 for the expired time, except as otherwise provided in subsections 23 (2), (3), and (4). 24 (b) That the policy may be canceled at any time by the 25 insurer by mailing to the insured at the insured's address last 26 known to the insurer or an authorized agent of the insurer, with 27 postage fully prepaid, a not less than 10 days' written notice of 03489'01 71 1 cancellation with or without tender of the excess of paid premium 2 or assessment above the pro rata premium for the expired time. 3 (c) That the minimum earned premium on any policy canceled 4 pursuant to this subsection, other than automobile insurance as 5 defined in section 2102(2)(a) and (b), shall not be less than the 6 pro rata premium for the expired time or $25.00, whichever is 7 greater. 8 (2) An insurer may file a rule with the commissioner provid- 9 ing for a minimum retention of premium for automobile insurance 10 as defined in section 2102(2)(a) and (b). The rule shall 11 describe the circumstances under which the retention is applied 12 and shall set forth the amount to be retained, which is subject 13 to the approval of the commissioner. The rule shall include, but 14 need not be limited to, the following provisions: 15 (a) That a minimum retention shall be applied only when the 16 amount exceeds the amount that would have been retained had the 17 policy been canceled on a pro rata basis. 18 (b) That a minimum retention does not apply to renewal 19 policies. 20 (c) That a minimum retention does not apply when a policy is 21 canceled for the following reasons: 22 (i) The insured is no longer required to maintain security 23 pursuant to section 3101(1). 24 (ii) The insured has replaced the automobile insurance 25 policy being canceled with an automobile insurance policy from 26 another insurer and provides proof of the replacement coverage to 27 the canceling insurer. 03489'01 72 1 (3) Notwithstanding subsection (1), an insurer may issue a 2 noncancelable, nonrefundable, 6-month prepaid automobile insur- 3 ance policy in order for an insured to meet the registration 4 requirements of section 227a of the Michigan vehicle code, 1949 5 PA 300, MCL 257.227a. 6 (4) An insurer may provide for a short rate premium for 7 insurance on a motorcycle, watercraft, off-road vehicle, or 8 snowmobile. As used in this subsection: 9 (a) "Motorcycle" means that term as defined in section 10 3101. 11 (b) "Off-road vehicle" means an ORV as defined in section 12 81101 of the natural resources and environmental protection act, 13 1994 PA 451, MCL 324.81101. 14 (c) "Snowmobile" means that term as defined in section 82101 15 of the natural resources and environmental protection act, 1994 16 PA 451, MCL 324.82101. 17 (d) "Watercraft" means that term as defined in section 80301 18 of the natural resources and environmental protection act, 1994 19 PA 451, MCL 324.80301. 20 (5) Cancellation SHALL NOT BE EFFECTIVE UNTIL AFTER THE 21 NOTICE as prescribed in this sectionisHAS EXPIRED, AND THE 22 CANCELLATION SHALL BE without prejudice to any claim originating 23 before the cancellation. The mailing of notice is prima facie 24 proof of notice. Delivery of written notice is equivalent to 25 mailing. 26 (6) A notice of cancellation, including a cancellation 27 notice under section 3224, shall be accompanied by a statement 03489'01 73 1 that the insured shall not operate or permit the operation of the 2 vehicle to which notice of cancellation is applicable, or operate 3 any other vehicle, unless the vehicle is insured as required by 4 law. 5 (7) An insurer who wishes to provide for a short rate pre- 6 mium under subsection (4) shall file with the commissioner pursu- 7 ant to chapter 24 or 26 a rule establishing a short rate 8 premium. The rule shall describe the circumstances under which 9 the short rate is applied and shall set forth the amount or per- 10 centage to be retained. 11 SEC. 3105A. AN INSURER LIABLE TO PAY PERSONAL PROTECTION 12 INSURANCE BENEFITS UNDER THIS CHAPTER HAS A DUTY TO DEAL FAIRLY 13 AND IN GOOD FAITH WITH ITS INSURED, ANY PERSON ENTITLED TO 14 RECEIVE PERSONAL PROTECTION INSURANCE BENEFITS UNDER A POLICY 15 ISSUED TO ITS INSURED, OR ANY PERSON ENTITLED TO RECEIVE PERSONAL 16 PROTECTION INSURANCE BENEFITS FROM THE INSURER UNDER THE PROVI- 17 SIONS OF THIS CHAPTER. THE DUTY IMPOSED BY THIS SECTION IS 18 DEEMED TO INVOLVE MATTERS OF MENTAL CONCERN AND SOLICITUDE. A 19 BREACH OF THE DUTY TO DEAL FAIRLY AND IN GOOD FAITH SUBJECTS THE 20 INSURER TO LIABILITY IN TORT FOR ANY DAMAGES PROXIMATELY ARISING 21 THEREFROM AND FOR PUNITIVE DAMAGES. 22 Sec. 3321. The facility shall provide, with respect to all 23 automobiles not included in section 3320: 24 (a) Only the insurance required by law or required by the 25 commissioner.of insurance.The commissioner may only require 26 insurance for which a rate has been filed by aninsurance rating27organization orinsurer,andwhich rate is in effect, and 03489'01 74 1 which the commissioner finds, after a public hearing, to be 2 reasonable, necessary, and in the public interest. The temporary 3 provision of insurance may be required pending the public hearing 4 if the commissioner determines it necessary to do so. 5 (b) The equitable distribution of applicants to participat- 6 ing members in accordance with the participation ratios defined 7 in section 3303. 8 Sec. 3340. (1) As agent for participating members, the 9 facility shall file with the commissioner every manual of classi- 10 fication, every manual of rules and rates, every rating plan, and 11 every modification of a manual of classification, manual of rules 12 and rates, or rating plan proposed for use for private passenger 13 nonfleet automobile insurance placed through the facility. The 14 facility may incorporate by reference in its filings other mate- 15 rial on file with the commissioner. The classifications, rules, 16 and rates and any amendmentsthereof shall beTO THE CLASSIFI- 17 CATIONS, RULES, AND RATES ARE subject to prior written approval 18 by the commissioner. Except as provided in this chapter, rates 19 filed by the facility for private passenger nonfleet automobile 20 insurance shall be in accordance with chapter 21 and rates by the 21 facility for all other automobile insurance shall be filed in 22 accordance with chapter 24. 23 (2) Every participating member designated to act on behalf 24 of the facilityshall beIS authorized to use the rates and 25 rules approved by the commissioner for use by the facility on 26 business placed through the facility and shall not use other 27 rates for automobile insurance placed through the facility. 03489'01 75 1 (3) Laws relating to rating organizations or advisory 2 organizationsshallDO not apply to functions provided for 3 under this section. 4 (4) Private passenger nonfleet automobile rates for the 5 facility shall comply with the following requirements: 6(a) The territories for the facility shall be defined as7those of the principal rating organization for the voluntary8market.9 (A)(b)The base rates for the facility shall be derived 10 from the weighted average of the base rates currently chargedin11each facility territoryby the 5 largest insurer groups, deter- 12 mined by voluntary net direct automobile insurance car years 13 written in the state for the calendar year ending December 31 of 14 the second prior year as reported to the statistical agent. 15(c) The base rates as determined in subdivision (b) in each16facility territory shall be modified as follows:17(i) One hundred percent of the weighted average in each ter-18ritory in the highest rated territory or territories in the state19within a single political subdivision.20(ii) From 105% to 125% of the weighted average for all other21facility territories, with the highest rated such territories22receiving the lowest surcharge and increasing to the highest sur-23charge in the lowest rated facility territories in 5 percentage24point increments. In no event, however, shall any such rate25exceed the rate established in subdivision (i).26 (B)(d)The facility shall adjust its rates at least once 27 each year or whenever changes in private competitive insurance 03489'01 76 1 market rate levels would produce a change in excess of 5% in the 2 facility rate.for any facility territory.However, changes 3 shall not be made more often than quarterly. 4 (C)(e) In the event thatIF underwriting losses and 5 administrative expenses resulting from the operation of the 6 facility at rates established pursuant to this subsection would 7 exceed an amount equal to 5% of the net direct private passenger 8 nonfleet automobile premiums for this state,thelevels 9specified in subdivision (c)(i) and (ii)shall be proportion- 10 ately increased in an amount to produce underwriting losses and 11 administrative expenses that do not exceed 5%. 12 Enacting section 1. Sections 122, 2131, 2446, and 2640 of 13 the insurance code of 1956, 1956 PA 218, MCL 500.122, 500.2131, 14 500.2446, and 500.2640, are repealed. 15 Enacting section 2. (1) The legislature finds that there 16 exists in this state an emergency for a significant number of 17 citizens who are obligated under law to purchase automobile 18 insurance that has become unaffordable and unavailable. A sub- 19 stantial number of urban registered vehicles are now without 20 automobile insurance coverage. While a vehicle is often a neces- 21 sity for employment and other essential daily activities, citi- 22 zens who drive automobiles without insurance coverage violate 23 criminal law regardless of the fact that for a substantial number 24 of those citizens it is impossible to obtain automobile insurance 25 due to the unaffordability and the unequal availability of that 26 insurance. The affordability and equal availability of 27 automobile insurance is essential to the preservation of the 03489'01 77 1 state's interest in providing that its citizens obtain automobile 2 insurance coverage under the state's compulsory automobile insur- 3 ance laws. In many areas of the state, insurers are charging in 4 a subjective and discriminatory manner unreasonable amounts for 5 coverage. In addition, the automobile insurance market structure 6 has not resulted in promoting reasonable competition among insur- 7 ers, and this has further contributed to the unaffordability and 8 unavailability of automobile insurance. Five automobile insur- 9 ance insurers control over 60% of the entire state automobile 10 insurance market with 1 of those insurers controlling 23% of the 11 market. 12 (2) It is the purpose of this amendatory act to preserve the 13 state's interest in providing its citizens with automobile insur- 14 ance coverage by relieving the emergency condition of unafford- 15 able and unequally available automobile insurance; to provide 16 more stringent regulation of automobile insurance rate-making and 17 underwriting and to eliminate and prevent arbitrary and discrim- 18 inatory practices in automobile insurance marketing, rate-making, 19 and underwriting; to monitor the level of competition in the 20 automobile insurance market and to enable corrective measures 21 when necessary to create a healthy, competitive market for auto- 22 mobile insurance; to examine loss prevention systems, controls, 23 and costs; to ensure that automobile insurance prices reflect the 24 actual costs of claims and reasonable expenses; and to eliminate 25 injustices that have resulted from the compulsory automobile 26 insurance system. 03489'01 Final page. 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