February 27, 2013, Introduced by Senator SMITH and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending section 2109 (MCL 500.2109).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec.
2109. (1) All rates for automobile insurance and home
insurance to which this chapter applies shall be made in accordance
with
the following: provisions:
(a)
Rates A rate shall not be excessive, inadequate, or
unfairly discriminatory. A rate shall not be held to be excessive
unless the rate is unreasonably high for the insurance coverage
provided and a reasonable degree of competition does not exist for
the insurance to which the rate is applicable.
(b) A rate shall not be held to be inadequate unless the rate
is unreasonably low for the insurance coverage provided and the
continued use of the rate endangers the solvency of the insurer; or
unless the rate is unreasonably low for the insurance provided and
the use of the rate has or will have the effect of destroying
competition among insurers, creating a monopoly, or causing a kind
of insurance to be unavailable to a significant number of
applicants who are in good faith entitled to procure that insurance
through ordinary methods.
(c) A rate for a coverage is unfairly discriminatory in
relation to another rate for the same coverage if the differential
between the rates is not reasonably justified by differences in
losses, expenses, or both, or by differences in the uncertainty of
loss,
for the individuals or risks to which the rates apply. A To
be
held reasonable under this subdivision, a justification shall
must be supported by a reasonable classification system; by sound
actuarial
principles when if applicable; and by actual and credible
loss
and expense statistics or, in the case of for new coverages
and classifications, by reasonably anticipated loss and expense
experience. A rate is not unfairly discriminatory under this
subdivision because it reflects differences in expenses for
individuals or risks with similar anticipated losses, or because it
reflects differences in losses for individuals or risks with
similar expenses.
(2) A determination concerning the existence of a reasonable
degree
of competition with respect to under
subsection (1)(a) shall
must take into account a reasonable spectrum of relevant economic
tests, including the number of insurers actively engaged in writing
the
insurance in question, the present availability of such the
insurance compared to its availability in comparable past periods,
the
underwriting return of that the
insurance over a period of time
sufficient to assure reliability in relation to the risk associated
with
that the insurance, and the difficulty encountered by new
insurers
in entering the market in order to compete for the writing
of
that the insurance.
(3) All rates for automobile insurance to which this chapter
applies shall be made in accordance with the following:
(a) A rate shall not be excessive. A rate is excessive if it
is likely to produce a profit that is unreasonably high in relation
to the risk involved or if the cost of the insurance is
unreasonably high in relation to services rendered.
(b) A rate shall not be inadequate. A rate is inadequate if
either of the following applies:
(i) The rate is clearly insufficient, when combined with the
investment income attributable to the rate, to sustain projected
losses and expense.
(ii) As to the premium charged to a risk, discounts or credits
are allowed that exceed a reasonable reflection of expense savings
and reasonably expected loss experience from the risk.
(c) A rate shall not be unfairly discriminatory. A rate is
unfairly discriminatory as to a risk if the application of premium
discounts, credits, or surcharges to the risk does not bear a
reasonable relationship to the expected loss and expense
experience.