SENATE BILL No. 226

 

 

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.