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HB-4993, As Passed House, April 16, 2008

SUBSTITUTE FOR

HOUSE BILL NO. 4993

A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending sections 2106, 2108, 2109, 2110, 2114, and 2127 (MCL

500.2106, 500.2108, 500.2109, 500.2110, 500.2114, and 500.2127) and

by adding section 2109a.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 2106. Except as specifically provided in this chapter,

the provisions of chapter 24 and chapter 26 ~~shall~~ do not apply to

automobile insurance and home insurance. An Until January 1, 2009,

an insurer may use rates for automobile insurance or home insurance

as soon as those rates are filed. Beginning January 1, 2009,

automobile insurance rates are subject to section 2109a. To the

extent that other provisions of this ~~code~~ act are inconsistent with

the provisions of this chapter, this chapter ~~shall govern~~ governs

with respect to automobile insurance and home insurance.

Sec. 2108. (1) ~~On the effective date thereof, each~~ Each

insurer shall file with the commissioner every manual of

classification, every manual of rules and rates, every rating plan,

and every modification of a manual of classification, manual of

rules and rates, or a rating plan ~~which~~ that it proposes to use for

automobile insurance and home insurance. Each filing shall state

the character and extent of the coverage contemplated. Each insurer

subject to this chapter who maintains rates in any part of this

state shall at all times maintain rates in effect for all eligible

persons meeting the underwriting criteria of the insurer.

(2) An insurer may satisfy its obligation to make filings

under subsection (1) by becoming a member of, or a subscriber to, a

rating organization licensed under chapter 24 or chapter 26 which

makes those filings, and by filing with the commissioner a copy of

its authorization of the rating organization to make those filings

on its behalf. Nothing contained in this chapter shall be construed

as requiring any insurer to become a member of or a subscriber to

any rating organization. Insurers may file and use deviations from

filings made on their behalf, which deviations shall be subject to

the provisions of this chapter.

(3) Each filing shall be accompanied by a certification by or

on behalf of the insurer that, to the best of its information and

belief, the filing conforms to the requirements of this chapter.

(4) Each filing shall include information that supports the

filing with respect to the requirements of ~~section~~ sections 2109

and 2109a. The information may include 1 or more of the following:

(a) The experience or judgment of the insurer or rating

organization making the filing.

(b) The interpretation of the insurer or rating organization

of any statistical data it relies upon.

(d) Any other relevant information.

(5) A filing and any accompanying information shall be open to

public inspection upon filing.

(6) An insurer shall not make, issue, or renew a contract or

policy except in accordance with filings ~~which~~ that are in effect

for the insurer pursuant to this chapter.

Sec. 2109. (1) All rates for automobile insurance and home

insurance shall be made in accordance with the following

provisions:

(a) Rates shall not be excessive, inadequate, or unfairly

discriminatory. A rate shall not be held to be excessive unless the

rate is unreasonably high for the insurance coverage provided and a

reasonable degree of competition does not exist for the insurance

to which the rate is applicable. Effective January 1, 2009,

automobile insurance rates are also subject to section 2109a.

(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.

relation to another rate for the same coverage if the differential

between the rates is not reasonably justified by differences in

losses, expenses, or both, or by differences in the uncertainty of

loss, for the individuals or risks to which the rates apply. A

reasonable justification shall be supported by a reasonable

classification system; by sound actuarial principles when

applicable; and by actual and credible loss and expense statistics

or, in the case of new coverages and classifications, by reasonably

anticipated loss and expense experience. A rate is not unfairly

discriminatory because it reflects differences in expenses for

individuals or risks with similar anticipated losses, or because it

reflects differences in losses for individuals or risks with

similar expenses.

(2) A determination concerning the existence of a reasonable

degree of competition with respect to subsection (1)(a) shall take

into account a reasonable spectrum of relevant economic tests,

including the number of insurers actively engaged in writing the

insurance in question, the present availability of such insurance

compared to its availability in comparable past periods, the

underwriting return of that insurance over a period of time

sufficient to assure reliability in relation to the risk associated

with that insurance, and the difficulty encountered by new insurers

in entering the market in order to compete for the writing of that

insurance.

Sec. 2109a. (1) Each insurer authorized to transact automobile

insurance in this state shall file with the commissioner annually

on a date to be determined by the commissioner all of the following

information:

(a) The total number of new claims that were submitted to the

insurer within the last 1-year period in each of the following

categories:

(i) Claims for personal protection insurance benefits.

(ii) Claims for property protection insurance benefits.

(iii) Claims for residual bodily injury damages.

(iv) Claims for uninsured motorist benefits.

(v) Claims for underinsured motorist benefits.

(vi) Claims for collision and comprehensive insurance benefits.

(b) For each category of claims under subdivision (a), the

insurer shall also disclose the total amount paid by the insurer.

If any portion of the amount paid by the insurer was reimbursed by

the catastrophic claims association or other sources, those

reimbursements shall be reported by the insurer and then the total

net payments made by the insurer for each category under

subdivision (a) shall be stated.

year period on claims that were submitted to the insurer prior to

the last 1-year period in each of the following categories:

(i) Claims for personal protection insurance benefits.

(ii) Claims for property protection insurance benefits.

(iii) Claims for residual bodily injury damages.

(iv) Claims for uninsured motorist benefits.

(v) Claims for underinsured motorist benefits.

(vi) Claims for collision and comprehensive insurance benefits.

(d) For each category of claims under subdivision (c), the

insurer shall disclose the total number of claims and the total

amount paid by the insurer. If any portion of the amount paid by

the insurer was reimbursed by the catastrophic claims association

or other sources, those reimbursements shall be reported by the

insurer and then the total net payments made by the insurer for

each category under subdivision (c) shall be stated.

(e) The total number of new lawsuits that were filed against

the insurer or the insured within the last 1-year period in each of

the following categories:

(i) Claims for personal protection insurance benefits.

(ii) Claims for property protection insurance benefits.

(iii) Claims for residual bodily injury damages.

(iv) Claims for uninsured motorist benefits.

(v) Claims for underinsured motorist benefits.

(vi) Claims for collision and comprehensive insurance benefits.

(f) For each category of claims under subdivision (e), the

insurer shall also disclose the total amount paid by the insurer to

settle or otherwise resolve those lawsuits as well as the total

amount paid by the insurer to defend those lawsuits. If any portion

of the amount paid by the insurer was reimbursed by the

catastrophic claims association or other sources, those

reimbursements shall be reported by the insurer and then the total

net payments made by the insurer for each category under

subdivision (e) shall be stated.

(g) The total amount paid by the insurer during the last 1-

year period to settle or otherwise resolve lawsuits that were filed

against the insurer or the insured prior to the last 1-year period

in each of the following categories:

(i) Claims for personal protection insurance benefits.

(ii) Claims for property protection insurance benefits.

(iii) Claims for residual bodily injury damages.

(iv) Claims for uninsured motorist benefits.

(v) Claims for underinsured motorist benefits.

(vi) Claims for collision and comprehensive insurance benefits.

(h) For each category of claims under subdivision (g), the

insurer shall also disclose the total number of claims and the

total amount paid by the insurer to settle or otherwise resolve

those lawsuits, as well as the total amount paid by the insurer to

defend those lawsuits. If any portion of the amount paid by the

insurer was reimbursed by the catastrophic claims association or

other sources, those reimbursements shall be reported by the

insurer and then the total net payments made by the insurer for

each category under subdivision (g) shall be stated.

(i) The total premiums collected by the insurer during the

last 1-year period for each of the following coverages:

(i) The total premiums collected for personal protection

insurance benefits.

(ii) The total premiums collected for property protection

insurance benefits.

(iii) The total premiums collected for residual liability

insurance coverage.

(iv) The total premiums collected for collision and

comprehensive coverage.

(v) The total premiums collected for uninsured motorist

coverage.

(vi) The total premiums collected for underinsured motorist

coverage.

(j) The insurer's total net profit for its most recent fiscal

year.

(2) All information disclosed and filed with the commissioner

or required by subsection (1) shall be considered public

information and shall be made available by the commissioner for

inspection or photocopying by any person requesting the

information, subject to reasonable charges and reasonable

conditions established by the commissioner for the release of this

information.

(3) An insurer authorized to transact automobile insurance in

this state shall not increase the base rates the insurer charges

for personal protection insurance benefits, property protection

insurance benefits, or residual liability insurance coverages,

unless the insurer first does each of the following:

(a) The insurer files all disclosures required by subsection

(1) and gives notice to the public of its proposed base rate

increases pursuant to procedures established by the commissioner.

(b) The insurer justifies the rate increase by submitting a

report entitled "Rate Increase Analysis" which sets forth, in plain

language, all reasons for the rate increase, reliable actuarial

support for the rate increase, and any other documentation

justifying the rate increase.

(4) An insurer may, 90 days after submitting the filings,

disclosures, and other information required by subsections (1) and

(3), increase its rates for personal protection insurance benefits,

property protection insurance benefits, and residual liability

insurance, unless, during that 90-day period, 1 or more of the

following events occur:

(a) The commissioner challenges the proposed rate increase.

(b) A challenge to the proposed rate increase has been filed

by an interested person with the commissioner, pursuant to rate

challenge procedures established by the commissioner.

(5) If the commissioner or an interested person files a

challenge to an insurer's proposed rate increase, the commissioner

shall convene a public, contested hearing, pursuant to rules and

procedures promulgated by the commissioner pursuant to the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328, and shall, after the hearing, approve the proposed rate

increase if the commissioner finds that the proposed rate increase

is fair and equitable in light of the compulsory insurance system

established by this act and the constitutional due process

protections that are inherent in and applicable to the compulsory

insurance system established by this act.

Sec. 2110. (1) In developing and evaluating rates pursuant to

the standards prescribed in ~~section~~ sections 2109 and 2109a, due

consideration shall be given to past and prospective loss

experience within and outside this state, to catastrophe hazards,

if any; to a reasonable margin for underwriting profit and

contingencies; to dividends, savings, or unabsorbed premium

deposits allowed or returned by insurers to their policyholders,

members, or subscribers; to past and prospective expenses, both

countrywide and those specially applicable to this state exclusive

of assessments under this ~~code~~ act; to assessments under this ~~code~~

act; to underwriting practice and judgment; and to all other

relevant factors within and outside this state.

(2) The systems of expense provisions included in the rates

for use by any insurer or group of insurers may differ from those

of other insurers or groups of insurers to reflect the requirements

of the operating methods of the insurer or group with respect to

any kind of insurance, or with respect to any subdivision or

combination thereof for which subdivision or combination separate

expense provisions are applicable.

(3) Risks may be grouped by classifications for the

establishment of rates and minimum premiums. The classifications

may measure differences in losses, expenses, or both.

Sec. 2114. (1) A person or organization aggrieved with respect

to any filing ~~which~~ that is in effect and ~~which~~ that affects the

person or organization may make written application to the

commissioner for a hearing on the filing. However, the insurer or

rating organization ~~which~~ that made the filing shall not be

authorized to proceed under this subsection. The application shall

specify the grounds to be relied upon by the applicant. If the

commissioner finds that the application is made in good faith, that

the applicant would be so aggrieved if the grounds specified are

established, or that the grounds specified otherwise justify

holding a hearing, the commissioner, not more than 30 days after

receipt of the application, shall hold a hearing in accordance with

~~Act No. 306 of the Public Acts of 1969, as amended~~ the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328, upon not less than 10 days' written notice to the

applicant, the insurer, and the rating organization which made the

filing.

(2) If after hearing initiated under subsection (1) or upon

the commissioner's own motion pursuant to ~~Act No. 306 of the Public~~

~~Acts of 1969, as amended~~ the administrative procedures act of 1969,

1969 PA 306, MCL 24.201 to 24.328, the commissioner finds that a

filing does not meet the requirements of sections 2109, 2109a, and

2111, the commissioner shall issue an order stating the specific

reasons for that finding. The order shall state when, within a

reasonable time after issuance of the order, the filing shall be

considered no longer effective. A copy of the order shall be sent

to the applicant, if any, and to each insurer and rating

organization subject to the order. The order shall not affect a

contract or policy made or issued before the date the filing

becomes ineffective, as indicated in the commissioner's order.

Sec. 2127. The commissioner may by rule prospectively require

insurers, rating organizations, and advisory organizations to

collect and report data ~~only~~ to the extent necessary to monitor and

evaluate the automobile and home insurance markets in this state.

The commissioner shall authorize the use of sampling techniques in

each instance where sampling is practicable and consistent with the

purposes for which the data, by county, are to be collected and