January 22, 2008, Introduced by Senators BRATER, JACOBS, CLARK-COLEMAN, ANDERSON, THOMAS, GLEASON, SCHAUER, SWITALSKI, BASHAM, HUNTER, CHERRY, SCOTT and CLARKE and referred to the Committee on Economic Development and Regulatory Reform.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending section 2403 (MCL 500.2403), as amended by 1993 PA 200.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2403. (1) All rates shall be made in accordance with this
section and all of the following:
(a) Due consideration shall be given to past and prospective
loss experience within and outside this state; to catastrophe
hazards; 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; to
underwriting practice, judgment, and to all other relevant factors
within and outside this state. For worker's compensation insurance,
in determining the reasonableness of the margin for underwriting
profit and contingencies, consideration shall be given to all
after-tax investment profit or loss from unearned premium and loss
reserves attributable to worker's compensation insurance, as well
as the factors used to determine the amount of reserves. For all
other kinds of insurance to which this chapter applies, all factors
to which due consideration is given under this subdivision shall be
treated in a manner consistent with the laws of this state that
existed on December 28, 1981.
(b) 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.
(c) Risks may be grouped by classifications for the
establishment of rates and minimum premiums. Classification rates
may be modified to produce rates for individual risks in accordance
with rating plans that measure variations in hazards, expense
provisions, or both. The rating plans may measure any differences
among risks that may have a probable effect upon losses or expenses
as provided for in subdivision (a).
(d) 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 with respect to
the
classification, kind, or type of risks to which the rate is
applicable.
Except as otherwise provided in
this subdivision, 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 coverage
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 the
insurance through ordinary methods. For commercial liability
insurance a rate shall not be held to be inadequate unless the
rate, after consideration of investment income and marketing
programs and underwriting programs, is unreasonably low for the
insurance coverage provided and is insufficient to sustain
projected losses and expenses; or unless the rate is unreasonably
low for the insurance coverage 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 the insurance through ordinary methods.
As used in this subdivision, "commercial liability insurance" means
insurance that provides indemnification for commercial, industrial,
professional, or business liabilities. For worker's compensation
insurance provided by an insurer that is controlled by a nonprofit
health care corporation formed pursuant to the nonprofit health
care
corporation reform act, Act No. 350 of the Public Acts of
1980,
being sections 550.1101 to 550.1704 of the Michigan Compiled
Laws
1980 PA 350, MCL 550.1101 to
550.1704, a rate shall not be
held to be inadequate unless the rate is unreasonably low for the
insurance coverage provided. A rate for a coverage is unfairly
discriminatory in relation to another rate for the same coverage,
if the differential between the rates is not reasonably justified
by differences in losses, expenses, or both, or by differences in
the uncertainty of loss for the individuals or risks to which the
rates apply. A reasonable justification shall be supported by a
reasonable classification system; by sound actuarial principles
when applicable; and by actual and credible loss and expense
statistics or, in the case of new coverages and classifications, by
reasonably anticipated loss and expense experience. A rate is not
unfairly discriminatory because the rate reflects differences in
expenses for individuals or risks with similar anticipated losses,
or because the rate reflects differences in losses for individuals
or risks with similar expenses. Rates are not unfairly
discriminatory if they are averaged broadly among persons insured
on a group, franchise, blanket policy, or similar basis.
(2) Except to the extent necessary to meet the provisions of
subsection (1)(d), uniformity among insurers in any matters within
the scope of this section is neither required nor prohibited.
Enacting section 1. This amendatory act does not take effect
unless all of the following bills of the 94th Legislature are
enacted into law:
(a) Senate Bill No. 1023.
(b) Senate Bill No. 1024.
(c) Senate Bill No. 1026.