January 22, 2008, Introduced by Senators GLEASON, JACOBS, CLARK-COLEMAN, ANDERSON, BRATER, THOMAS, SCHAUER, SWITALSKI, BASHAM, HUNTER, SCOTT, CHERRY 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 2603 (MCL 500.2603).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2603. (1) All rates shall be made in accordance with the
following provisions:
(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; and to
all other relevant factors within and outside this state. In the
case of fire insurance rates, consideration also shall be given to
the experience of the fire insurance business during a period of
not less than the most recent 5-year period for which that
experience is available.
(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 which 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.
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 the
insurance through ordinary methods. 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. 1025.