SB-1305, As Passed Senate, November 29, 2012
SENATE BILL NO. 1305
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 2110a, 2111, 2117, 2119, and 2121 (MCL
500.2110a, 500.2111, 500.2117, 500.2119, and 500.2121), section
2110a as added by 1996 PA 514, sections 2111, 2117, and 2121 as
amended by 2002 PA 492, and section 2119 as amended by 1980 PA 461.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2110a. If uniformly applied to all its insureds, an
establish and maintain a premium discount plan utilizing
use factors in addition to those permitted by section
2111 for insurance if the plan is consistent with the purposes of
this act and reflects reasonably anticipated reductions or
increases in losses or expenses. This section does not affect
or obligations required under chapter 31.
Nothing in this
authorizes does not authorize an insurer to offer or
prohibit an insurer from offering premium discount plans
concerning any of the following:
(a) Health care services, health care providers, or health
(b) Automobile repair providers.
(c) Materials used in the repair of an automobile.
2111. (1) Notwithstanding any provision of this act
or this chapter to the contrary, classifications and territorial
rates used by
any an insurer in this state with respect to
automobile insurance or home insurance shall conform to the
applicable requirements of this section.
pursuant to under this section
automobile insurance shall be based only
upon on 1
or more of
the following factors, which shall be applied by an insurer on a
the this state:
(a) With respect to all automobile insurance coverages:
(i) Either the age of the driver; the length of driving
experience; or the number of years licensed to operate a motor
(ii) Driver primacy, based
upon on the
proportionate use of
each vehicle insured under the policy by individual drivers insured
or to be insured under the policy.
(iii) Average miles driven weekly, annually, or both.
(iv) Type of use, such as business, farm, or pleasure use.
(v) Vehicle characteristics, features, and options, such as
engine displacement, ability of the vehicle and its equipment to
protect passengers from injury, and other similar items, including
vehicle make and model.
(vi) Daily or weekly commuting mileage.
(vii) Number of cars insured by the insurer or number of
licensed operators in the household. However, number of licensed
operators shall not be used as an indirect measure of marital
(viii) Amount of insurance.
(b) In addition to the factors prescribed in subdivision (a),
with respect to personal protection insurance coverage:
(i) Earned income.
(ii) Number of dependents of income earners insured under the
(iii) Coordination of benefits.
(iv) Use of a safety belt.
(c) In addition to the factors prescribed in subdivision (a),
with respect to collision and comprehensive coverages:
(i) The anticipated cost of vehicle repairs or replacement,
which may be measured by age, price, cost new, or value of the
insured automobile, and other factors directly relating to that
(ii) Vehicle make and model.
(iii) Vehicle design characteristics related to vehicle
(iv) Vehicle characteristics relating to automobile theft
(d) With respect to all automobile insurance coverage other
than comprehensive, successful completion by the individual driver
or drivers insured under the policy of an accident prevention
education course that meets the following criteria:
(i) The course shall include a minimum of 8 hours of classroom
(ii) The course shall include, but not be limited to, a review
of all of the following:
(A) The effects of aging on driving behavior.
(B) The shapes, colors, and types of road signs.
(C) The effects of alcohol and medication on driving.
(D) The laws relating to the proper use of a motor vehicle.
(E) Accident prevention measures.
(F) The benefits of safety belts and child restraints.
(G) Major driving hazards.
(H) Interaction with other highway users, such as
motorcyclists, bicyclists, and pedestrians.
(3) Each insurer shall establish a secondary or merit rating
plan for automobile insurance, other than comprehensive coverage. A
secondary or merit rating plan required under this subsection shall
provide for premium surcharges for any or all coverages for
automobile insurance, other than comprehensive coverage, based upon
any or all of the following, when that information becomes
available to the insurer:
(a) Substantially at-fault accidents.
(b) Convictions for, determinations of responsibility for
civil infractions for, or findings of responsibility in probate
for civil infractions for
under chapter VI of
the Michigan vehicle code, 1949 PA 300, MCL 257.601 to 257.750.
beginning 90 days after the effective date of this sentence,
an insured shall not be merit rated
for a civil
infraction under chapter VI of the Michigan vehicle code, 1949 PA
300, MCL 257.601 to 257.750, for a period of time longer than that
which the secretary of state's office carries points for that
infraction on the insured's motor vehicle record.
(4) An insurer shall not establish or maintain rates or rating
for automobile insurance based
upon on sex or
(5) Notwithstanding other provisions of this chapter,
automobile insurance risks may be grouped by territory.
shall does not be construed as limiting limit
insurers or rating organizations from establishing and maintaining
reporting territories. This section
shall does not be construed
to prohibit an insurer from
establishing or maintaining,
for automobile insurance, a premium discount plan for senior
citizens in this state who are 65 years of age or older, if the
plan is uniformly applied by the insurer throughout this state. If
an insurer has not established and maintained a premium discount
plan for senior citizens, the insurer shall offer reduced premium
rates to senior citizens in this state who are 65 years of age or
older and who drive less than 3,000 miles per year, regardless of
pursuant to under this section
for home insurance other than inland marine insurance provided by
floaters or endorsements shall be based only
upon on 1
more of the following factors:
(a) Amount and types of coverage.
(b) Security and safety devices, including locks, smoke
detectors, and similar, related devices.
(c) Repairable structural defects reasonably related to risk.
(d) Fire protection class.
(e) Construction of structure, based on structure size,
building material components, and number of units.
Loss experience of the insured, based
upon on prior
attributable to factors under the control of the insured that have
been paid by an insurer. An insured's failure, after written notice
from the insurer, to correct a physical condition that presents a
risk of repeated loss shall be considered a factor under the
control of the insured for purposes of this subdivision.
(g) Use of smoking materials within the structure.
(h) Distance of the structure from a fire hydrant.
(i) Availability of law enforcement or crime prevention
(8) Notwithstanding other provisions of this chapter, home
insurance risks may be grouped by territory.
An insurer may utilize factors in addition to those specified
in this section, if the commissioner finds, after a hearing
held pursuant to the administrative procedures act of 1969, 1969
PA 306, MCL 24.201 to 24.328, that the factors would encourage innovation,
would encourage insureds to minimize the risks of loss from
hazards insured against, and would be consistent with the purposes
of this chapter.
(9) An insurer may use factors in addition to those permitted
by this section for insurance if the plan is consistent with the
purposes of this act and reflects reasonably anticipated reductions
or increases in losses or expenses.
Sec. 2117. (1) As a condition of maintaining its certificate
of authority, an insurer shall not refuse to insure, refuse to
continue to insure, or limit the coverage available to an eligible
person for home insurance, except in accordance with underwriting
pursuant to under
this section and section 2119.
insurer shall not establish underwriting rules for home insurance
for contracts providing identical coverages that differ from
those of any affiliate of the insurer.
(2) The underwriting rules that an insurer may establish for
home insurance shall be based only on the following:
(a) Criteria identical to the standards set forth in section
(b) The physical condition of the property insured or to be
provided if the underwriting rules are objective, are
directly related to the perils insured against, and, without regard
the age of the structure, are based
upon on the specific
provisions of a national, state, or local housing and safety code,
a manufacturer's specification, or standards of similar
specificity. If an applicant or insured obtains a certificate of
compliance or habitation issued by an appropriate governmental unit
or agency, certifying that a building is in substantial compliance
with local housing and safety codes, the certificate creates a
rebuttable presumption that the dwelling meets the insurer's
underwriting rules relating to physical condition.
(c) For the renewal of a home insurance policy, the claim
history of the person insured or to be insured during the 3-year
period immediately preceding renewal of the policy, if that history
is based on 1 or both of the following:
(i) Claim experience arising out of
an the insured's
(ii) Failure by the insured, after written notice from the
insurer, to correct a physical condition that is directly related
to a paid claim or that presents a clear risk of a significant loss
under the property or liability portions of a homeowners policy.
(d) The relationship between market value and replacement cost
of a dwelling insured or to be insured for a replacement cost
if a repair cost policy is offered by
that the insurer
to under subsection (3).
For nonrenewal of a home insurance
policies, policy, the
claim history under the policy, excluding liability claims, as
(i) If there has been 1 or more of the following:
(A) Three paid claims within the immediately preceding 3-year
period totaling $3,000.00 or more, exclusive of weather-related
(B) Three paid claims within the immediately preceding 3-year
period totaling $4,000.00 or more, including weather-related
(ii) A history of 3 or more paid claims within an immediately
preceding 3-year period if the insurer meets all of the following:
(A) Has an underwriting rule under subparagraph (i) in effect.
(B) The underwriting rule under this subparagraph is for a
paid claim history that totals not less than the amount in
subparagraph (i)(A) exclusive of weather-related claims and totals
not less than the amount in subparagraph (i)(B) including weather-
(C) The underwriting rule under this subparagraph applies to
an insured who has had a home insurance policy with the insurer for
a continuous minimum period of time as determined by the insurer
that may be any period of time between 5 and 10 years.
The Whether the number of residences within the dwelling
are inconsistent with the policy forms approved by the commissioner
for the insurer.
The unoccupancy of Whether
a dwelling has been unoccupied
for more than 60 days, if there is evidence of an intent to vacate
or keep the premises vacant or unoccupied, as to the applicant or
(h) The existence of an adjacent physical hazard, if the
hazard presents a significant risk of loss directly related to the
perils insured or to be insured against for which a rate surcharge
is not applicable. For purposes of this subdivision only,
residential property or traffic patterns shall not be considered to
cause a significant risk of loss. Nonrenewals based upon an
adjacent physical hazard shall be due to a change in the hazard
from that which existed at the original date of issuance of the
(i) The failure of the insured or applicant to purchase an
amount of insurance in excess of 80% of the replacement cost of the
property to be insured under a replacement cost policy, if both of
the following conditions are met:
(i) The purchase of an amount of insurance in excess of 80% of
the replacement cost is a condition for sale of the policy.
(ii) The insurer offers in this state at least 1 form of a
replacement cost policy for which the insurer requires only a
minimum amount of insurance equal to 80% of the replacement cost of
the dwelling as a condition of purchase.
(j) One or more incidents involving a threat, harassment, or
physical assault by the insured or applicant for insurance on an
insurer employee, agent, or agent employee while acting within the
of his or her employment,
so long as if a report of the
incident was filed with an appropriate law enforcement agency.
If an insurer establishes an underwriting rule based
on the relationship between the market value and replacement cost
to under subsection (2)(d), all both of the
apply as to the repair cost
The insurer shall offer
for sale a the repair cost policy
with deductibles, terms and conditions, perils insured against, and
types and amounts of coverage, which are substantially equivalent
to the deductibles, terms and conditions, perils insured against,
and types and amounts of coverage provided by the replacement cost
policy of the insurer, at least equivalent to the HO-2 form
replacement cost policy filed and in effect in this state for the
principal rating organization as of October 1, 1979.
The insurer shall not
an underwriting rule
upon on the relationship between the market value and
replacement cost for the repair cost policy.
(4) The rates of an insurer for a repair cost policy shall be
established so that the premium for a repair cost policy shall not
exceed 105% of the premium for an amount of insurance equal to 80%
of the replacement cost of the dwelling under the equivalent
replacement cost policy described in subsection (3)(a). Premiums
for dwellings with identical replacement costs shall vary on a
schedule determined by the insurer in accordance with the market
value of the dwellings.
(5) Off-premises claims may be aggregated for the purposes of
(2)(f), (2)(e), irrespective of the location of the
insured dwelling. All claims other than off-premises losses
used in a determination for purposes of subsection (2)(f)
(2)(e) shall be aggregated only as to an insured dwelling. The
dollar amounts prescribed in subsection
(2)(f)( i ) (2)(e)(i)
shall be adjusted on January 1, 2006, and on January 1 of every
reflect the aggregate annual average
percentage change in the consumer price index since the previous
adjustment, rounded to the nearest hundred dollars. As used in this
subsection, "consumer price index" means the consumer price index
for all urban consumers in the U.S. city average, as most recently
reported by the United States department of labor, bureau of labor
statistics, and after certification by the commissioner in an
Sec. 2119. (1) Each insurer subject to this chapter shall put
in writing all underwriting rules used by the insurer. An insurer
shall not transact automobile or home insurance inconsistently with
its underwriting rules.
(2) An insurer shall apply its underwriting rules uniformly
and without exception throughout this state, so that every
applicant or insured conforming with the underwriting rules will be
insured or renewed, and so that every applicant or insured not
conforming with the underwriting rules will be refused insurance or
nonrenewed, when the information becomes available to the insurer.
Affiliated insurers shall not adopt underwriting rules for automobile
insurance contracts providing identical coverages which would
permit a person to be insured, for automobile insurance, with more
than 1 of the affiliated insurers, unless the affiliated insurers
use identical rates and rating plans and have adopted identical
underwriting rules in compliance with this section.
An insurer with more than 1 rating
plan for automobile
insurance contracts providing identical coverages shall not adopt
which that would permit a person to be insured,
for automobile insurance, under more than 1 of the rating plans.
An insurer may establish
underwriting rules for new
which that are different than rules for renewals of
existing insureds only if the applicants or existing insureds are
not eligible persons. Underwriting rules pertaining to renewals of
existing insureds who are not eligible persons may be based on a
contractual obligation of the insurer not to cancel or nonrenew.
For informational purposes, an
insurer shall file with
commissioner its underwriting rules
prior to before their
in this state. All filed underwriting rules shall be available for
public inspection. If the commissioner finds that an underwriting
is inconsistent with
the provisions of this chapter, the
after a hearing held
pursuant to Act No. 306 of the Public
Acts of 1969, as amended, under
procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, shall by
prohibit further use of
This section shall does not
prohibit an insurer from
persons who are not eligible persons
pursuant to under
underwriting rules established under this section and sections
2117, 2118, and 2120.
Sec. 2121. (1) If an insurer uses an inspection of a dwelling
to determine whether the insured or applicant is an eligible person
for home insurance, criteria for selecting dwellings for inspection
not be based
upon any of the following: (a)
Location, whether by political subdivision, census tract, zip
code, neighborhood, or area which may be described as a block, set
of blocks, or by street coordinates. (b)
The age of the dwelling or the age of its plumbing, heating,
electrical, or structural components, or of any other components
which form a part of the dwelling. (c)
The market value of a dwelling, unless the value is used as
a minimum value above which all dwellings will be inspected. (d)
The amount of insurance, unless the amount is used as a minimum
above which all dwellings will be inspected. (e)
Race, on race, color, creed, marital status, sex, national
origin, residence, age, disability, or lawful occupation.
(2) If an insurer establishes an inspection program that
provides for inspection of a portion of its existing business on a
basis, the inspection program shall not be based
of the criteria in subsection
(1)(a), (c), or (e).(1).
(3) Criteria for selecting dwellings for inspection shall be
filed with the commissioner for informational purposes only. The
commissioner, after a hearing held pursuant to the administrative
procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, shall
the further use of inspection criteria
, if the
finds that the criteria are inconsistent with
of this chapter.
shall be is no civil liability, other than
where if applicable, on the part
of, and a
of action of any nature
not arise against, the
an insurer, an inspection bureau,
or an authorized
representative, agent, employee, or affiliate of the commissioner,
an insurer, or an inspection bureau, or any licensed insurance
for acts or omissions related solely to the physical
condition of the property in an inspection conducted for insurance
pursuant to under this chapter.