SENATE BILL No. 1305

 

 

September 20, 2012, Introduced by Senator HUNE and referred to the Committee on Insurance.

 

 

 

     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

 

insurer may 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 in losses

 

or expenses. This section does not affect benefits or obligations

 


required under chapter 31. Nothing in this This section authorizes

 

does not authorize an insurer to offer or prohibits prohibit an

 

insurer from offering premium discount plans concerning any of the

 

following:

 

     (a) Health care services, health care providers, or health

 

care facilities.

 

     (b) Automobile repair providers.

 

     (c) Materials used in the repair of an automobile.

 

     Sec. 2111. (1) Notwithstanding any provision of this act and

 

or this chapter to the contrary, classifications and territorial

 

base 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.

 

     (2) Classifications established pursuant to under this section

 

for automobile insurance shall be based only upon on 1 or more of

 

the following factors, which shall be applied by an insurer on a

 

uniform basis throughout 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

 

vehicle.

 

     (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

 

status.

 

     (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

 

policy.

 

     (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

 

anticipated cost.

 

     (ii) Vehicle make and model.

 

     (iii) Vehicle design characteristics related to vehicle

 

damageability.

 

     (iv) Vehicle characteristics relating to automobile theft

 

prevention devices.

 


     (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

 

instruction.

 

     (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

 


court for civil infractions for , violations under chapter VI of

 

the Michigan vehicle code, 1949 PA 300, MCL 257.601 to 257.750.

 

However, 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

 

classifications for automobile insurance based upon on sex or

 

marital status.

 

     (5) Notwithstanding other provisions of this chapter,

 

automobile insurance risks may be grouped by territory.

 

     (6) This section shall does not be construed as limiting limit

 

insurers or rating organizations from establishing and maintaining

 

statistical 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

 

statistical data.

 

     (7) Classifications established pursuant to under this section

 

for home insurance other than inland marine insurance provided by

 


policy floaters or endorsements shall be based only upon on 1 or

 

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.

 

     (f) Loss experience of the insured, based upon on prior claims

 

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

 

services.

 

     (8) Notwithstanding other provisions of this chapter, home

 

insurance risks may be grouped by territory.

 

     (9) An insurer may utilize use factors in addition to those

 

specified in this section, if the commissioner finds, after a

 

hearing held pursuant to under 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.

 

     (10) 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 an individual insured's 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

 

rules established pursuant to under this section and section 2119.

 

An 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

 

2103(2).

 

     (b) The physical condition of the property insured or to be

 

insured, provided if the underwriting rules are objective, are

 

directly related to the perils insured against, and, without regard

 

to 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

 

negligence.

 

     (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

 

policy, if a repair cost policy is offered by that the insurer

 

pursuant to under subsection (3).

 

     (e) For nonrenewal of a home insurance policies, policy, the

 

claim history under the policy, excluding liability claims, as

 

follows:

 

     (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

 

claims.

 

     (B) Three paid claims within the immediately preceding 3-year

 

period totaling $4,000.00 or more, including weather-related

 

claims.

 

     (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-

 

related claims.

 

     (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.

 

     (f) The Whether the number of residences within the dwelling

 

are inconsistent with the policy forms approved by the commissioner

 

for the insurer.

 

     (g) 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

 

insured.

 

     (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

 

policy.

 


     (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

 

scope of his or her employment, so long as if a report of the

 

incident was filed with an appropriate law enforcement agency.

 

     (3) If an insurer establishes an underwriting rule based upon

 

on the relationship between the market value and replacement cost

 

pursuant to under subsection (2)(d), all both of the following

 

shall apply as to the repair cost policy:

 

     (a) 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.

 


     (b) The insurer shall not utilize use an underwriting rule

 

based 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

 

subsection (2)(f), (2)(e), irrespective of the location of the

 

insured dwelling. All claims other than off-premises losses

 

utilized used in a determination for purposes of subsection (2)(f)

 

(2)(e) shall be aggregated only as to an insured dwelling. The

 

minimum dollar amounts prescribed in subsection (2)(f)(i) (2)(e)(i)

 

shall be adjusted on January 1, 2006, and on January 1 of every

 

sixth year thereafter , to 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

 

administrative bulletin.

 

     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.

 

     (3) 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.

 

     (3) (4) An insurer with more than 1 rating plan for automobile

 

insurance contracts providing identical coverages shall not adopt

 

underwriting rules which that would permit a person to be insured,

 

for automobile insurance, under more than 1 of the rating plans.

 

     (4) (5) An insurer may establish underwriting rules for new

 

applicants 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.

 

     (5) (6) For informational purposes, an insurer shall file with

 

the commissioner its underwriting rules prior to before their use

 


in this state. All filed underwriting rules shall be available for

 

public inspection. If the commissioner finds that an underwriting

 

rule is inconsistent with the provisions of this chapter, the

 

commissioner, after a hearing held pursuant to Act No. 306 of the

 

Public Acts of 1969, as amended, under the administrative

 

procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, shall by

 

order prohibit further use of that the underwriting rule.

 

     (6) (7) This section shall does not prohibit an insurer from

 

insuring 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

 

shall 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

 

periodic basis, the inspection program shall not be based upon on

 

any 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

 

disapprove the further use of inspection criteria, if the

 

commissioner finds that the criteria are inconsistent with the

 

provisions of this chapter.

 

     (4) There shall be is no civil liability, other than

 

contractual liability, where if applicable, on the part of, and a

 

cause of action of any nature shall does not arise against, the

 

commissioner, 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

 

agent, for acts or omissions related solely to the physical

 

condition of the property in an inspection conducted for insurance

 

purposes pursuant to under this chapter.