April 18, 2007, Introduced by Senator THOMAS 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 2111 (MCL 500.2111), as amended by 2002 PA 492.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2111. (1) Notwithstanding any provision of this act and
this chapter to the contrary, classifications and territorial base
rates used by any 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 this section for
automobile insurance shall be based only upon 1 or more of the
following factors, which shall be applied by an insurer on a
uniform basis throughout the 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 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 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 sex or marital
status.
(5) Notwithstanding other provisions of this chapter,
automobile
insurance risks may shall be grouped by territory. and
territorial base rates for coverages shall be established as
follows:
(a) An insurer shall not be limited as to the number of
territories employed in its rating plan. However, an insurer shall
not employ more than 20 different territorial base rates for an
automobile insurance coverage. A territorial base rate may be made
applicable in 1 or more territories contained in the rating plan of
the insurer.
(b) An insurer shall not employ a territorial base rate for an
automobile insurance package policy that is less than 45% of the
highest territorial base rate for the same policy, all other rating
classifications being the same.
(c) An insurer shall not employ a territorial base rate in a
territory for an automobile insurance package policy that is less
than 90% of the territorial base rate employed in any adjacent
territory for the same policy, all other rating classifications
being the same.
(6) An insurer may elect at any time to exempt itself from the
requirements of subsection (5) by filing for an exemption with the
commissioner. An insurer electing this exemption shall initially
file a rating plan in which no territorial base rate for an
automobile insurance package policy is less than 45% of the highest
territorial base rate for the same policy, all other rating
classifications being the same. Five years from the date of the
initial filing, the insurer shall be prohibited from using a rating
plan in which any territorial base rate for an automobile insurance
package policy will be less than 67% of the highest territorial
base rate for that same policy, all other rating classifications
being the same. An insurer's election of an exemption under this
subsection is permanent, final, and not subject to change.
(7) Beginning 1 year after the effective date of this
subsection, if an insurer can demonstrate to the commissioner,
after an opportunity for an evidentiary hearing held pursuant to
the administrative procedures act of 1969, 1969 PA 306, MCL 24.201
to 24.328, that clear and significant financial impairment exists
in the geographic territory or territories in question because of
the need for an additional territorial base rate, or for a greater
variance in the adjacent geographic territory differential
contained in subsection (5)(c), the additional territorial base
rate or a greater variance, or both, shall be permitted for use by
the insurer or a licensed rating organization on behalf of that
insurer, at such time as the need exists. Evidence shall not
include financial impairment resulting from exemptions granted to
other insurers.
(8) If the commissioner finds, solely on the evidence
presented, that a greater variance in the adjacent geographic
territory differential than that authorized under subsection (5)(c)
is justified, the increase in variance shall not exceed 100% of
that authorized under that subsection. If an increase in variance
in the adjacent geographic territory differential greater than 100%
of that authorized under subsection (5)(c) is justified, the
commissioner shall require the creation of an additional
territorial base rate.
(9) An exemption granted under subsections (7) and (8) shall
be applicable only to the geographic territory or territories in
question and only to the insurer requesting the exemption.
(10) An insurer shall not have more than 5 exemptions in force
at any 1 time. For purposes of determining the number of existing
exemptions, each additional territorial base rate or each increase
in variance in the adjacent geographic territory differential
granted shall be considered to be a separate exemption.
(11) (6) This section shall not be construed as
limiting
insurers or rating organizations from establishing and maintaining
statistical reporting territories. This section shall 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.
(12) (7)
Classifications established pursuant to this section
for home insurance other than inland marine insurance provided by
policy floaters or endorsements shall be based only upon 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 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.
(13) (8)
Notwithstanding other provisions of this chapter,
home insurance risks may be grouped by territory.
(14) (9)
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.