July 18, 2012, Introduced by Reps. Howze, Durhal, Talabi, Liss, Rutledge, Santana, Jackson, Nathan, Stanley, Callton, Stallworth, Ananich, Cavanagh, Greimel, Hovey-Wright, Hobbs, Geiss, Hammel, Tlaib, Meadows and Oakes and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 2106, 2111, and 3104 (MCL 500.2106, 500.2111,
and 500.3104), section 2111 as amended by 2002 PA 492 and section
3104 as amended by 2002 PA 662, and by adding chapter 25A.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2106. Except as specifically provided in this chapter,
the
provisions of chapter chapters
24 and chapter 26 shall do not
apply to automobile insurance and home insurance. An insurer may
use rates for automobile insurance or home insurance as soon as
those
rates are filed. To With
the exception of chapter 25A, to the
extent
that other provisions of this code act are inconsistent with
the
provisions of this chapter, this
chapter shall govern governs
with respect to automobile insurance and home insurance.
Sec.
2111. (1) Notwithstanding With
the exception of chapter
25A,
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.
CHAPTER 25A
SILVER LINING INSURANCE RENAISSANCE ZONES
Sec. 2511. As used in this chapter:
(a) "Automobile insurance" means that term as defined in
section 2102.
(b) "Fund" means the silver lining insurance fund created in
section 2517.
(c) "Home insurance" means that term as defined in section
2103.
(d) "Insurance renaissance zone" means a geographic area
designated under section 2513.
(e) "Local unit of government" means a township, city, or
village.
(f) "Qualified city" means a city whose population as
determined by the latest federal decennial census decreased 10% or
more from the population as determined by the previous federal
decennial census.
(g) "Qualified resident" means an individual whose principal
residence is in the insurance renaissance zone and who has
maintained home insurance on the residence for the 5 years
preceding the claim and, if the claim is made under an automobile
insurance policy, on the automobile for the part of the 5-year
period during which the individual owned the automobile.
Sec. 2512. The legislature of this state finds and declares
that there is a continuing need for programs to assist certain
cities in this state in encouraging density of population, the
retention of residents, and repopulation. To achieve these
purposes, it is necessary to create insurance renaissance zones as
provided in this chapter.
Sec. 2513. (1) The city council of a qualified city may
declare 1 or more distinct geographic areas within the city to be
insurance renaissance zones.
(2) After an area is designated as an insurance renaissance
zone under subsection (1), if a qualified resident submits a claim
under the qualified resident's home insurance or automobile
insurance policy and the claim is the first claim of that type made
by the qualified resident, the insurer shall not increase the
premium charged for the policy because of the claim or the loss on
which the claim is based.
Sec. 2515. (1) The commissioner shall monitor the home
insurance and automobile insurance premiums and rates and the
claims submitted in each insurance renaissance zone.
(2) The commissioner shall compare the premiums charged for
home insurance and automobile insurance in each insurance
renaissance zone with premiums charged for home insurance and
automobile insurance in each surrounding local unit of government
whose closest boundary is 20 miles or more from the boundary of the
city in which the insurance renaissance zone is located. A local
unit of government shall not be compared under this subsection if
there is another local unit of government that qualifies to be
included for comparison that is located between the local unit of
government and the city.
(3) Within 30 days after each anniversary date of the
establishment of an insurance renaissance zone, the commissioner
shall determine whether there is a disparity of 50% or more between
the average insurance premium charged in the renaissance zone and
the average insurance premium charged for the same type of
insurance in the local units of government to which the premiums
for the insurance renaissance zone is compared under subsection
(2). The commissioner shall publish the determination made under
this subsection and include a summary of the data on which the
determination is based.
(4) If the commissioner makes a determination under subsection
(3) that there is a disparity of 50% or more and the determination
is the first such determination for the insurance renaissance zone,
an insurer that issues home insurance or automobile insurance
policies to residents of the insurance renaissance zone shall
reduce the first renewal premium charged for a home insurance or
automobile insurance policy in the insurance renaissance zone
during the 12 months following the determination by 20% from the
most recent premium charged for the policy.
(5) If the commissioner makes a determination under subsection
(3) that there is a disparity of 50% or more, the determination is
not the first such determination for the insurance renaissance
zone, and an insurer that issues home insurance or automobile
insurance policies to residents of the insurance renaissance zone
cannot demonstrate to the commissioner that it would be entitled to
reimbursement under section 2517(6) if reductions under this
subsection are required, the insurer shall reduce its first renewal
premium charged for a home insurance or automobile insurance policy
in the insurance renaissance zone during the 12 months following
the determination by 20% from the most recent premium charged for
the policy.
Sec. 2517. (1) The silver lining insurance fund is created
within the state treasury.
(2) The state treasurer may receive money from the
catastrophic claims association as provided in section 3104 and
money or other assets from any other source for deposit into the
fund. The state treasurer shall direct the investment of the fund.
The state treasurer shall credit to the fund interest and earnings
from fund investments.
(3) Money in the fund at the close of the fiscal year shall
remain in the fund and shall not lapse to the general fund.
(4) The office of financial and insurance regulation shall be
the administrator of the fund for auditing purposes.
(5) The office of financial and insurance regulation shall
expend money from the fund, upon appropriation, only to reimburse
insurers as provided in subsection (6).
(6) To the extent that money is available in the fund, an
insurer is entitled to reimbursement from the fund for money lost
because of reductions in premiums under section 2515(4). An insurer
is entitled to reimbursement under this section and is not required
to reduce premiums under section 2515(5) if the insurer
demonstrates to the satisfaction of the commissioner that, for the
year preceding the 12-month period for which the reductions were or
would be made, there was an increase in the number of claims made
and the aggregate amount of claims paid under home insurance and
automobile insurance policies issued by the insurer to residents of
the insurance renaissance zone.
Sec. 2519. (1) An insurer that issues home insurance or
automobile insurance policies to individuals who reside in an
insurance renaissance zone shall provide to the commissioner all
information in its possession that is necessary to allow the
commissioner to perform his or her duties under sections 2515 and
2517.
(2) Within 5 years after the effective date of the amendatory
act that added this chapter, the commissioner shall report to the
members of the standing committees of the house of representatives
and senate with primary jurisdiction over insurance matters on the
progress and developments of the insurance renaissance program
under this chapter. The report shall include, but not be limited
to, information received and comparisons made under this section.
Sec. 3104. (1) An unincorporated, nonprofit association to be
known
as the catastrophic claims association
, hereinafter referred
to
as the association, is created.
Each insurer engaged in writing
insurance coverages that provide the security required by section
3101(1) within this state, as a condition of its authority to
transact insurance in this state, shall be a member of the
association and shall be bound by the plan of operation of the
association. Each insurer engaged in writing insurance coverages
that provide the security required by section 3103(1) within this
state, as a condition of its authority to transact insurance in
this state, shall be considered a member of the association, but
only for purposes of premiums under subsection (7)(d). Except as
expressly provided in this section, the association is not subject
to any laws of this state with respect to insurers, but in all
other respects the association is subject to the laws of this state
to the extent that the association would be if it were an insurer
organized and subsisting under chapter 50.
(2) The association shall provide and each member shall accept
indemnification for 100% of the amount of ultimate loss sustained
under personal protection insurance coverages in excess of the
following amounts in each loss occurrence:
(a) For a motor vehicle accident policy issued or renewed
before July 1, 2002, $250,000.00.
(b) For a motor vehicle accident policy issued or renewed
during the period July 1, 2002 to June 30, 2003, $300,000.00.
(c) For a motor vehicle accident policy issued or renewed
during the period July 1, 2003 to June 30, 2004, $325,000.00.
(d) For a motor vehicle accident policy issued or renewed
during the period July 1, 2004 to June 30, 2005, $350,000.00.
(e) For a motor vehicle accident policy issued or renewed
during the period July 1, 2005 to June 30, 2006, $375,000.00.
(f) For a motor vehicle accident policy issued or renewed
during the period July 1, 2006 to June 30, 2007, $400,000.00.
(g) For a motor vehicle accident policy issued or renewed
during the period July 1, 2007 to June 30, 2008, $420,000.00.
(h) For a motor vehicle accident policy issued or renewed
during the period July 1, 2008 to June 30, 2009, $440,000.00.
(i) For a motor vehicle accident policy issued or renewed
during the period July 1, 2009 to June 30, 2010, $460,000.00.
(j) For a motor vehicle accident policy issued or renewed
during the period July 1, 2010 to June 30, 2011, $480,000.00.
(k) For a motor vehicle accident policy issued or renewed
during the period July 1, 2011 to June 30, 2013, $500,000.00.
Beginning July 1, 2013, this $500,000.00 amount shall be increased
biennially on July 1 of each odd-numbered year, for policies issued
or renewed before July 1 of the following odd-numbered year, by the
lesser of 6% or the consumer price index, and rounded to the
nearest $5,000.00. This biennial adjustment shall be calculated by
the association by January 1 of the year of its July 1 effective
date.
(3) An insurer may withdraw from the association only upon
ceasing to write insurance that provides the security required by
section 3101(1) in this state.
(4) An insurer whose membership in the association has been
terminated by withdrawal shall continue to be bound by the plan of
operation, and upon withdrawal, all unpaid premiums that have been
charged to the withdrawing member are payable as of the effective
date of the withdrawal.
(5) An unsatisfied net liability to the association of an
insolvent member shall be assumed by and apportioned among the
remaining members of the association as provided in the plan of
operation. The association has all rights allowed by law on behalf
of the remaining members against the estate or funds of the
insolvent
member for sums money due the association.
(6) If a member has been merged or consolidated into another
insurer or another insurer has reinsured a member's entire business
that provides the security required by section 3101(1) in this
state, the member and successors in interest of the member remain
liable for the member's obligations.
(7) The association shall do all of the following on behalf of
the members of the association:
(a) Assume 100% of all liability as provided in subsection
(2).
(b) Establish procedures by which members shall promptly
report to the association each claim that, on the basis of the
injuries or damages sustained, may reasonably be anticipated to
involve the association if the member is ultimately held legally
liable for the injuries or damages. Solely for the purpose of
reporting claims, the member shall in all instances consider itself
legally liable for the injuries or damages. The member shall also
advise the association of subsequent developments likely to
materially affect the interest of the association in the claim.
(c) Maintain relevant loss and expense data relative to all
liabilities of the association and require each member to furnish
statistics, in connection with liabilities of the association, at
the times and in the form and detail as may be required by the plan
of operation.
(d) In a manner provided for in the plan of operation,
calculate and charge to members of the association a total premium
sufficient to cover the expected losses and expenses of the
association that the association will likely incur during the
period for which the premium is applicable. The premium shall
include an amount to cover incurred but not reported losses for the
period and may be adjusted for any excess or deficient premiums
from previous periods. Excesses or deficiencies from previous
periods may be fully adjusted in a single period or may be adjusted
over several periods in a manner provided for in the plan of
operation. Each member shall be charged an amount equal to that
member's total written car years of insurance providing the
security required by section 3101(1) or 3103(1), or both, written
in this state during the period to which the premium applies,
multiplied by the average premium per car. The average premium per
car shall be the total premium calculated divided by the total
written car years of insurance providing the security required by
section 3101(1) or 3103(1) written in this state of all members
during the period to which the premium applies. A member shall be
charged a premium for a historic vehicle that is insured with the
member of 20% of the premium charged for a car insured with the
member. As used in this subdivision:
(i) "Car" includes a motorcycle but does not include a historic
vehicle.
(ii) "Historic vehicle" means a vehicle that is a registered
historic vehicle under section 803a or 803p of the Michigan vehicle
code, 1949 PA 300, MCL 257.803a and 257.803p.
(e) Require and accept the payment of premiums from members of
the association as provided for in the plan of operation. The
association shall do either of the following:
(i) Require payment of the premium in full within 45 days after
the premium charge.
(ii) Require payment of the premiums to be made periodically to
cover the actual cash obligations of the association.
(f)
Receive and distribute all sums money
required by the
operation of the association.
(g) Establish procedures for reviewing claims procedures and
practices of members of the association. If the claims procedures
or practices of a member are considered inadequate to properly
service the liabilities of the association, the association may
undertake or may contract with another person, including another
member, to adjust or assist in the adjustment of claims for the
member on claims that create a potential liability to the
association and may charge the cost of the adjustment to the
member.
(h) From money received by the association, pay $50,000,000.00
per year into the silver lining insurance fund created under
section 2517.
(8) In addition to other powers granted to it by this section,
the association may do all of the following:
(a) Sue and be sued in the name of the association. A judgment
against the association shall not create any direct liability
against the individual members of the association. The association
may provide for the indemnification of its members, members of the
board of directors of the association, and officers, employees, and
other persons lawfully acting on behalf of the association.
(b) Reinsure all or any portion of its potential liability
with reinsurers licensed to transact insurance in this state or
approved by the commissioner.
(c) Provide for appropriate housing, equipment, and personnel
as may be necessary to assure the efficient operation of the
association.
(d) Pursuant to the plan of operation, adopt reasonable rules
for the administration of the association, enforce those rules, and
delegate authority, as the board considers necessary to assure the
proper administration and operation of the association consistent
with the plan of operation.
(e) Contract for goods and services, including independent
claims management, actuarial, investment, and legal services, from
others within or without this state to assure the efficient
operation of the association.
(f) Hear and determine complaints of a company or other
interested party concerning the operation of the association.
(g) Perform other acts not specifically enumerated in this
section that are necessary or proper to accomplish the purposes of
the association and that are not inconsistent with this section or
the plan of operation.
(9)
A board of directors is created, hereinafter referred to
as
the board, which shall be is responsible
for the operation of
the association consistent with the plan of operation and this
section.
(10) The plan of operation shall provide for all of the
following:
(a) The establishment of necessary facilities.
(b) The management and operation of the association.
(c) Procedures to be utilized in charging premiums, including
adjustments from excess or deficient premiums from prior periods.
(d) Procedures governing the actual payment of premiums to the
association.
(e) Reimbursement of each member of the board by the
association for actual and necessary expenses incurred on
association business.
(f) The investment policy of the association.
(g) Any other matters required by or necessary to effectively
implement this section.
(11) Each board shall include members that would contribute a
total of not less than 40% of the total premium calculated pursuant
to subsection (7)(d). Each director shall be entitled to 1 vote.
The initial term of office of a director shall be 2 years.
(12) As part of the plan of operation, the board shall adopt
rules providing for the composition and term of successor boards to
the initial board, consistent with the membership composition
requirements in subsections (11) and (13). Terms of the directors
shall be staggered so that the terms of all the directors do not
expire at the same time and so that a director does not serve a
term of more than 4 years.
(13) The board shall consist of 5 directors, and the
commissioner shall be an ex officio member of the board without
vote.
(14) Each director shall be appointed by the commissioner and
shall serve until that member's successor is selected and
qualified. The chairperson of the board shall be elected by the
board. A vacancy on the board shall be filled by the commissioner
consistent with the plan of operation.
(15)
After the board is appointed, the The board shall meet as
often as the chairperson, the commissioner, or the plan of
operation
shall require, requires, or at the request of any 3
members
of the board. The chairperson shall retain the right to may
vote on all issues. Four members of the board constitute a quorum.
(16) An annual report of the operations of the association in
a
form and detail as may be determined by the board shall be
furnished to each member.
(17)
Not more than 60 days after the initial organizational
meeting
of the board, the board shall submit to the commissioner
for
approval a proposed plan of operation consistent with the
objectives
and provisions of this section, which shall provide for
the
economical, fair, and nondiscriminatory administration of the
association
and for the prompt and efficient provision of
indemnity.
If a plan is not submitted within this 60-day period,
then
the commissioner, after consultation with the board, shall
formulate
and place into effect a plan consistent with this
section.
(18)
The plan of operation, unless approved sooner in writing,
shall
be considered to meet the requirements of this section if it
is
not disapproved by written order of the commissioner within 30
days
after the date of its submission. Before disapproval of all or
any
part of the proposed plan of operation, the commissioner shall
notify
the board in what respect the plan of operation fails to
meet
the requirements and objectives of this section. If the board
fails
to submit a revised plan of operation that meets the
requirements
and objectives of this section within the 30-day
period,
the commissioner shall enter an order accordingly and shall
immediately
formulate and place into effect a plan consistent with
the
requirements and objectives of this section.
(17) (19)
The proposed plan of operation or Any
amendments to
the plan of operation of the association are subject to majority
approval
by the board , ratified and ratification by a
majority of
the membership having a vote, with voting rights being apportioned
according to the premiums charged in subsection (7)(d) and are
subject to approval by the commissioner.
(18) (20)
Upon approval by the commissioner and ratification
by
the members of the plan submitted, or upon the promulgation of a
plan
by the commissioner, each Each
insurer authorized to write
insurance providing the security required by section 3101(1) in
this state, as provided in this section, is bound by and shall
formally
subscribe to and participate in the plan approved of
operation as a condition of maintaining its authority to transact
insurance in this state.
(19) (21)
The association is subject to all
the reporting,
loss reserve, and investment requirements of the commissioner to
the
same extent as would a member are
the members of the
association.
(20) (22)
Premiums charged members by the
association shall be
recognized in the rate-making procedures for insurance rates in the
same manner that expenses and premium taxes are recognized.
(21) (23)
The commissioner or an authorized
representative of
the commissioner may visit the association at any time and examine
any and all of the association's affairs.
(22) (24)
The association does not have
liability for losses
occurring before July 1, 1978.
(23) (25)
As used in this section:
(a) "Association" means the catastrophic claims association
created in subsection (1).
(b) "Board" means the board of directors of the association
created in subsection (9).
(c)
(a) "Consumer price index" means the
percentage of change
in the consumer price index for all urban consumers in the United
States city average for all items for the 24 months prior to
October
1 of the year prior to before
the July 1 effective date of
the biennial adjustment under subsection (2)(k) as reported by the
United States department of labor, bureau of labor statistics, and
as certified by the commissioner.
(d) (b)
"Motor vehicle accident
policy" means a policy
providing the coverages required under section 3101(1).
(e) (c)
"Ultimate loss" means the
actual loss amounts that a
member is obligated to pay and that are paid or payable by the
member, and do not include claim expenses. An ultimate loss is
incurred by the association on the date that the loss occurs.