EXECUTIVE DIRECTIVE No. 2009 - 1

FAIR AND EQUITABLE AUTOMOBILE INSURANCE RATES


WHEREAS, Section 1 of Article V of the Michigan Constitution of 1963 vests the executive power of the State of Michigan in the Governor;

WHEREAS, under Section 8 of Article V of the Michigan Constitution of 1963, each principal department of state government is under the supervision of the Governor unless otherwise provided by the Constitution;

WHEREAS, under Section 8 of Article V of the Michigan Constitution of 1963, the Governor is responsible to take care that the laws be faithfully executed;

WHEREAS, under Section 17 of Article I of the Michigan Constitution of 1963, no person may be deprived of life, liberty or property, without due process of law;

WHEREAS, in Shavers v Attorney General, 402 Mich 554, 611; 267 NW2d 72, 93 (1978), the Michigan Supreme Court held, as a matter of constitutional due process, that citizens may be required to purchase no fault automobile insurance only if the state acts to "assure the availability of no fault insurance at fair and equitable rates";

WHEREAS, during the past 30 years since Shavers was decided, there has been a gradual dismantling of regulatory authority over the automobile insurance industry in Michigan;

WHEREAS, during that time period, both insurance premiums and industry profits have grown significantly - and, in fact, since 1989, Michigan automobile insurance premiums have increased at a staggering rate of 69%, the fastest rate of increase in the United States;

WHEREAS, automobile insurance has become unaffordable for a significant and growing portion of this state's population, at the same time that insurance industry profits have skyrocketed to their highest levels in United States history, even factoring in losses resulting from the aftermath of the September 11, 2001 attacks and the devastation wrought by Hurricane Katrina in 2005;

WHEREAS, at a time when our economy has stretched consumers' pocketbooks to the limit, Michigan residents are paying some of the highest automobile insurance rates in America for insurance policies they are compelled by law to purchase;

WHEREAS, the Office of the Automobile and Home Insurance Consumer Advocate was created by Executive Order 2008-2 with the objective of conducting fact-finding, educating the public, representing consumer interests, and making recommendations to the Governor on achieving affordable, reliable, and fair insurance rates for all Michigan residents;

WHEREAS, the Automobile and Home Insurance Consumer Advocate has developed 10 recommendations to significantly lower automobile insurance premiums for Michigan residents while preserving essential health care benefits required under this state's no-fault automobile insurance system;

WHEREAS, in my annual message to the Michigan Legislature, I have recommended that the Michigan Senate and the House of Representatives enact measures to ensure that the automobile insurance rates are fair and equitable as recommended by the Advocate and consistent with Shavers v Attorney General;

WHEREAS, in my annual message, I also called upon every automobile insurance company doing business in this state to freeze automobile insurance rate increases for a period of 12 months while the Michigan Legislature works to enact comprehensive automobile insurance reform;

NOW, THEREFORE, I, Jennifer M. Granholm, Governor of the State of Michigan, by virtue of the power and authority vested in the Governor by the Michigan Constitution of 1963 and Michigan law, direct:

A. The Office of Financial and Insurance Regulation shall establish a system to receive notification from each automobile insurance company doing business in this state of a freeze in automobile insurance rate increases imposed by the automobile insurance company for a 12-month period beginning after the effective date of this Directive but not later than March 1, 2009.

B.  If an automobile insurance company fails to submit a notification as provided under Paragraph A by March 1, 2009, the Office of Financial and Insurance Regulation shall utilize every administrative tool at the Office's disposal to assure that the automobile insurance company provides automobile insurance at fair and equitable rates in this state, including, but not limited to disapproval of rate increases or rejection of rate filings submitted by the automobile insurance company until the proposed rate has been thoroughly and carefully evaluated and the company has clearly demonstrated that the proposed rate meets all applicable statutory and constitutional requirements.

C. Promulgation of administrative rules regulating the use of automobile rating factors where the Commissioner of Financial and Insurance Regulation deems the rules necessary to effectuate the affordability of automobile insurance and to facilitate the purchase of that insurance by all residents of this state at fair and equitable rates.

D. This Directive shall remain in effect until the Governor, based upon recommendations from the Commissioner of Financial and Insurance Regulation and the Automobile and Home Insurance Advocate, determines that the Michigan Legislature has enacted comprehensive automobile insurance reform that is consistent with the recommendations of the Automobile and Home Insurance Advocate and conforms with the constitutional safeguards recognized by the Michigan Supreme Court in Shavers v Attorney General.

E. As used in this Directive:

1. "Automobile and Home Insurance Consumer Advocate" means the advocate position created within the Office of the Automobile and Home Insurance Consumer Advocate under Executive Order 2008-2, MCL 445.2005.

2. "Commissioner of Financial and Insurance Regulation" means the head of the Office of Financial and Insurance Regulation.

3. "Department of Energy, Labor and Economic Growth" means the principal department of state government created as the Department of Commerce under Section 225 of the Executive Organization Act of 1965, 1965 PA 380, MCL 16.325, renamed the Department of Consumer and Industry Services under Executive Order 1996-2, MCL 445.2001, renamed the Department of Labor and Economic Growth under Executive Order 2003-18, MCL 445.2011, and renamed the Department of Energy, Labor, and Economic Growth under Executive Order 2008-20.

4. "Office of Financial and Insurance Regulation" means the office within the Department of Energy, Labor, and Economic Growth established by Executive Order 2000-4, MCL 445.2003, as the Office of Financial and Insurance Services, and renamed the Office of Financial and Insurance Regulation under Executive Order 2008-2, MCL 445.2005.

This Directive is effective immediately.

Given under my hand this 3rd day of February in the year of our Lord, two thousand and nine.
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JENNIFER M. GRANHOLM
GOVERNOR