Auto and Home Insurance Rating Pursuant to Public Act 98 of 1996

Issued and entered May 30, 1996 by D. Joseph Olson, Commissioner of Insurance

INFORMATIONAL STATEMENT ISSUED PURSUANT TO ACT 306 OF THE PUBLIC ACTS OF 1969 AS AMENDED

Public Act 98 of 1996 (the Act) was signed into law February 28, 1996 and took immediate effect. The Act made significant changes to the way home and auto insurance rates may be developed. The purpose of this bulletin is to provide information to insurers for use in making home and auto insurance filings pursuant to the amendments contained in the Act.

Merit Rating Plan Restrictions
The Act amends section 500.2111(3) of the Insurance Code (the Code) which applies to auto insurance surcharge plans. The amendment requires insurers to establish a secondary or merit rating plan for auto insurance, other than comprehensive coverage, that limits the amount of time an insured can be surcharged for a civil infraction under the motor vehicle code.

In pertinent part, the new language states:

". . . beginning 90 days after the effective date of this sentence [which is May 28, 1996], an insured shall not be merit rated for a civil infraction under chapter VI of Act No. 300 of the Public Acts of 1949, 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 [date, emphasis added]."

This means a surcharge for a civil infraction may not be applied to policies bound or renewed after the date the points awarded for that infraction are dropped from the insured's motor vehicle record. Points for a civil infraction expire 2 years from the date of a determination of responsibility for the civil infraction or a finding of responsibility for the civil infraction in probate court.

The May 28 effective date of this amendment requires secondary or merit rating plans to be in compliance with the new law as of that date.

The new language does not affect, and therefore does not limit, the time period for which an insured may be surcharged for substantially-at-fault accidents, or for any convictions for violations under the relevant sections of chapter VI of the motor vehicle code which are not civil infractions [i.e., misdemeanors, felonies].

The new language also does not affect the assignment of "eligibility points" for the purpose of determining eligibility or acceptability.

Removal of Territory Rating Constraints
The Act also amends section 500.2111 of the Code by removing the territorial rating constraints for both home and auto insurance. New language allows, rather than requires, insurers to group risks by territory for rating purposes.

Any questions regarding the filing of home and auto insurance rates pursuant to the new law may be directed to: