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Bulletin No. 94-10

Rates for home insurance or automobile insurance written on a group, franchise, blanket policy, or similar basis

Issued and entered October 25, 1994 by David J. Dykhouse, Commissioner of Insurance

Rates for automobile insurance or home insurance written on a group, franchise, blanket policy, or similar basis ("specified rates") are governed by Section 2403 or 2603 of the Insurance Code of 1956, as amended ("Code"), MCL 500.2403; MSA 24.12403, MCL 500.2603; MSA 24.12403. These sections provide, in pertinent part, that:

. . . Due consideration shall be given to past and prospective loss experience within and outside this state; to catastrophe hazards; to a reasonable margin for underwriting profit and contingencies; to dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers; to past and prospective expenses, both countrywide and those specially applicable to this state; . . . and to all other relevant factors within and outside this state.

It is often the case that, before filing specified rates for approval, an insurer has filed in Michigan and had lawfully in effect rates applying to individual policies of insurance in the same line. In making these individual filings, the insurer is held to the same standards regarding loss experience, expenses, and other relevant factors under Section 2110 of the Code, MCL 500.2110; MSA 24.12110, as it is with specified filings.

Given that the standards are the same for individual and specified filings with respect to loss experience, expenses, and other relevant factors, an insurer in making a specified filing under Chapter 24 or 26 of the Code may utilize rates lawfully in effect for individual lines under Chapter 21 as a basis for calculating its specified rates. Thus, an insurer may take rates in effect for individuals and derive specified rates by making appropriate adjustments, such as discounts for lower administrative expenses.

Questions concerning this Bulletin should be addressed to Bill Wagner, Director, Commercial Market Standards, at (517) 355-1713.