Mich. Admin. Code (Insurance and Financial Services) | Michigan Administrative Code — Department of Insurance and Financial Services

Insurance Insurance

R 257.531 to R 257.540 Certificates of No-Fault Self -Insurance

Mich. Admin. Code R 257.531 Definitions {#sec-r-257.531 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 257.531}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

CERTIFICATES OF NO-FAULT SELF-INSURANCE

(By authority conferred on the director of the Department of Insurance and Financial Services by section 210 of 1956 PA 218, MCL 500.210; 1969 PA 306, MCL 24.201 to 24.328; E.R.O. No. 2011-4, MCL 445.2030; and E.R.O. No. 2013-1, MCL 550.991.)

Rule 1. (1) As used in these rules:

(a) "Act" means the insurance code of 1956, 1956 PA 218, MCL 500.100 to MCL 500.8302.

(b) "Applicant" means a motor vehicle registrant who is required to maintain security for the payment of benefits under section 3101 of the no-fault law and who applies for a certificate of self-insurance.

(c) "Casualty insurance company" means an insurer authorized, as defined in section 108 of the act, MCL 500.108, to transact casualty insurance business in this state, or an eligible unauthorized insurer recognized by the director of insurance pursuant to section 1920 of the act, MCL 500.1920.

(d) “Financial responsibility law” means Chapter V of the Motor vehicle code, 1949 PA 300, MCL 257.501 to MCL 257.532.

(e) "Motor vehicle" means a vehicle, including a trailer operated or designed for operation upon a public highway by power other than muscular power that has more than 2 wheels and is required to be registered under the act Michigan vehicle code. Motor vehicle does not include a motorcycle or a moped.

(f) "No-fault law" means sections 3101 to 3179 of the act, MCL 500.3101 to MCL 500.3179.

(g) “Michigan vehicle code” means the Michigan vehicle code, 1949 PA 300, MCL 257.1 to MCL 257.923.

(h)"Qualified actuary" means an individual who meets the following:

(i) Is a member in good standing of the American academy of actuaries or the casualty actuarial society.

(ii) Notwithstanding subdivision (c) of this subrule, has not been found by the director to have done any of the following:

(A) Violated any provision of, or any obligation imposed by, the act or other law in the course of his or her dealings as a qualified actuary.

(B) Been found guilty of fraudulent or dishonest practices.

(D) Resigned or been removed as an actuary within the past five 5 years as a result of failure to adhere to generally acceptable actuarial standards.

(iii) If an individual has done any of the activities listed in paragraphs (i) to (iv) of this subrule, but has subsequently been reinstated as a qualified actuary following appropriate notice and hearing, the director may, in his or her discretion, deem the individual to be a qualified actuary for purposes of this rule.

(iv) Has notified the director of any action taken by the director of insurance of any other state similar to that described in paragraph (ii) of this subdivision.

(2) A term defined in the act has the same meaning when used in these rules, unless defined otherwise in this rule.

History

History: 1993 AACS; 2018 AACS.

Mich. Admin. Code R 257.532 Security equivalent; qualifications for certificate; excess insurance requirement {#sec-r-257.532 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 257.532}

Rule 2. (1) A certificate of self-insurance that is issued pursuant to these rules constitutes security equivalent to that afforded by a policy of insurance that provides for the payment of benefits pursuant to the no-fault law.

(2) Pursuant to section 3101d of the no-fault law, the director may issue a certificate of self-insurance to an applicant who possesses all the following qualifications:

(a) Registers in the applicant's name more than 25 motor vehicles, excluding trailers, in this state.

(b) Agrees, in writing, to comply with all of the provisions of the no-fault law, the financial responsibility law contained in chapter V of the Michigan vehicle code, and these rules.

(c) Has not been declared bankrupt or had a financial manager appointed or any substantially equivalent action taken within the 5-year period immediately preceding the date of application.

(d) Possesses a net worth of more than $15,000,000.00 and complies with the provisions of subrule (3) of this rule.

(e) Possesses a sound financial condition, has sufficient liquid assets, and utilizes financial practices and methods that would not bring into question its ability to pay claims fully and in a timely manner.

(f) Establishes a fully funded loss reserve as described in R 257.536.

(g) Has not had a certificate of self-insurance denied or canceled by this state or any other state within 1 year preceding the date of application, and has maintained insurance coverage on the vehicles described in R 257.533(4)(f) at all times as required by law.

(h) Submits to the director a completed application for a certificate of self-insurance with all required documents attached.

(3) The applicant shall, in addition to meeting the qualifications specified in subrule (2) of this rule, secure and maintain an excess insurance policy, as described in R 257.537, with policy limits and retention amounts commensurate to its risks and exposure that are acceptable to the director.

(4) Except as provided in subrule (6) of this rule, a parent company and its subsidiaries shall make separate applications for the issuance of a certificate of selfinsurance pursuant to these rules.

(5) Except for a parent company and its wholly owned subsidiaries making a combined application for the issuance of a certificate of self-insurance pursuant to the provisions of subrule (6) of this rule, a parent company and its subsidiaries shall not combine or commingle net worth, motor vehicle registrations, or loss reserves for the purpose of qualifying or maintaining qualification for a certificate of self-insurance pursuant to these rules.

(6) A parent company and its wholly owned subsidiaries may make a combined application for the issuance of a certificate of self-insurance if either of the following provisions is satisfied:

(a) Both the parent company and each wholly owned subsidiary included in the combined application otherwise meet the qualifications for the issuance of a certificate of self-insurance set forth in this rule.

(b) Both of the following conditions are met:

(i) Both the parent company and each wholly owned subsidiary included in the combined application enter into a written indemnity agreement jointly and severally binding each entity for any liability under the no-fault law, the financial responsibility law contained in chapter V of the Michigan vehicle code, and these rules. The language and form of the written agreement must be approved by the director.

(ii) For each wholly owned subsidiary included in the combined application, the parent company guarantees in writing its subsidiary's liability for payment of benefits under the no-fault law, the financial responsibility law contained in chapter V of the Michigan vehicle code, and these rules. The form and substance of the guarantees must be approved by the director.

History

History: 1993 AACS; 2018 AACS.

Mich. Admin. Code R 257.533 Application; form; completeness; signature; effective date; accompanying documents {#sec-r-257.533 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 257.533}

Rule 3. (1) A person who seeks to qualify as a self-insurer or renew his or her certificate of self-insurance shall submit an application for a certificate of self-insurance to the director on a form prescribed by the director and available on the department of insurance and financial services website.

(2) The application for a certificate of self-insurance must contain complete answers to all questions and must be signed by the person who makes the application or by the applicant's duly authorized representative.

(3) An application must be submitted to the director not less than 45 days before the desired effective date of the certificate.

(4) An application must be accompanied by all of the following documents:

(a) A statement of financial condition that has been prepared in accordance with generally accepted accounting practices and principles, that has been certified by a certified public accountant, and that covers at least a 1-year period ending not more than 12 months before the date of application. The director may request more recent unaudited financial statements be filed with the application.

(b) A copy of the declaration sheet of any policy of excess insurance.

(i) A written estimate of loss reserve that is prepared by a qualified actuary.

(ii) A written estimate of loss reserve that is prepared by a qualified employee of a casualty insurance company.

(d) A copy of a written authorization that designates a specified employee of the applicant, or another authorized person, to receive and process claims that are submitted to the applicant.

(e) A copy of a claim form that is used by a person who submits a claim to the applicant for benefits due to suffering accidental bodily injury or property damage arising out of the ownership, operation, maintenance, or use of a motor vehicle that is registered or owned by the applicant.

(f) A list of all motor vehicles that are registered in this state in the name of the applicant at the time of application or that are to be self-insured under a certificate of selfinsurance issued to the applicant as determined at the time of application. The vehicles must be identified by all of the following:

(i) Make.

(ii) Model.

(iii) Year.

(iv) Vehicle identification number (VIN).

(v) Registration number.

(g) A written policy and procedure or detailed description on how claims will be processed and paid in a timely manner.

(5) A claim form that accompanies an application must include all of the following information:

(a) A statement of a claimant's right to personal protection insurance benefits, property protection insurance benefits, and residual liability insurance benefits under the no-fault law.

(b) A statement of a self-insurer's responsibility to pay claims in a timely manner.

(c) An instruction that directs claimants to contact the director concerning a selfinsurer's failure to fulfill its responsibilities under the no-fault law.

History

History: 1993 AACS; 2018 AACS.

Mich. Admin. Code R 257.534 Application; review; hearing; certificate duration; renewals {#sec-r-257.534 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 257.534}

Rule 4. (1) Upon receipt of a complete application for an original certificate of selfinsurance, the director shall promptly review the application and all supporting documents. Within 45 days after receipt, the director shall notify the applicant that the application has been approved or denied.

(2) If an application has been denied, the applicant may request an administrative hearing to review the denial. This hearing must be conducted in accordance with the procedures set forth in R 257.539. The director shall affirm or reverse the denial based upon the record made at the hearing.

(3) If an applicant meets the qualifications for receipt of a certificate of selfinsurance, the director shall issue the applicant a formal certificate that indicates that status as a self-insurer is conferred. An original certificate of self-insurance will expire 1 year after the effective date of the certificate.

(4) A self-insurer may apply for a renewal certificate of self-insurance by submitting a complete renewal application 45 days before the expiration of the previously issued certificate. The renewal application must be accompanied by the documents required pursuant to the provisions of R 257.533(4). The director shall promptly review the renewal application and all supporting documents. Within 30 days after receipt, the director shall notify the applicant that the renewal application has been approved or denied.

(5) If a renewal application has been denied, the applicant may request an administrative hearing to review the denial. This hearing must be conducted in accordance with the procedures set forth in R 257.539. The director shall affirm or reverse the denial based upon the record made at the hearing.

(6) If a renewal application is submitted and approved, the existing certificate of selfinsurance will be extended for 1 year from the date of expiration. A renewal application that is submitted after the expiration of the previously issued certificate is considered an application for an original certificate of self-insurance.

History

History: 1993 AACS; 2018 AACS.

Mich. Admin. Code R 257.535 Additional reports {#sec-r-257.535 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 257.535}

Rule 5. The director may require a self-insurer or applicant to submit additional reports, including an accident and claim activity report or a statement of claims and losses, and any relevant additional information that is necessary to determine the continuing ability of the self-insurer or applicant to pay present and future claims. Any additional report, statement, or information that is required must be made upon a form that is prescribed by the director and is due not later than 30 days after being requested by the director. If the director does not receive the additional report, statement, or information within the 30-day period, the self-insurer's certificate of self-insurance may be canceled or the applicant's application for a certificate of self-insurance may be denied.

History

History: 1993 AACS; 2018 AACS.

Mich. Admin. Code R 257.536 Loss reserve; use; amount; funding; expenditures; commingling; trust or escrow account {#sec-r-257.536 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 257.536}

Rule 6. (1) A loss reserve must be utilized to pay claims that are anticipated during the certification year and that are submitted for payment during that year and to pay claims that have been incurred and submitted before the certification year, but have not yet been paid by the applicant or self-insurer.

(2) Except as provided in subrule (7) of this rule, a fully funded loss reserve consists of an amount of money or investment grade securities that can be liquidated for face value, as determined by a qualified actuary, or as determined by a qualified employee of a casualty insurance company, that is sufficient to compensate claimants for all benefits that are due for claims that are to be paid or that are anticipated to be paid during the certification year and all benefits that are due for claims incurred before the certification year, but are to be paid or are anticipated to be paid during the certification year, including all benefits that may be due during the certification year for claims that can be anticipated or are incurred but not reported, exclusive of that portion of any claim that is covered by excess insurance.

(3) Before the beginning of a certification year, an applicant or self-insurer shall fully fund its loss reserve account.

(4) Loss reserve funds must only be expended to pay claims that are incurred and submitted under the no-fault law, the financial responsibility law contained in chapter V of the Michigan vehicle code, and these rules.

(5) Loss reserve funds must be kept in a segregated account and must not be commingled with other funds of the applicant or self-insurer. The funds must be physically located in this state unless otherwise approved by the director and may be maintained in a financial institution, in an escrow account, under a trust agreement, or by the applicant or self-insurer individually. With prior approval of the director, the loss reserve may be commingled for applicants with net worth of more than $50,000,000.00 and sufficient liquidity.

(6) For a governmental unit that has the authority to tax, a fully funded loss reserve consists of an amount of money that is included in the budget or reserve accounts of the governmental unit for the fiscal year, which includes its certification year, as determined by a qualified actuary, or as determined by a qualified employee of a casualty insurance company, and that is sufficient to compensate claimants for all benefits that are due for claims that are to be paid or that are anticipated to be paid during the certification year and all benefits that are due for claims that are incurred before the certification year, but are to be paid or are anticipated to be paid during the certification year, including all benefits that may be due during the certification year for claims that can be anticipated or are incurred but not reported, exclusive of that portion of any claim that is covered by excess insurance.

History

History: 1993 AACS; 2018 AACS.

Mich. Admin. Code R 257.537 Excess insurance; conditions for compliance {#sec-r-257.537 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 257.537}

Rule 7. The director shall not recognize a contract or policy of excess insurance in considering the ability of an applicant to fulfill its financial obligations under the no-fault law or the financial responsibility law contained in chapter V of the Michigan vehicle code, unless the contract or policy is in compliance with all of the following requirements:

(a) Is issued by a casualty insurance company.

(b) Is not cancelable or nonrenewable, unless the party that desires to cancel or not renew the policy gives written notice, by registered or certified mail, to the other party to the policy and to the director not less than 30 days before termination of the policy.

(c) Does not contain policy coverage exceptions or exclusions, or any other policy provisions, that are not in compliance with the no-fault law, the Michigan vehicle code, and these rules.

(d) Does not contain a commutation clause, unless the clause provides that a commutation does not relieve an underwriter of further liability either in respect to claims and expenses unknown at the time of the commutation or in respect to any claim that is apparently closed at the time of initial commutation and that is subsequently reopened by, or through, a competent authority. The clause must, in addition, provide for both of the following:

(i) If the underwriter proposes to settle its liability for future claims with respect to accidents that occur during the term of the policy by the payment of a lump sum to the self-insurer, to be fixed as provided in the commutation clause of the policy, then not less than 30 days' prior notice of the commutation must be given to the director by the underwriter or its agent by certified mail.

(ii) If any commutation is effected, then the director may direct that the sum be placed in trust for the benefit of all claimants who are entitled to future payments of compensation.

(e) Contains a clause that provides that if a self-insurer becomes insolvent and is unable to pay claims, the excess insurer shall make, directly to claimants or their authorized representatives, such payments as would have been made by the excess carrier to the self-insurer after it has been determined that the retention level has been reached on the excess insurance contract.

History

History: 1993 AACS; 2018 AACS.

Mich. Admin. Code R 257.538 Denial or cancellation of certificate; certificates issued before effective date of rules {#sec-r-257.538 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 257.538}

Rule 8. (1) The director may disapprove an application for a certificate of selfinsurance if the applicant fails to possess a qualification for the issuance of a certificate of self-insurance as set forth in R 257.532.

(2) The director may cancel a certificate of self-insurance if any of the following provisions applies to a self-insurer:

(a) Fails to pay a judgment that is rendered against the self-insurer upon a cause of action arising out of the ownership, operation, maintenance, or use of any motor vehicle, as defined in the Michigan vehicle code or the no-fault law, within 30 days after the judgment becomes final.

(b) Fails to pay an assessment bill that is issued pursuant to the provisions of section 3171 of the no-fault law within 30 days after billing.

(c) Fails to pay personal protection insurance benefits to which a claimant is entitled under the no-fault law within 30 days after the receipt of reasonable proof of the loss and the amount of loss.

(d) Files a petition in bankruptcy or is declared bankrupt by a federal court.

(e) Is placed in receivership, declared insolvent, or ordered dissolved or liquidated by a state court or has a financial manager appointed by the governor or any substantially equivalent action taken.

(f) Commits an act that would jeopardize the self-insurer's ability to pay claims that are filed with, or judgments that are obtained against, the self-insurer.

(g) Fails to continuously possess any qualification for a certificate of self-insurance as described in R 257.532 or fails to comply with any other provision of these rules.

(h) The director has reasonable grounds to believe that any information that is submitted by an applicant or self-insurer and that is contained in any application, renewal, document, statement, or report that is required pursuant to these rules is false.

History

History: 1993 AACS; 2018 AACS.

Mich. Admin. Code R 257.539 Administrative hearing {#sec-r-257.539 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 257.539}

Rule 9. (1) An administrative hearing that is conducted with regard to the denial of an application for a certificate of self-insurance, or before the cancellation of a certificate of self-insurance pursuant to the provisions of section 3101d of the no-fault law must be conducted pursuant to these rules, the procedures set forth in chapter 4 of 1969 administrative procedures act of 1969, 1969 PA 306, MCL 24.271 to MCL 24.287, and R 500.2101 to R 500.2142.

(2) Before the commencement of any proceeding with regard to the denial of a renewal application or the cancellation of a certificate of self-insurance, the director shall afford an applicant or self-insurer an opportunity to demonstrate compliance pursuant to section 92 of 1969 PA 306, MCL 24.292.

History

History: 1993 AACS; 2018 AACS.

Mich. Admin. Code R 257.540 Proof of insurance {#sec-r-257.540 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 257.540}

Rule 10. A person whose certificate of self-insurance has been canceled or whose renewal application has been denied shall immediately obtain a policy of insurance that affords security for the payment of benefits as required by the no-fault law for each motor vehicle that is required to be registered by the person in this state and shall provide proof of insurance to the director and the secretary of state.

History

History: 1993 AACS; 2018 AACS.

Financial Institutions Financial Institutions

R 445.1001 to R 445.1038 Mortgage and Home Lending Practices

Mich. Admin. Code R 445.1001 Definitions and explanation of terms {#sec-r-445.1001 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1001}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

FINANCIAL INSTITUTIONS BUREAU

MORTGAGE AND HOME IMPROVEMENT LENDING PRACTICES

(By authority conferred on the commissioner of the financial institutions bureau by section 10 of Act No. 135 of the Public Acts of 1977, as amended, being S445.1610 of the Michigan Compiled Laws)

Rule 1. (1) As used in these rules and the act:

(a) "Act" means Act No. 135 of the Public Acts of 1977, as amended, being S445.1601 et seq. of the Michigan Compiled Laws.

(b) "Administrative procedures act" means Act No. 306 of the Public Acts of 1969, as amended, being S24.201 et seq. of the Michigan Compiled Laws.

(c) "Branch office" or "service center" does not mean an electronic funds transfer facility or a branch or service center that is exclusively a drive-in branch or drive-in service center.

(d) "Bureau" means the financial institutions bureau of the Michigan department of commerce.

(e) "Contested case hearing" means a hearing conducted pursuant to chapter 4 of the administrative procedures act, being SS24.271 to 24.281 of the Michigan Compiled Laws.

(f) "Loan inquiry" means a request made in person or by telephone, letter, or other communication device that is related to the prospects of obtaining a mortgage loan or a home improvement loan from a credit-granting institution.

(g) "Neighborhood," as defined in section 1(h) of the act, includes an area designated by a single zip code number under the zoning improvement plan of the United States postal service for any area located within a standard metropolitan statistical area that has not been assigned a census tract number as defined by the United States bureau of the census.

(h) "Objections" means exceptions and written arguments made by a party adversely affected by a proposal for decision to a contested case hearing held pursuant to these rules.

(2) A home improvement loan secured by a mortgage shall be considered a home improvement loan and not a mortgage loan.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1002 Forms, reports, and correspondence; providing requested copies {#sec-r-445.1002 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1002}

Rule 2. A credit-granting institution shall be deemed in compliance with section 2(7) of the act if the copies of completed forms, reports, or correspondence requested by an applicant are mailed within a reasonable time after receipt of the request.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1003 Rescinded {#sec-r-445.1003 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1003}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1004 Pamphlet or document required pursuant to section 2(10) of the act; availability {#sec-r-445.1004 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1004}

Rule 4. The pamphlet or document required to be made available pursuant to section 2(10) of the act shall be available where loan applications or loan inquiries are routinely received by the credit-granting institution and where the public may obtain a copy without the aid of an employee of the credit-granting institution.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1005 Notice to inquirers and loan applicants required by section 5 of the act; printing; type size requirements {#sec-r-445.1005 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1005}

Rule 5. The text of the written notice required by section 5 of the act shall be printed in 18-point or larger medium face type, and the heading shall be printed in 48point or larger capital letter boldface type.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1006 Rescinded {#sec-r-445.1006 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1006}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1007 Rescinded {#sec-r-445.1007 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1007}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1008 Rescinded {#sec-r-445.1008 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1008}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1009 Rescinded {#sec-r-445.1009 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1009}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1010 Rescinded {#sec-r-445.1010 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1010}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1011 Affidavit required by section 6 of the act; form {#sec-r-445.1011 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1011}

Rule 11. The affidavit required by section 6 of the act shall be completed in a form prescribed by the commissioner.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1012 Rescinded {#sec-r-445.1012 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1012}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1013 Rescinded {#sec-r-445.1013 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1013}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1014 Rescinded {#sec-r-445.1014 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1014}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1015 Rescinded {#sec-r-445.1015 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1015}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1016 Rescinded {#sec-r-445.1016 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1016}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1017 Rescinded {#sec-r-445.1017 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1017}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1018 Rescinded {#sec-r-445.1018 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1018}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1019 Rescinded {#sec-r-445.1019 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1019}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1020 Rescinded {#sec-r-445.1020 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1020}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1021 Rescinded {#sec-r-445.1021 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1021}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1022 Complaint; form; initiation of investigation pursuant to section 8(1) of the act {#sec-r-445.1022 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1022}

Rule 22. (1) The commissioner shall prescribe a standardized complaint form and make it available to any individual who desires to file a written complaint alleging a violation of the act by a credit-granting institution.

(2) The commissioner shall provide a copy of the complaint form prescribed in subrule (1) of this rule to each depository credit-granting institution. The commissioner shall provide a copy of the complaint form prescribed in subrule (1) of this rule to each nondepository credit-granting institution that makes a request and provides its name and address. A credit-granting institution may duplicate the complaint form in order to provide sufficient copies for use by its loan applicants or inquirers.

(3) The complaint form shall be provided by a credit-granting institution upon receipt of a written request mailed or delivered to any office of the creditgranting institution or upon a request made in person at the main office of the creditgranting institution in the area of the main office where loan applications or loan inquiries are routinely received.

(4) An investigation pursuant to section 8(1) of the act shall be initiated if a written complaint is received by the bureau and is determined by the commissioner or a representative of the commissioner to contain sufficient information to constitute an allegation of a violation of the act by a credit-granting institution.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1023 Rescinded {#sec-r-445.1023 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1023}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1024 Investigation; location; written response; report of findings {#sec-r-445.1024 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1024}

Rule 24. (1) An investigation conducted pursuant to section 8(1) of the act may include an inspection of the books, records, papers, documents, or files of the creditgranting institution and may be conducted by either or both of the following means:

(a) An on-site investigation at the office of the credit-granting institution where an application was submitted or loan inquiry was made that is the subject of a written complaint or at an office of the credit-granting institution where the commissioner or a representative of the commissioner reasonably believes the materials and information necessary to conduct an investigation are located.

(b) By serving the chief executive officer of the credit-granting institution with a notice of investigation that requires a written response to an allegation of a violation of the act and submission of copies of all requested materials and information pertaining to the alleged violation.

(2) An investigation conducted pursuant to subrule 1(b) of this rule shall be conducted as follows:

(a) The notice of investigation shall contain a short, plain statement of the alleged violation of the act that enables the credit-granting institution to respond to each allegation with specificity and assemble all materials and information requested. A copy of the complaint form or written complaint shall be attached to the notice of investigation required by this rule.

(b) Each question shall be responded to in writing and in a manner deemed sufficient by the commissioner or a representative of the commissioner, and all documentation requested in the notice prescribed by this rule shall be submitted, within 20 days from the date of service of the notice of investigation. In the discretion of the commissioner, the time to submit materials and information may be extended not more than 10 days if the credit-granting institution provides written notice to the commissioner, within 15 days from the date of service, that it has made a good faith effort to comply with this rule.

(c) The response shall be accompanied by a sworn affidavit signed by an officer of the credit-granting institution stating that all of the questions have been fully answered and all documentation requested has been submitted to the commissioner. If, in the discretion of the commissioner or a representative of the commissioner, the responses or documentation submitted are insufficient to conduct an investigation, an additional request for information may be made or an on-site investigation may be conducted, or both.

(3) At the conclusion of an investigation pursuant to section 8(1) of the act and these rules, the commissioner or a representative of the commissioner shall issue a written report of findings to be served on the complainant and the chief executive officer of the credit-granting institution.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1025 Rescinded {#sec-r-445.1025 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1025}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1026 Rescinded {#sec-r-445.1026 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1026}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1027 Rescinded {#sec-r-445.1027 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1027}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1028 Rescinded {#sec-r-445.1028 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1028}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1029 Rescinded {#sec-r-445.1029 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1029}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1030 Violation of act; fine; recommendation in proposal for decision {#sec-r-445.1030 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1030}

Rule 30. (1) If after an investigation the commissioner, or a representative of the commissioner concludes that the credit-granting institution has violated the act, the report of findings shall contain a recommendation stating whether a fine should be imposed pursuant to section 12 of the act.

(2) If the report of findings contains a conclusion that the act has been violated, recommends the imposition of a fine, or both, a notice of opportunity for a contested case hearing shall accompany the report of findings served on the chief executive officer of the credit-granting institution.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1031 Rescinded {#sec-r-445.1031 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1031}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1032 Rescinded {#sec-r-445.1032 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1032}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1033 Rescinded {#sec-r-445.1033 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1033}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1034 Rescinded {#sec-r-445.1034 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1034}

History

History: 1979 AC; 1996 AACS.

Mich. Admin. Code R 445.1035 Contested case hearing; parties {#sec-r-445.1035 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1035}

Rule 35. Parties to a contested case hearing held pursuant to these rules shall be the credit-granting institution through its designated representative or representatives and the bureau.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1036 Contested case hearing; proposal for decision; objections; final decision; rehearing; judicial review {#sec-r-445.1036 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1036}

Rule 36. (1) A proposal for decision of a contested case hearing held pursuant to these rules shall be served on the chief executive officer of the credit-granting institution or any other party.

(2) The proposal for decision shall become the final decision of the bureau unless either of the following provisions is complied with:

(a) Within 20 days from the date of service, or within a period the commissioner may authorize, an adversely affected party files objections with the commissioner, who shall do either of the following:

(i) Review the hearing record, proposal for decision, and objections and within a reasonable time after the review, issue the final decision and final order of the bureau.

(ii) Order a hearing over which the commissioner presides and which is limited in scope to the issues raised in the objections, review the hearing records, and proposal for decision, and within a reasonable time after the review issue the final decision and final order of the bureau.

(b) After the expiration of the time allowed by this rule for the filing of objections during which no objections are filed and within 40 days from the date of service, the commissioner provides notice to the parties that he or she will review the hearing record and proposal for decision, and within a reasonable time after the review issue the final decision and final order of the bureau.

(3) Before a party may seek judicial review of a final decision and final order of the bureau, a motion requesting a rehearing shall be made to the commissioner in accordance with the administrative procedures act and a ruling on the motion shall be made.

(4) Any objection that has not been raised before the commissioner shall not be considered by a court, unless the failure or neglect to raise the objection is excused because of extraordinary circumstances.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1037 Payment of fine {#sec-r-445.1037 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1037}

Rule 37. If a fine is to be assessed against a credit-granting institution, it shall be payable to the "State of Michigan" for deposit in the general fund and shall be paid within 30 days from the date of the order, unless stayed by further order of the commissioner or an order of the circuit court that has jurisdiction over the matter.

History

History: 1979 AC; 1995 AACS.

Mich. Admin. Code R 445.1038 Rescinded {#sec-r-445.1038 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 445.1038}

History

History: 1979 AC; 1996 AACS.

R 451.1221 to R 451.1246 Debt Management

Mich. Admin. Code R 451.1221 Definitions {#sec-r-451.1221 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1221}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

DEBT MANAGEMENT

(By authority conferred on the director of the department of insurance and financial services by section 22 of the debt management act, 1975 PA 148, MCL 451.432)

Rule 1. As used in these rules:

(a) "Act" means the debt management act, 1975 PA 148, MCL 451.411 to 451.437.

(b) “Certified counselor” means that term as defined in section 2(b) of the act, MCL 451.412.

(d) "Firm" means a debt management licensee or exempt person.

(e) "Monthly amortizable amount" means the payment made in equal monthly amounts, extinguishing the fees and charges stated in the contract, less the $50.00 initial fee. No more than 1 monthly fee may be taken in any calendar month.

(f) "Rate" means the percentage of a firm's fees or charges in relation to the debt to be liquidated during the life of the contract.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1222 Application for license or exemption order; renewal application {#sec-r-451.1222 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1222}

Rule 2. (1) The application for license or exemption order must be on the form prescribed by the department.

(2) The application must be accompanied by the financial statements of the applicant for its last fiscal year and as of a date not more than 45 days prior to the filing.

(3) Financial statements, for the purposes of this rule, must include a balance sheet and income statement prepared in accordance with generally accepted accounting principles.

(4) Payment of fees must be made by a check payable to the "State of Michigan."

(5) The original application must be accompanied by a business history form for each officer and director if an association or corporation, for each partner if a partnership, for each member if a limited liability company, and for each proprietor, counselor, and officer manager. A credit report on the firm must also be submitted.

(6) A firm that has operated without interruption during the past year under a license or exemption order pursuant to section 4(2) of the act, MCL 451.414, may file a renewal application on the form prescribed by the department.

(7) The application must request a license or exemption order for each location from which the business of debt management is conducted.

(8) In the event of a change of business form, a new application must be filed prior to the effective date of the change. The application must include payment of a new fee as on renewal application.

(9) The department shall not accept for filing an application with a name that would cause confusion with the name of an existing firm or governmental agency or cause confusion about services to be received from a licensee.

History

History: 1979 AC; 1985 AACS; 2020 AACS.

Mich. Admin. Code R 451.1223 Amended application {#sec-r-451.1223 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1223}

Rule 3. (1) A proposed change of name of a firm must be filed with the department for approval prior to effecting the change. The department shall not accept a name change that would be confusing with the name of an existing firm or governmental agency, or cause confusion about services to be received from a licensee. An amended application must be filed contemporaneously with the name change.

(2) A firm shall file an amended application with the department within 5 days of the occurrence of any of the following:

(a) If a firm is a corporation, a change in its officers or directors.

(b) If a firm is a partnership, a change in its partners.

(d) If a firm is limited liability company, a change in its members.

(e) Conviction of an officer, director, partner, member, or sole proprietor of the firm of a felony or misdemeanor involving moral turpitude.

(f) Insolvency, filing in bankruptcy, receivership, or assignment for the benefit of creditors of the licensee.

(3) If a firm transfers its debt management business to another office at a different address, its license applies to its new office only if the following requirements are met:

(a) The department amends its application to reflect the effective date of the transfer.

(b) The firm ceases to conduct debt management business at the old address on the date indicated, and has notified its clients of the change of address not less than 5 days prior to the change.

(c) The surety company has notified the department that the bond furnished pursuant to the act applies in full force and effect to the new office after the date of the transfer.

(d) The firm has submitted its license certificate or order to the department for reissuance to cover the new office, and the license or order has been so reissued.

(4) The firm shall promptly file an amended application upon the occurrence of any material event affecting the accuracy of the information contained in the current application.

(5) If the partnership agreement of a firm provides for the substitution, withdrawal, or addition of partners of the partnership without winding up the partnership business, it is not necessary to obtain a new license or exemption order because of substitutions, withdrawals, or additions if evidence satisfactory to the department is furnished as to the following:

(a) That the surety bond furnished pursuant to the act shall continue in full force and effect.

(b) The financial responsibility, experience, character, and general fitness of new partners. The licensee shall furnish an executed business history form for each new partner.

(d) That at least 2/3 in number and interest of those who were partners when the license was applied for and issued are continuing as partners of the partnership, or that 1 of the original partners remains in a 2-person partnership and a new partner is added simultaneously with the departure of original partner.

(6) A change in the ownership of a sole proprietorship firm terminates the license and requires the filing of a new application and the issuance of a new license before continuance of the debt management business.

(7) If the firm seeks to open an additional branch office, it shall amend its current application to reflect the address of the additional office and the name of the office manager. The licensee or exempted person shall file the appropriate forms with the department and pay the statutory fee.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1224 Rescinded {#sec-r-451.1224 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1224}

History

History: 1979 AC; 1985 AACS.

Mich. Admin. Code R 451.1225 Notice of termination of bond {#sec-r-451.1225 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1225}

Rule 5. If a surety company gives 30 days' notice of termination of a bond, the firm, if continuing in the debt management business, shall furnish a satisfactory new bond before the expiration of the 30 days. Failure to maintain a bond is cause for issuance of a summary suspension order.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1226 Debt management contract; budget analysis format; creditors agreement form {#sec-r-451.1226 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1226}

Rule 6. (1) The applicant shall file a copy of its proposed debt management contract for debtors at the time of filing its application for review and acceptance by the department.

(2) The applicant shall file a copy of its proposed budget analysis format with the department.

(3) A true copy of the budget analysis must be provided to each debtor before a contract is signed.

(4) The applicant shall file a copy of its proposed creditor's agreement form with the department.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1227 Books and records {#sec-r-451.1227 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1227}

Rule 7. The firm shall make and keep current the following books and records relating to its business:

(a) Journals or other records of original entry containing an itemized daily record of all payments and receipts for, or on behalf of, debtors of the firm, all receipts and disbursements of cash, and all other debits and credits.

(b) Ledgers or other records reflecting all assets, liabilities, income, expense, and capital accounts. The books and records included in this subdivision are not current unless the firm updates and posts to the books and records at least monthly.

(c) Ledger accounts or other records, itemizing separately as to each debtor all receipts from the debtor, payments to the firm, and disbursements on behalf of the debtor, the creditor's representative contacted, the response obtained or whether there has been a response within 14 days after the mailing of the creditor consent form, any revised or special conditions or arrangements conditioning the consent, and the date the required consents were secured.

(d) A complaint file containing copies of all written complaints made to the firm by debtors.

(e) Personnel files for all employees, listing the employee’s name, current home address, home phone number, social security number, and a record of all compensation.

History

History: 1979 AC; 2020 AACS; 2024 MR 12, Eff. July 1, 2024.

Mich. Admin. Code R 451.1228 Financial reports; audit {#sec-r-451.1228 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1228}

Rule 8. (1) The department may at any time require the filing of special financial or other operational reports if it finds that such filing is in the public interest and for the protection of debtors.

(2) If a firm services more than 100 debtors, an audit is required of the firm annually. The audit must be done pursuant to an approved audit plan submitted by an independent accountant and accepted by the department in writing.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1229 Rescinded {#sec-r-451.1229 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1229}

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1230 Cancellation of contract {#sec-r-451.1230 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1230}

Rule 10. Upon written notice of cancellation of a contract, the firm shall promptly refund to the debtor all the amounts due the debtor. Failure to make prompt repayment shall constitute an unethical business practice, and may constitute grounds for summary suspension. The firm shall not be required to stop payment of checks to creditors pursuant to this cancellation, and may retain in the account funds relating to lost checks for subsequent reissue to the same creditor.

History

History: 1979 AC.

Mich. Admin. Code R 451.1231 Rescinded {#sec-r-451.1231 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1231}

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1232 Rescinded {#sec-r-451.1232 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1232}

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1233 Renewal applications {#sec-r-451.1233 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1233}

Rule 13. Renewal applications must be filed with the department by December 1 of each year. Failure to file by that date will result in the expiration of the license or order.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1234 Dishonest or unethical business conduct {#sec-r-451.1234 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1234}

Rule 14. Dishonest or unethical business conduct, as provided in section 9 of the act, MCL 451.419, includes, but is not limited to, the following:

(a) Failure to promptly refund a debtor's money upon written cancellation of a contract.

(b) Borrowing money from a debtor.

(c) Giving preference to creditors for the convenience or benefit of the firm rather than the primary benefit of the debtor.

(d) Receiving money from the debtor, except as provided in the contract with the debtor, which contract has been accepted as to form and content by the department.

(e) Failing to promptly record on the books of the firm any transaction involving funds of the debtor.

(f) Paying funds of a debtor to a fictitious creditor.

(g) Accepting a rebate, kickback, or other remuneration for payment of a debtor's obligations, except under a plan approved by the department and fully disclosed to the debtor.

(h) Using debtors' funds as compensating balances for loans.

(i) Making erasures or changes on the portion of the client account card used for recording payments received from the debtor, on checks issued to creditors, on fees taken, or on the dates of such entries. If a correction is needed, the error must have 1 line drawn through it and be initialed by an individual authorized by the licensee who did not make the correction or change. All entries must be made with ink, be typewritten, or be made by other machine entry.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1235 Posting statutory provision, address, and phone number; filing fee schedule and amendments thereto {#sec-r-451.1235 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1235}

Rule 15. (1) The firm shall prominently post at each business location and website the provisions of sections 13(1) and (2), 14(1), and 18 of the act, MCL 451.423, 451.424, and 451.428, as well as the address and phone number of the department.

(2) The firm shall annually file with the department its fee schedule or a schedule of its range of fees, and shall file amendments to that schedule 5 days prior to any change in fees charged to the debtor.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1236 Employment qualifications {#sec-r-451.1236 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1236}

Rule 16. Except as approved by the administrator, a firm shall not knowingly employ as an office manager or counselor a person who has done any of the following:

(a) Been convicted of a crime involving moral turpitude, which includes forgery, embezzlement, obtaining money under false pretenses, larceny, extortion, conspiracy to defraud, or any other like offense.

(b) Violated or failed to comply with a provision of the act, or a rule or order promulgated or issued pursuant to the act.

(c) Had a license to engage in the business of debt management revoked or suspended in this state or another state for any reason other than failure to pay licensing fees.

(d) Defaulted in the payment of money collected for others, including the discharge of debts, because of bankruptcy proceedings. The director of the department may, at his or her discretion, waive this restriction if provided with evidence of justifiable cause for the bankruptcy, plus convincing evidence of the fitness of the bankrupt party to carry out his or her functions under the act.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1237 Procedures; review {#sec-r-451.1237 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1237}

Rule 17. (1) Each firm shall prepare and maintain written policies and procedures for compliance with the act.

(2) Each firm shall provide each certified counselor of the firm with the written policies and procedures.

History

History: 1979 AC; 2020 AACS; 2024 MR 12, Eff. July 1, 2024.

Mich. Admin. Code R 451.1238 License {#sec-r-451.1238 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1238}

Rule 18. (1) A license must be issued for each main office and branch office rendering debt management service.

(2) Whenever a licensee or exempt person discontinues the business of debt management, whether totally or at a specific location, the license certificate, or exemption order, must be mailed to the department within 5 days. An explanation of the reason for discontinuance, a statement of any amounts remaining in the client trust account, and the plan and timetable for disbursement must accompany the license certificate, or exemption order, unless all accounts are transferred, without interruption in service, to another of the firm's branches.

(3) A license must not be terminated for a firm unless it is revoked or unless all payments due creditors or debtors have been made, and the department issues an order terminating the license.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1239 Budget analysis {#sec-r-451.1239 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1239}

Rule 19. (1) A copy of the budget analysis required under section 12 of the act, MCL 451.422, must be retained in the debtor's file for a period of 6 years after the last transaction.

(2) The budget analysis must be signed by a certified counselor of the firm who participated in the preparation of the analysis.

(3) The budget analysis must identify the type and amount of each debtor’s obligation by providing an adequate general description. Adequate general descriptions include “credit card,” “unsecured loan,” “vehicle loan,” “mortgage loan,” or other terms similarly identifying the type of debtor’s obligation. The terms “other,” “miscellaneous,” or “generic” are not adequate general descriptions.

History

History: 1979 AC; 2020 AACS; 2024 MR 12, Eff. July 1, 2024.

Mich. Admin. Code R 451.1240 Certification of compliance {#sec-r-451.1240 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1240}

Rule 20. (1) Every contract must set forth, in bold type, the set-up and cancellation fee provisions and amounts, and advise the prospective client to note these carefully before signing the contract.

(2) The department may approve the accumulation of debtor's funds in payment of obligations which are required to be paid in large lump sums, such as income and property taxes, insurance premiums, and house payments. All such accumulations, however, must be designated for a specific purpose and must not be used to pay for fees and charges, including the close out fee of the firm.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1241 Reconciliation {#sec-r-451.1241 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1241}

Rule 21. (1) The trust account reconciliation must contain provisions for recording and identifying the balance in each debtor's account, the balance from the bank statement, the check number and amount of each outstanding check, the date and amount of deposits not yet credited by the bank, the reconciled bank balance, the balance from the checkbook, and a detailed breakdown of any differences.

(2) Remedial action, as provided in section 15(5) of the act, MCL 451.425, must be either an immediate replacement of funds, or an immediate cessation of business until sufficient funds are placed in the account.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1242 Statement of disbursements {#sec-r-451.1242 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1242}

Rule 22. The statement prepared in compliance with section 16(1)(e) of the act, MCL 451.426, must be prepared as of a date no earlier than the date of the first full distribution to creditors under the contract.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1243 Separate remuneration prohibition; waiver or modification {#sec-r-451.1243 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1243}

Rule 23. All requests for waiver or modification of the separate remuneration prohibition of section 19(h) of the act, MCL 451.429, must be made in writing to the, setting forth in detail the need for such waiver or modification; the persons or entities from which the benefit will be solicited or sought; the amount or percentage of contribution solicited from donors in the capacity of creditor for a debtor; any relationship, affiliation, or connection creating an actual or potential conflict of interest between the parties involved; and any reciprocal arrangements made or to be made.

The department shall examine the proposal promptly and shall, within 15 days, notify the licensee or exempted person of its decision, or of the necessity for additional information. All such decisions must be in writing and must give the effective date of the declaratory ruling.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1244 Rescinded {#sec-r-451.1244 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1244}

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1245 Charges for other services {#sec-r-451.1245 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1245}

Rule 25. (1) A firm or affiliate thereof shall not charge a debtor for any services or goods, or make other charges, unless the firm or affiliate has filed with the department a plan setting forth the basis of charges, and the department has determined that such charges in the future do not result in an excessive fee in violation of section 18 of the act, MCL 451.428.

(2) If a firm or affiliate thereof proposes to alter its plan of charges, the amended plan must be filed with the department and approved prior to use.

History

History: 1979 AC; 2020 AACS.

Mich. Admin. Code R 451.1246 Rescission {#sec-r-451.1246 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 451.1246}

Rule 26. Rules 1201 to 1217 of the rules entitled "Debt Management," being R 451.1201 to R 451.1217 of the Michigan Administrative Code and appearing on pages 5792 to 5795 of the 1970-71 Annual Supplements to the Code, are rescinded.

History

History: 1979 AC.

R 487.2121 to R 487.2123 Deferred Presentment Statewide Database

Mich. Admin. Code R 487.2121 Definitions {#sec-r-487.2121 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 487.2121}

DEPARTMENT OF LABOR AND ECONOMIC GROWTH

OFFICE OF FINANCIAL AND INSURANCE SERVICES

DEFERRED PRESENTMENT STATEWIDE DATABASE

(By authority conferred on the commissioner of the Office of Financial and Insurance Services by sections 20, 22, and 51 of 2005 PA 244, 1969 PA 306, E.R.O.

No 2000-2 and E.R.O. No 2003-1; MCL 487.2140, MCL 487.2142, MCL 487.2171, MCL 24.231 to MCL 24.233, MCL 445.2003, and MCL 445.2011)

Rule 1. As used in these rules:

(a) "Act" means the Deferred Presentment Service Transactions Act, 2005 PA 244, MCL 487.2121 to MCL 487.2173.

(b) "Archive" means to copy data to a long-term storage mechanism apart from the database.

(d) "Customer transaction data" means all data reported to the database pertinent to a particular customer transaction, including the date of the transaction, identification of the licensee and location, the sum of money involved, the time payment is deferred, fees charged, any alleged violations of the Act, and any identifying customer information.

(e) "Database" means the database described specifically in Section 22 of the act.

(g) "Delete" means to erase data by overwriting the data.

(h) "Identifying customer information" means the name of the customer, his or her Social Security number, driver license number, or other state-issued identification number, address, any account numbers or information specific to a check or draft drawn by a customer on a bank, savings bank, savings and loan association, or credit union, and any other nonpublic, personal financial information of a customer entered into the database or that comes into the possession of the database provider through customer or licensee inquiry or report.

(i) Other terms defined in the act have the same meanings when used in these rules.

History

History: 2007 AACS.

Mich. Admin. Code R 487.2122 Data retention; archiving; deletion {#sec-r-487.2122 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 487.2122}

Rule 2. The database provider shall do all of the following:

(a) Retain data in the database only as required to ensure licensee compliance with the act.

(b) Archive data in the database concerning a customer transaction within 365 days after the customer transaction is closed unless notified by the commissioner that such data is needed for a pending enforcement action.

(d) Delete data concerning a customer transaction from the database 3 years after the customer transaction is closed or upon completion as determined by the Commissioner of any enforcement action pending 3 years after a customer transaction is closed, whichever is later.

History

History: 2007 AACS.

Mich. Admin. Code R 487.2123 Implementation {#sec-r-487.2123 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 487.2123}

Rule 3. For the purpose of implementing the archiving and deletion requirements of Section 22(3) of the act, MCL 487.2142(3) and R 487.2122, the database provider shall deem closed on July 31, 2006, the date the database became fully operational, all transactions closed during the database pilot program period described in Section 22(1) of the act, MCL 487.2142(1).

History

History: 2007 AACS.

R 493.1 to R 493.95 Regulatory Loan Licensees

Mich. Admin. Code R 493.1 Definitions {#sec-r-493.1 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.1}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

FINANCIAL INSTITUTIONS BUREAU

REGULATORY LOAN LICENSEES

(By authority conferred on the director of the department of insurance and financial services by section 21 of the regulatory loan act, 1939 PA 21, MCL 493.21, and Executive Reorganization Order Nos. 2003-1, 2008-1, 2008-4, 2011-4, and 2013-1, MCL 445.2011, 445.2005, 445.2025, 445.2030, and 550.991)

Rule 1. (1) As used in these rules:

(a) "Act" means the regulatory loan act, 1939 PA 21, MCL 493.1 to 493.24.

(b) “Department” means the department of insurance and financial services.

(2) Terms defined in the act have the same meaning when used in these rules.

History

History: 1981 AACS; 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.5 Rescinded {#sec-r-493.5 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.5}

History

History: 1981 AACS; 1983 AACS; 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.10 Rescinded {#sec-r-493.10 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.10}

History

History: 1981 AACS; 1983 AACS; 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.11 Records; daily transactions; borrowers; alphabetical index; judgments {#sec-r-493.11 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.11}

Rule 11. (1) A licensee shall maintain a record of all transactions involving receipt or disbursement of funds by each office from which the licensee operates. The record must identify each transaction; show separately payments received on principal and interest charges; show account numbers, names of borrowers, and all amounts disbursed; and be posted and balanced daily.

(2) A licensee shall maintain, from the date of loan inception, a record for each borrower that contains all of the following information:

(a) Borrower's name and address.

(b) Loan number.

(d) Loan date.

(e) Rate of charge.

(f) Repayment terms.

(g) Description of security.

(h) Names of endorsers, comakers, or sureties.

(i) Amount of filing or discharge fees collected from the borrower.

(j) Marital status only if the loan is secured by household goods.

(k) Any amount received or withheld from the borrower as a premium for insurance in connection with the loan, and the period covered by such insurance policy or policies.

(l) The date and amounts of all principal payments received, interest charges received, and cash disbursements pertaining to the loan, including court costs.

(m) The date to which interest charges are paid and the unpaid balance due on the principal.

(3) A licensee shall maintain an alphabetical index identifying the name, loan number, and original loan amount of each borrower, comaker, surety, guarantor, or endorser. Information concerning a comaker, surety, guarantor, or endorser must be readily identifiable.

(4) When a note is reduced to judgment, all of the following provisions must be complied with:

(a) The loan record maintained pursuant to subrule (2) of this rule must be clearly designated a judgment account.

(b) Payments received must be identified and applied on the judgment loan record.

(d) A licensee shall maintain a list of all loans reduced to judgment during the previous 25 months.

(e) A licensee that charges a borrower for court costs it incurred on a judgment account shall itemize the costs on the loan record and retain a receipt or other document substantiating the costs.

(f) A licensee shall retain a copy of the officer's return of execution issued when property is sold pursuant to a judgment.

(5) When property is taken in accordance with the terms of a security agreement or by judicial process or abandonment, the loan record must be designated clearly as a repossession account and must state when and how possession of the security was obtained and must identify the proceeds of the sale of the property. The licensee shall retain all of the following:

(a) A copy of any agreement entered into with the borrower with respect to terms of surrender.

(b) A copy of the notice of sale, together with evidence of mailing or personal delivery.

(d) A signed statement from the purchasers, or from the auctioneer if the sale was public, describing the collateral purchased and showing the amounts paid.

(e) Evidence that the sale was held on the date set forth in the notice of sale, including a record of any bids received.

(f) A copy of a detailed statement of final accounting sent to the borrower setting forth the disposition of the proceeds of the sale and the principal balance due on the account, if any.

(g) Paid receipts evidencing costs incurred in the repossession and sale of the security which have been charged to the borrower.

(h) A list of all loan accounts where collateral was repossessed each month during the previous 25 months.

(6) When the property is abandoned and the address of the borrower is uncertain or unknown, a notice of sale and statement of final accounting shall be sent to the last known address by registered or certified mail, return receipt requested, and the copies of the notice and statement shall be retained by the licensee.

History

History: 1983 AACS; 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.12 Records; assets, liabilities, income, and expenses; temporary entry items {#sec-r-493.12 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.12}

Rule 12. (1) A licensee shall maintain records showing all of its assets, liabilities, income, and expenses.

(2) A licensee shall maintain lists of temporary entry items.

(3) The records required by this rule must be posted not less frequently than monthly and must be available for examination by the department not later than 25 days after the end of a month.

History

History: 1983 AACS; 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.13 Records; errors {#sec-r-493.13 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.13}

Rule 13. A licensee shall clearly designate errors and correcting entries in the records required by R 493.11(2). Alternatively, a licensee may maintain a record of all errors made in the records required by R 493.11(2). This record shall identify the loan record in which an error occurred; the date, nature, and amount of the error; and the date of the correcting entry.

History

History: 1983 AACS.

Mich. Admin. Code R 493.14 Correspondence; retention by licensee {#sec-r-493.14 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.14}

Rule 14. Each licensee shall retain all its written correspondence with the department.

History

History: 1983 AACS; 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.15 Insurance certificate or policy; provision to borrower of copy of document evidencing indebtedness or constituting security; consolidation of loans; retention of documents evidencing indebtedness or security {#sec-r-493.15 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.15}

Rule 15. (1) When a licensee obtains insurance on behalf of the borrower in connection with a loan, wherein the premium is paid by the borrower, a properly executed policy or certificate of insurance must be furnished to the borrower within 15 days of the date of the loan. Such policy or certificate must clearly show all of the following:

(a) The name of the insurance company.

(b) The nature of the insurance.

(d) The amount of the premium.

(e) The effective date and expiration date of the policy.

(2) A licensee shall furnish to a borrower, upon request, a copy of any note, assignment, or other document, that evidences indebtedness or constitutes security and that the borrower is required to sign.

(3) Each licensee shall retain the original or a copy of each note, security agreement, or other evidence of indebtedness or security that has been signed by a borrower in favor of the licensee.

History

History: 1981 AACS; 1983 AACS; 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.16 Designated business hours {#sec-r-493.16 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.16}

Rule 16. A licensee shall prominently display, at each business location and website, the respective days and times a borrower will be able to make payments.

History

History: 1983 AACS; 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.20 Advertising {#sec-r-493.20 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.20}

Rule 20. (1) A licensee shall maintain copies of all advertising material sent to residents of Michigan. The date that the advertising material was used must be indicated on the material. A licensee that operates 2 or more physical locations or websites, or both, in Michigan may, upon notice to the director, maintain 1 record of the advertising material required by this rule in a centrally located office in Michigan for all licensed offices. All copies that are required to be maintained by this rule must be retained for a minimum of 3 years.

(2) An address must not be carried in any advertisement, except for the address of an active location or the home office of the licensee.

History

History: 1981 AACS; 1983 AACS; 1997 AACS; 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.22 Display of license information {#sec-r-493.22 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.22}

Rule 22. (1) A licensee shall display a copy of its license in a public area at each physical office location within Michigan.

(2) Each website operated by a licensee must display the assigned license number and effective date, identify the department as the licensee’s regulator, and provide the address and telephone number that a person may use to contact the department.

History

History: 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.24 Monthly statements {#sec-r-493.24 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.24}

Rule 24. A licensee shall provide each borrower listed on a loan document with a monthly statement of account that includes all of the following:

(a) Borrower’s name and address.

(b) Loan number.

(d) Loan date.

(e) Rate of charge.

(f) Amount of filing or discharge fees collected from the borrower.

(g) Any amount received or withheld from the borrower as a premium for insurance in connection with the loan, and the period covered by such insurance policy or policies.

(h) The date and amounts of all principal payments received, interest charges received, fees received, fees assessed, and cash disbursements pertaining to the loan, including court costs.

(i) The date to which interest charges are current, any unpaid fees, and the balance due on the principal.

History

History: 2020 MR 11, Eff. June 8, 2020.

Mich. Admin. Code R 493.95 Rescinded {#sec-r-493.95 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.95}

History

History: 1981 AACS; 2020 MR 11, Eff. June 8, 2020.

R 493.101 to R 493.120 Secondary Mortgage Licenses

Mich. Admin. Code R 493.101 Definitions {#sec-r-493.101 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.101}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

FINANCIAL INSTITUTIONS BUREAU

SECONDARY MORTGAGE LICENSEES

(By authority conferred on the commissioner of the financial institutions bureau by sections 19, 23, and 28 of Act No. 125 of the Public Acts of 1981, being SS493.69, 493.73, and 493.78 of the Michigan Compiled Laws)

Rule 1. (1) As used in these rules, "act" means Act No. 125 of the Public Acts of 1981, being §493.51 et seq. of the Michigan Compiled Laws.

(2) Terms defined in the act have the same meanings when used in these rules.

History

History: 1982 AACS; 1998-2000 AACS.

Mich. Admin. Code R 493.102 Rescinded {#sec-r-493.102 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.102}

History

History: 1982 AACS; 1998-2000 AACS.

Mich. Admin. Code R 493.110 Rescinded {#sec-r-493.110 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.110}

History

History: 1982 AACS; 1998-2000 AACS.

Mich. Admin. Code R 493.111 Records; daily transactions; borrowers; foreclosure loan accounts; location of records {#sec-r-493.111 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.111}

Rule 11. (1) A licensee or registrant shall maintain a record of all transactions covered by the act involving receipt or disbursement of money by the licensee or registrant each day.

The record shall identify each transaction and show all of the following:

(a) All payments received, shown separately.

(b) Account numbers.

(d) Amounts disbursed.A licensee or registrant shall post and balance the record daily.

(2) A servicer shall maintain a record for each borrower. The record shall contain all of the following information:

(a) Borrower's name and address.

(b) Loan number.

(d) The date any adjustment is made to the contract rate and the adjusted rate.

(e) Loan date.

(f) Contract rate.

(g) Repayment terms.

(h) Address of security.

(i) Any amount received or withheld from the borrowers as a premium for insurance in connection with the loan and the term covered by the insurance policy.

(j) The dates and amounts of all principal payments received, interest charges received, and cash disbursements pertaining to the loan, including court costs.

(k) The date to which interest charges are paid and the unpaid principal balance.

(l) Description and amount of fees collected from the borrower.

(3) A licensee or registrant shall maintain a list of all foreclosure loan accounts.

(4) A licensee or registrant shall store and make available, at the address appearing on the licensee's or registrant's license or registration certificate, all records maintained on transactions covered by the act. A licensee or registrant may store records at a site other than the address appearing on the licensee's or registrant's license or registration certificate if the licensee or registrant provides the commissioner with a notice of the site's address indicating which records are stored at the site's address.

History

History: 1982 AACS; 1998-2000 AACS.

Mich. Admin. Code R 493.112 Records; errors {#sec-r-493.112 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.112}

Rule 12. A licensee or registrant shall maintain a list of all loan records maintained under R 493.111 in which errors were made. A licensee or registrant shall provide, if requested for examination purposes, the date, nature, and amount of an error and its correcting entry.

History

History: 1982 AACS; 1998-2000 AACS.

Mich. Admin. Code R 493.113 Correspondence; retention by licensed office {#sec-r-493.113 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.113}

Rule 13. A licensee or registrant shall retain all written correspondence between the bureau and the licensee or registrant for a period of not less than 2 years.

History

History: 1982 AACS; 1998-2000 AACS.

Mich. Admin. Code R 493.114 Rescinded {#sec-r-493.114 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.114}

History

History: 1982 AACS; 1998-2000 AACS.

Mich. Admin. Code R 493.120 Rescinded {#sec-r-493.120 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 493.120}

History

History: 1982 AACS; 1998-2000 AACS.

Insurance Insurance

R 500.1 to R 500.6 Pre-Licensure Education Requirements

Mich. Admin. Code R 500.1 Definitions {#sec-r-500.1 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

PRE-LICENSURE EDUCATION REQUIREMENTS

(By authority conferred on the director of insurance and financial services by sections 210 and 1204a of the insurance code of 1956, 1956 PA 218, MCL 500.210 and 500.1204a, and Executive Reorganization Order No. 2013-1, MCL 550.991)

Rule 1. As used in these rules:

(a) "Code" means the insurance code of 1956, MCL 500.100 to 500.8302.

(b) “Director” means the director of the department of insurance and financial services.

History

History: 1988 AACS; 2019 AACS.

Mich. Admin. Code R 500.2 Program review and registration {#sec-r-500.2 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2}

Rule 2. (1) For a program to be registered as an insurance producer/solicitor program of study, program course materials and examinations must be submitted in their entirety to the director for review. The director will determine which courses meet the standards set forth in these rules for registration as qualified insurance producer/solicitor program courses.

(2) Any change in course material after approval is granted must also be submitted to the director not less than 2 weeks before implementation.

(3) The director may, at any time, request a review of any and all materials, classrooms, and instructors.

(4) A program of study must be taught by an instructor meeting the requirements of R 500.6.

(5) A program of study may be taught by any of the following methods: classroom, selfstudy, online, or a combination of any of those methods.

History

History: 1988 AACS; 2019 AACS.

Mich. Admin. Code R 500.3 Property , casualty, or personal lines insurance producers and solicitors; curriculum and final examination requirements {#sec-r-500.3 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.3}

Rule 3. (1) To qualify as a registered insurance producer/solicitor program of study on the subjects of property or casualty insurance, a course must provide a minimum of 20 hours of instruction for a property program, 20 hours of instruction for a casualty program, 20 hours of instruction for a personal lines program, or 40 hours of instruction for a program of study combining property and casualty curricula.

(2) The 20 hours of instruction and final examination for a property program must include all of the following areas, but may be taught in any order or combination the instructor chooses:

(a) Fourteen hours on the principles of property insurance, including the following subjects and their definitions, characteristics, and application:

(i) Fire insurance.

(ii) General property form.

(iii) Home insurance.

(iv) Personal and commercial automobile insurance.

(v) Inland marine insurance.

(vi) Commercial package policies.

(vii) Boiler and machinery insurance.

(viii) Rates and rate changes, including coinsurance.

(ix) Business interruption insurance.

(b) Six hours on professional ethics and the requirements of the insurance laws of Michigan, including, but not limited to, the following chapters of the Michigan insurance code:

(i) Chapter 12 of the code, MCL 500.1200 to 500.1247.

(ii) Chapter 20 of the code, MCL 500.2001 to 500.2093.

(iii) Chapter 21 of the code, MCL 500.2101 to 500.2131.

(iv) Chapter 31 of the code, MCL 500.3101 to 500.3179.

(v) Chapter 45 of the code, MCL 500.4501 to 500.4511.

(3) The 20 hours of instruction and final examination for a casualty program must include all of the following areas, but may be taught in any order or combination the instructor chooses:

(a) Fourteen hours on the principles of liability insurance, including the following subjects and their definitions, characteristics, and application:

(i) Basic principles of liability.

(ii) On-premises insurance.

(iii) Off-premises insurance.

(iv) Products and completed operations insurance.

(v) Contractual liability insurance.

(vi) Comprehensive general liability insurance.

(vii) Personal liability insurance as contained in home, auto, and personal umbrella policies.

(viii) Workers' compensation insurance.

(b) Six hours on professional ethics and the requirements of the insurance laws of Michigan, including, but not limited to, the following chapters of the Michigan insurance code:

(i) Chapter 12 of the code, MCL 500.1200 to 500.1247.

(ii) Chapter 20 of the code, MCL 500.2001 to 500.2093.

(iii) Chapter 21 of the code, MCL 500.2101 to 500.2131.

(iv) Chapter 31 of the code, MCL 500.3101 to 500.3179.

(v) Chapter 45 of the code, MCL 500.4501 to 500.4511.

(4) The 40 hours of instruction and final examination for a combined property and casualty program must include all of the following areas, but may be taught in any order or combination the instructor chooses:

(a) Thirty-four hours on all of the topics listed in subrules (2)(a) and (3)(a) of this rule.

(b) Six hours on the topics listed in subrule (3)(b) of this rule.

(5) A program of study completed under subrule (4) of this rule satisfies the program of study requirements for personal lines producers and solicitors.

History

History: 1988 AACS; 2019 AACS.

Mich. Admin. Code R 500.4 Life and accident and health producers; curriculum requirements {#sec-r-500.4 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.4}

Rule 4. (1) To qualify as a registered insurance producer program of study on the subject of accident and health insurance, a course must provide a minimum of 20 hours of study. These 20 hours of instruction and final examination must include all of the following areas, but may be taught in any order the instructor chooses:

(a) Fourteen hours on the principles of accident and health insurance, including, but not limited to, the following subjects and their definitions, characteristics, and application:

(i) Loss of time or disability policies.

(ii) Expense incurred policies.

(iii) Accidental death and dismemberment policies.

(iv) Hospital indemnity policies.

(v) Medicare supplement policies.

(vi) Dread disease policies.

(vii) Long-term care policies.

(viii) Group health insurance policies.

(ix) Major medical policies.

(x) Excess loss policies.

(xi) Blanket disability policies.

(b) Six hours on professional ethics and the requirements of the insurance laws of Michigan, including, but not limited to, all of the following chapters and subjects:

(i) Chapter 12 of the code, MCL 500.1200 to 500.1247.

(ii) Chapter 20 of the code, MCL 500.2001 to 500.2093.

(iii) Chapter 34 of the code, MCL 500.3400 to 500.3477.

(iv) Chapter 45 of the code, MCL 500.4501 to 500.4511.

(v) R 500.651 to R 500.669 of the Michigan Administrative Code.

(vi) The definitions and characteristics of all of the following:

(A) Title X of the consolidated omnibus budget reconciliation act of 1985 (Title X of COBRA), Public Law 99-272.

(B) Third-party administrators.

(D) Administrative services only contracts.

(E) Coordination of benefits.

(F) The patient protection and affordable care act, Public Law 111-148, as amended by the health care and education reconciliation act of 2010, Public Law 111-152.

(2) To qualify as a registered insurance producer program of study on the subject of life insurance, a course shall provide for a minimum of 20 hours of study. These 20 hours of instruction and final examination must include all of the following areas, but may be taught in any order the instructor chooses:

(a) Fourteen hours on the principles of life insurance, including, but not limited to, all of the following subjects and their definitions, characteristics, and application:

(i) All of the following types of policies and principal policy provisions:

(A) Term life policies.

(B) Whole life policies.

(D) Universal life policies.

(E) Variable life policies.

(ii) Annuities.

(iii) Premiums and dividends.

(iv) Group life insurance.

(b) Six hours on professional ethics and the requirements of the insurance laws of Michigan, including, but not limited to, all of the following chapters and subjects:

(i) Chapter 12 of the code, MCL 500.1200 to 500.1247.

(ii) Chapter 20 of the code, MCL 500.2001 to 500.2093.

(iii) Chapter 40 of the code, MCL 500.4000 to 500.4073.

(iv) Chapter 44 of the code, MCL 500.4400 to 500.4454.

(v) Chapter 45 of the code, MCL 500.4501 to 500.4511.

(vi) R 500.1371 to R 500.1387 of the Michigan Administrative Code.

(3) The 40 hours of instruction and final examination for a combined life and accident and health program must include all of the following areas, but may be taught in any order or combination the instructor chooses:

(a) Thirty-four hours on all of the topics listed in subrules (1)(a) and (2)(a) of this rule.

(b) Six hours on the topics listed in subrule (2)(b) of this rule.

History

History: 1988 AACS; 2019 AACS.

Mich. Admin. Code R 500.5 Methods of instruction {#sec-r-500.5 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.5}

Rule 5. (1) For classroom courses, instruction of the entire number of approved credit hours must be conducted on-site at the classroom location identified by the education provider.

(2) For self-study courses, contact between the instructor and student must be maintained through homework and examination. Instruction for the entire number of approved credit hours shall be completed by the student without classroom instruction. At the end of the course, students must pass a final examination which covers all subjects required to be taught in the course of instruction.

(3) For online courses, instruction of the entire number of approved credit hours must be conducted by electronic interaction between the instructor and the student. At the end of the course, students must pass a final examination which covers all subjects required to be taught in the course of instruction.

(4) For courses approved to be taught as a combination course (classroom and self-study, classroom and online, or self-study and online), instruction of the number of approved classroom hours must be conducted on-site at the classroom location identified by the education provider, and the number of approved self-study or online hours must be completed by the student outside the classroom. Contact between the instructor and student must be maintained through classroom contact, homework, and examination. At the end of the course, students must pass a final examination which covers all subjects required to be taught in the course of instruction.

(5) Records of response from students shall be maintained by the instructor for a period of 1 year.

History

History: 1988 AACS; 2019 AACS.

Mich. Admin. Code R 500.6 Instructor requirements {#sec-r-500.6 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.6}

Rule 6. (1) To qualify as an instructor of a registered insurance producer/solicitor program of study, a person shall possess at least 1 of the following:

(a) Three years of experience in the line of insurance which is to be taught.

(b) Three years of experience in teaching.

(2) Approved instructors must report any of the following to the director within 30 calendar days of the event, stating in his or her own words the circumstances of the event:

(a) Violation of an insurance law or violation of a rule, subpoena, order of the director, or of another state’s insurance commissioner.

(b) If the instructor has been found liable, has been convicted of, or has been found responsible in an administrative proceeding of using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this state or outside this state.

(c) Revocation of the instructor’s insurance producer license or its equivalent by any state, province, district, or territory of the United States.

(3) Approved instructors must obtain the director’s approval prior to scheduling or taking any Michigan insurance licensing examination.

History

History: 1988 AACS; 1997 AACS.; 2019 AACS.

R 500.21 to R 500.25 Good Moral Character

Mich. Admin. Code R 500.21 Definitions {#sec-r-500.21 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.21}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

GOOD MORAL CHARACTER

(By authority conferred on the director of the department of insurance and financial services by section 210 of the insurance code of 1956, 1956 PA 218, MCL 500.210, section 3 of 1974 PA 381, MCL 338.43, and Executive Reorganization Order No. 2013-1, MCL 550.991)

Rule 1. (1) As used in these rules:

(a) “Act” means the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.

(b) “Applicant” means an individual applying for a license as an insurance producer under section 1205 or 1206a of the act, MCL 500.1205 or 500.1206a; solicitor under section 1214 of the act, MCL 500.1214; adjuster under section 1224 of the act, MCL 500.1224; or insurance counselor under section 1234 of the act, MCL 500.1234.

(c) “Conviction” means a final judgment entered by a court upon a plea of guilty, guilty but mentally ill, or nolo contendere or upon a jury verdict or court finding that a defendant is guilty or guilty but mentally ill. However, the following are not considered a conviction for the purposes of these rules:

(i) An order of disposition entered under section 18 of chapter XIIA of the probate code of 1939, 1939 PA 288, MCL 712A.18, or a similar law of another jurisdiction applicable to the adjudication of juveniles.

(ii) A conviction that has been expunged. As used in this paragraph, “expunged” means that the conviction was set aside pursuant to 1965 PA 213, MCL 780.621 to 780.624, or a similar law of another jurisdiction, or the criminal history record information pertaining to the conviction was destroyed. A conviction is not considered expunged solely because the conviction is sealed, nonpublic, or otherwise not disclosable to 1 or more individuals or group of individuals pursuant to applicable law.

(iii) A conviction that has been reversed or vacated.

(d) “Director” means the director of the department of insurance and financial services.

(e) “Felony” means that term as defined in section 1 of 1974 PA 381, MCL 338.41.

(f) “Misdemeanor” means a violation of either of the following:

(i) A penal law that is not a felony.

(ii) An order, rule, or regulation if the violation is punishable by a term of imprisonment in a jail or prison.

(2) A term defined in the act has the same meaning when used in these rules.

History

History: 2023 MR 6, Eff. March 20, 2023.

Mich. Admin. Code R 500.22 Scope and applicability {#sec-r-500.22 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.22}

Rule 2. These rules do the following:

(a) Identify convictions, not already identified as a bar to licensure under the act, that evidence an applicant’s lack of good moral character.

(b) Establish criteria and standards for the director’s review of an applicant’s good moral character.

(c) Establish procedures for an applicant to submit a claim to rebut the use of a conviction as evidence of lacking good moral character.

History

History: 2023 MR 6, Eff. March 20, 2023.

Mich. Admin. Code R 500.23 Convictions that evidence a lack of good moral character {#sec-r-500.23 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.23}

Rule 3. (1) Subject to subrule (2) of this rule and only if an applicant’s criminal record includes a felony conviction that meets 1 or more of the requirements listed in section 2(2) of 1974 PA 381, MCL 338.42, an applicant’s lack of good moral character is evidenced by any of the following:

(a) The applicant’s conviction of any crime involving a substantial misrepresentation of any material fact, including any of the following:

(i) Bribery and bribe receipt.

(ii) Any type of fraud, including, but not limited to, insurance fraud, mail fraud, mortgage fraud, Medicare fraud, welfare fraud, unemployment fraud, land fraud, tax fraud, securities fraud, fraudulent use of a credit or debit card, or criminal fraud.

(iii) Filing a false claim.

(iv) Aiding or abetting the filing of a false claim.

(v) Allowing an establishment to be used for illegal purposes.

(b) The applicant’s conviction of any crime involving any of the following:

(i) Homicide.

(ii) Murder.

(iii) Manslaughter.

(iv) Mayhem.

(v) Negligent homicide.

(vi) Attempt to commit any of the offenses specified in paragraphs (i) and (ii) of this subdivision.

(d) The applicant’s conviction of any crime involving a violent act, or a threat of a violent act, against an individual or any crime constituting a sexual offense, including, but not limited to, any of the following:

(i) Criminal sexual conduct in any degree.

(ii) Activity for-profit involving any of the following:

(A) Child abuse, neglect, or exploitation.

(B) Kidnapping.

(D) Prostitution or related crimes, including, but not limited to, managing, human trafficking, and transporting.

(iii) Cruelty toward, or torture of, any individual.

(iv) Attempt to commit any of the offenses specified in paragraphs (i) and (iii) of this subdivision.

(e) The applicant’s conviction of any of the following crimes:

(i) Robbery.

(ii) Armed robbery.

(iii) Burglary crimes, including, but not limited to, breaking and entering, home invasion, and entering without breaking.

(iv) Attempt to commit any of the offenses specified in paragraphs (i), (ii), and (iii) of this subdivision.

(v) Arson.

(vi) Receiving or concealing stolen property.

(vii) Extortion.

(viii) Embezzlement.

(ix) Money laundering.

(x) Racketeering.

(xi) Theft offenses not otherwise identified in this rule that are punishable by a term of imprisonment of 1 year or more, including, but not limited to, larceny, larceny by trick, larceny by conversion, and obtaining property by false pretenses.

(xii) Forgery or any crime involving the falsification of documents.

(xiii) Criminal impersonation.

(xiv) Perjury or subornation of perjury.

(xv) Witness or evidence tampering.

(xvi) Crimes against children, including, but not limited to, possession of child pornography.

(xvii) Offenses involving poisoning.

(xviii) Offenses involving explosive materials or firearms.

(xix) Illicit trafficking in firearms or destructive devices.

(2) An applicant’s lack of good moral character is not evidenced by any of the following:

(a) A misdemeanor conviction for a violation of a traffic law.

(b) A criminal record of a conviction that may not be used, examined, or requested in making a determination of good moral character pursuant to section 3(1) of 1974 PA 381, MCL 338.43.

(c) For an applicant having not more than 1 conviction, a misdemeanor conviction that was entered more than 5 years before the date of the applicant’s application for licensure.

History

History: 2023 MR 6, Eff. March 20, 2023.

Mich. Admin. Code R 500.24 Director’s review; notice; submission of certain information or documentation {#sec-r-500.24 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.24}

Rule 4. (1) The director shall not consider a conviction, in and of itself, as conclusive proof that an applicant lacks good moral character, as provided in section 2(2) of 1974 PA 381, MCL 338.42.

(2) As provided in these rules and 1974 PA 381, MCL 338.41 to 338.47, the director may consider a conviction as evidence when determining an applicant’s good moral character. If a conviction is considered in that determination, the director shall also consider all of the following, as applicable:

(a) As provided in section 2(4) of 1974 PA 381, MCL 338.42, the applicant’s certificate of employability under section 34d of the corrections code of 1953, 1953 PA 232, MCL 791.234d, and any additional information regarding the applicant’s current circumstances, such as how long ago the offense occurred, whether the applicant completed the sentence for the offense, other evidence of rehabilitation, testimonials, employment history, and employment aspirations.

(b) Whether there is a reasonable relationship between the conduct relating to the conviction and the duties of the applicant if granted the license.

(d) The underlying facts of the conviction, including, but not limited to:

(i) The monetary value involved.

(ii) The applicant’s relationship to a victim.

(iii) The applicant’s age when the applicant was convicted.

(e) Whether the applicant disclosed his or her conviction on the application for licensure, and if the applicant did not make that disclosure, whether the applicant had good cause for the failure to make that disclosure.

(f) Any other information or documentation that the director considers appropriate in determining the applicant’s good moral character.

(3) To make a determination of an applicant’s good moral character, the director may require the applicant to submit 1 or more of the following, in a form and manner prescribed by the director:

(a) A copy of the official court records relating to the application’s conviction.

(b) A written statement from the applicant explaining the underlying facts relating to the conviction.

(c) Any other information or documentation relating to the applicant’s conviction that the director considers appropriate, including, but not limited to, information or documentation supporting a claim under R 500.25.

(4) At the conclusion of the director’s review, if the director determines that the applicant is not eligible for a license because of a lack of good moral character, the director shall provide the applicant with notice of the denial and an opportunity for a hearing or rehearing in accordance with section 5 of 1974 PA 381, MCL 338.45, and sections 1239(4) and 1242 of the act, MCL 500.1239 and 500.1242.

History

History: 2023 MR 6, Eff. March 20, 2023.

Mich. Admin. Code R 500.25 Claim to rebut use of conviction as evidence of lacking good moral character; submission of supporting information or documentation {#sec-r-500.25 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.25}

Rule 5. (1) If an applicant has a conviction that may be used as evidence of the applicant’s lack of good moral character, the applicant may provide the director with a claim for the purposes of rebutting that evidence by asserting 1 or more of the following:

(a) The applicant currently has the ability to, and is likely to, serve the public in a fair, honest, and open manner.

(b) The applicant has been rehabilitated.

(2) An applicant shall submit a claim described in subrule (1) of this rule with the application for the license in a form and manner prescribed by the director. The applicant shall submit with the claim supporting information, documentation, or a combination of both. In addition, the claim must include both of the following:

(a) A written statement by the applicant showing that 1 or more of the circumstances described in subrule (1) of this rule applies. The statement may include, but is not limited to, all the following:

(i) Length of time since the date of the applicant’s conviction.

(ii) Volunteer work performed by the applicant.

(iii) Employment history of the applicant.

(iv) Personal achievements of the applicant.

(v) Professional achievements of the applicant.

(vi) Educational achievements of the applicant, such as classes taken, certifications or licenses obtained, or degrees earned.

(vii) Organizational activities and community involvement of the applicant.

(viii) Meaningful contributions made by the applicant for the well-being of other individuals.

(ix) The applicant’s compliance with conditions of probation or parole and court-ordered obligations, including, but not limited to, full payment of fines and costs imposed as a result of a conviction.

(b) Two professional letters of reference from 2 different individuals that have worked with the applicant in a professional capacity. The letters must meet all of the following requirements:

(i) Be signed by the individual serving as a reference.

(ii) Be drafted and dated within 6 months before the date of the application for licensure.

(iii) Include a statement of how the individual knows the applicant and the length of time of their relationship.

History

History: 2023 MR 6, Eff. March 20, 2023.

R 500.31 to R 500.35 Pharmacy Benefit Manager Licensure and Regulation Act

Mich. Admin. Code R 500.31 Definitions {#sec-r-500.31 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.31}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

PHARMACY BENEFIT MANAGER LICENSURE AND REGULATION

(By authority conferred on the director of the department of insurance and financial services by sections 11 and 13 of the pharmacy benefit manager licensure and regulation act, 2022 PA 11, MCL 550.821 and 550.823)

Rule 1. (1) As used in these rules:

“Act” means the pharmacy benefit manager licensure and regulation act, 2022 PA 11, MCL 550.811 to 550.845.

(2) A term defined in the act has the same meaning when used in these rules.

History

History: 2023 MR 24, Eff. Jan 2, 2024.

Mich. Admin. Code R 500.32 Scope and applicability {#sec-r-500.32 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.32}

Rule 2. These rules establish all of the following:

(a) The application contents and fee.

(b) The license renewal schedule and renewal fee.

History

History: 2023 MR 24, Eff. Jan 2, 2024.

Mich. Admin. Code R 500.33 Application contents and fee; supplemental documents {#sec-r-500.33 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.33}

Rule 3. (1) To obtain a license, an applicant shall submit the following:

(a) An application on a form provided by the director.

(b) The supplemental documents required under section 11(2) of the act, MCL 550.821, and this rule.

(c) A nonrefundable application fee in an amount established by the director by bulletin. The director shall not adjust the application fee more than once per year.

(2) An applicant shall provide the following supplemental documents with an application submitted under subrule (1) of this rule:

(a) The documents required under section 11(2) of the act, MCL 550.821.

(b) A document providing the names, addresses, dates of birth, social security numbers, official positions, and professional qualifications of each individual who owns, legally or beneficially, 10% or more of the equity in the entity that is applying for a license.

(i) A list of every health plan or carrier on behalf of which the pharmacy benefit manager contracts with a pharmacy or a pharmacy services administration organization to provide pharmacy health services to individuals covered by the health plan or carrier.

(ii) A statement indicating all jurisdictions where the applicant has an application pending or has been registered, licensed, or otherwise certified to transact business as a pharmacy benefit manager.

(iii) A statement indicating whether:

(A) The pharmacy benefit manager or any individual responsible for the conduct of the affairs of the pharmacy benefit manager has had a pharmacy benefit manager certificate of authority or license denied or revoked for cause in another state.

(B) Any individual responsible for the conduct of the affairs of the pharmacy benefit manager has been convicted of, or has entered a plea of guilty or nolo contendere to, a felony without regard to whether adjudication was withheld.

(3) Any modification to the information required under subrule (2)(b) and (c) of this rule is significant, and, under section 11(3) of the act, MCL 550.821, the applicant shall file with the director a notice of modification to any information within 30 days after the modification.

History

History: 2023 MR 24, Eff. Jan 2, 2024.

Mich. Admin. Code R 500.34 License renewal schedule; license renewal fee {#sec-r-500.34 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.34}

Rule 4. (1) To renew an existing license for an additional 2 years, a pharmacy benefit manager shall file the materials required under this rule and section 11(10) of the act, MCL 550.821, no later than July 1 of the second calendar year after the calendar year in which the pharmacy benefit manager either first obtained or last renewed the existing license.

(2) A license expires if the pharmacy benefit manager fails to submit a complete renewal filing by the date established in subrule (1) of this rule. If a license expires under this subrule, the pharmacy benefit manager shall not operate in this state as a pharmacy benefit manager without first obtaining a new license through the process in R 500.33. On request and for good cause shown, the director may grant to a pharmacy benefit manager a reasonable extension of time not to exceed 30 days within which the renewal materials must be filed.

(3) A renewal filing is incomplete if the director determines that it does not contain a completed application and renewal schedule and full payment of the nonrefundable license renewal fee that is established by the director.

(4) A renewal application or a renewal schedule is not complete unless the licensee fully and accurately provides all the information and materials requested on any form provided by the director. The director has discretion to revise any form that the director provides under this subdivision.

(5) The director may establish the amount of the nonrefundable license renewal fee by bulletin. The director shall not adjust the license renewal fee more than once per year.

(6) A renewal filing is incomplete if the director determines that the renewal filing does not contain a retail pharmacy benefit manager network adequacy report, as required under section 17 of the act, MCL 550.827.

History

History: 2023 MR 24, Eff. Jan 2, 2024.

Mich. Admin. Code R 500.35 Suspension, revocation, and restriction of licensure; fines {#sec-r-500.35 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.35}

Rule 5. (1) The director may suspend the license of a pharmacy benefit manager as provided in sections 11(5) and (6) of the act, MCL 550.821. A pharmacy benefit manager whose license is suspended shall not operate within this state as a pharmacy benefit manager during the suspension.

(2) The director may revoke the license of a pharmacy benefit manager as provided in section 11(5) or (7) of the act, MCL 550.821. A pharmacy benefit manager whose license is revoked shall not operate within this state as a pharmacy benefit manager as of the date specified in the director’s order.

(3) The director may restrict the license of a pharmacy benefit manager under the authority of section 13 of the act, MCL 550.823. An order of the director to suspend or to restrict a license takes effect immediately, unless the order explicitly states otherwise. If a director’s order suspending or restricting a license explicitly allows the pharmacy benefit manager to operate after the order is issued, the affected pharmacy benefit manager shall operate for the period specified in the order and according to the conditions set forth in the order.

(4) When the director orders the suspension or revocation of a license under the act, the director has discretion to issue an order adapted to the underlying violation by requiring the pharmacy benefit manager to pay a fine or otherwise restricting the pharmacy benefit manager’s license.

(5) A pharmacy benefit manager whose license has been suspended or restricted under the act and these rules shall pay the fine specified in the order mandating the suspension or restriction. If the director’s order mandates a monthly fine until the underlying violation is remedied, the affected pharmacy benefit manager shall pay the specified fine each month until the pharmacy benefit manager demonstrates to the director, in a manner specified in the director’s order, that the pharmacy benefit manager has remedied the violation leading to the suspension or restriction. If the director’s order mandates any fine other than a monthly fine, the affected pharmacy benefit manager shall pay the fine specified in the order and comply with all other conditions set forth in the order.

History

History: 2023 MR 24, Eff. Jan 2, 2024.

R 500.51 to R 500.54 Disclosure of Material Transactions

Mich. Admin. Code R 500.51 Report of acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements {#sec-r-500.51 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.51}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

DISCLOSURE OF MATERIAL TRANSACTIONS

(By authority conferred on the commissioner of insurance by section 210 of Act No. 218 of the Public Acts of 1956, as amended, being S500.210 of the Michigan Compiled Laws)

Rule 1. (1) Every insurer domiciled in Michigan shall file a report with the commissioner disclosing material acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements, unless the acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements have been submitted to the commissioner for review, approval, or information purposes pursuant to other statutory or regulatory requirements.

(2) The report required in subrule (1) of this rule is due within 15 days after the end of the calendar month in which the transactions specified in subrule (1) of this rule occur.

(3) A complete copy of the report, including any exhibits or other attachments, shall also be filed with the national association of insurance commissioners.

(4) All reports obtained by, or disclosed to, the commissioner pursuant to this rule shall be confidential, shall not be subject to subpoena, and shall not be made public by the commissioner, the national association of insurance commissioners, or any other person without the prior written consent of the insurer to which it pertains, unless the commissioner, after giving the insurer that would be affected notice and an opportunity to he heard, determines that5 the interest of the policyholders, shareholders, or the public will be served by publication, in which event the commissioner may publish all or part of the report in the manner the commissioner deems appropriate. Notwithstanding the provisions of this subrule, if assurances are provided that the information contained in the report will be kept confidential, the commissioner may disclose the information to the insurance regulatory agencies of other states.

(5) Insurers are required to report material acquisitions and dispositions of assets and material nonrenewals, cancellations, or revisions of ceded reinsurance arrangements on a nonconsolidated basis, unless the insurer is part of a consolidated group of insurers that utilizes a pooling arrangement or 100% reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than $1,000,000.00 total direct and assumed premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than 5% of the insurer's capital surplus.

R 500.52 acquisitions and disposition of assets explained.

Rule 2. (1) As used in R 500.51, a material acqusition or disposition of assets is one which is nonrecurring and not in the ordinary course of business and which involves more than 5% of the reporting insurer's total admitted assets, as reported in its most recent statutory statement filed with the commissioner. A material acquisition or disposition includes the aggregate of any series of related acquisitions or dispositions during any 30-day period.

(2) Asset acquisitions subject to this rule include every purchase, lease, exchange, merger, consolidation, succession, or other acquisition other than the construction or development or real property by or for the reporting insurer or the acquisition of materials for such purpose.

(3) Asset dispositions subject to this rule include every assignment, whether for the benefit of creditors or otherwise, sale, lease, exchange, merger, consolidation, mortgage, hypothecation, abandonment, destruction, or other disposition.

(4) All of the following information is required to be disclosed in any report of a material acquisition or disposition of assets:

(a) The date of the transaction.

(b) The manner of acquisition or disposition.

(d) The nature and amount of the consideration given or received.

(e) The purpose of, or reason for, the transaction.

(f) The manner by which the amount of consideration was determined.

(g) The gain or loss recognized or realized as a result of the transaction.

(h) The name or names of the person or persons from whom the assets were acquired or to whom they were disposed.

History

History: 1996 AACS.
History: 1996 AACS.

Mich. Admin. Code R 500.53 Nonrenewals, cancellations, or revisions of ceded reinsurance agreements explained {#sec-r-500.53 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.53}

Rule 3. (1) As used in R 500.51, a material nonrenewal, cancellation, or revision of ceded reinsurance is one that, for property and casualty business, including accident and health business written by a property and casualty insurer, affects more than 50% of the health insurer's total ceded written premium or more than 50% of the insurer's total ceded indemnity and loss adjustment reserves as indicated in the insurer's most recent annual statement or, for life, annuity, anc accident and health business, affects more than 50% of the total reserve credit taken for business ceded, on an annualized basis, as indicated in the insurer's most recent annual statement.

(2) For either property and casualty business or life, annuity, and accident and health business, either of the following events shall constitute a material revision that shall be reported:

(a) An authorized reinsurer reinsuring more than 10% of the insurer's total ceded written premium is replaced by 1 or more unauthorized reinsurers.

(b) Previously established collateral requirements have been reduced or waived for 1 or more unauthorized reinsurers reinsuring collectively more than 10% of the insurer's total ceded written premium.

(3) Notwithstanding the provisions of subrules (1) and (2) of this rule, a report under R 500.51 shall not be required of either of the following provisions is complied with, as applicable:

(a) For property and casualty business, including accident and health business written by a property and casualty insurer, the insurer's total ceded written premium represents, on an annualized basis, less than 10% of its total written premium for direct and assumed business.

(b) For life, annuity, and accident and health business, the total reserve credit taken for business ceded represents, on an annualized basis, less than 10% of the statutory reserve requirement before any cession.

(4) All of the following information is required to be disclosed in any report of a material nonrenewal, cancellation, or revision of ceded reinsurance agreements:

(a) The effective date of the nonrenewal, cancellation, or revision.

(b) A description of the transaction, including identification of the initiator of the transaction.

(d) If applicable, the entity of the replacement reinsurers.

History

History: 1996 AACS.

Mich. Admin. Code R 500.54 Effective date of rules {#sec-r-500.54 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.54}

Rule 4. These rules shall take effect on July 1, 1996.

History

History: 1996 AACS.

R 500.61 to R 500.69 Utilization Review

Mich. Admin. Code R 500.61 Definitions {#sec-r-500.61 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.61}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

UTILIZATION REVIEW

(By authority conferred on the director of insurance and financial services by section 3157a of the insurance code of 1956, 1956 PA 218, 500.3157a, and Executive Reorganization Order No. 2013-1, MCL 550.991)

PART 1. GENERAL

Rule 61. As used in these rules:

(a) “Act” means the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.

(b) “Association” means the catastrophic claims association created under section 3104 of the act, MCL 500.3104.

(d) “Director” means the director of the department.

(e) “Facility” means an entity licensed by the state pursuant to the public health code, 1978 PA 368, MCL 333.1101 to 333.25211. The office of an individual practitioner is not considered a facility.

(f) “Injured person” means a person who has suffered an accidental bodily injury covered by personal protection insurance provided under chapter 31 or 31A of the act, MCL 500.3101 to 500.3179 and 500.3181 to 500.3189.

(g) “Insurer” means that term as defined in section 106 of the act, MCL 500.106.

(h) “Managed care option” means that term as defined in section 3181 of the act, MCL 500.3181.

(i) “Medically accepted standards” means the most appropriate practice guidelines for the treatment, training, products, services and accommodations provided to an injured person. These practice guidelines may include generally accepted practice guidelines, evidence-based practice guidelines, or any other practice guidelines developed by the federal government or national or professional medical societies, boards, and associations.

(j) “Personal protection insurance” means benefits provided under section 3107(1)(a) of the act, MCL 500.3107(1)(a).

(k) “Practitioner” means an individual who is licensed, registered, or certified as used in the public health code, 1978 PA 368, MCL 333.1101 to 333.25211.

(l) “Provider” means a physician, hospital, clinic, or other person providing treatment, training, products, services, and accommodations to an injured person.

(m) “Utilization review” means that term as defined in section 3157a(6) of the act, MCL 500.3157a(6).

History

History: 2020 MR 24, Eff. Dec. 18, 2020.

Mich. Admin. Code R 500.62 Scope and applicability {#sec-r-500.62 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.62}

Rule 62. These rules do all of the following:

(a) Establish criteria and standards for utilization review that identify utilization of treatment, training, products, services, and accommodations provided to an injured person for the injured person’s care, recovery, or rehabilitation as required under section 3107(1)(a) of the act, MCL 500.3107(1)(a), above the usual range of utilization, based on medically accepted standards.

(b) Establish procedures for all of the following:

(i) Acquisition of necessary records, medical bills, and other information concerning the treatment, training, products, services, and accommodations provided to an injured person.

(ii) For an insurer and for the association to request an explanation for, and requiring a provider to explain, the reasonable necessity or indication for treatment, training, products, services, and accommodations provided to an injured person.

(iii) Provider appeals to the department from an insurer’s or the association’s determination that the provider overutilized or otherwise rendered or ordered inappropriate treatment, training, products, services, and accommodations, or that the cost of the treatment, training, products, services, and accommodations was inappropriate under chapter 31 of the act, MCL 500.3101 to 500.3179, and rules promulgated thereunder.

(c) Apply to treatment, training, products, services, and accommodations provided after July 1, 2020, to an injured person who is insured under a policy of no-fault automobile insurance issued under chapter 31 or chapter 31A of the act, MCL 500.3101 to 500.3179 and 500.3181 to 500.3189.

(d) Apply to all insurers providing personal protection insurance under chapter 31 of the act, MCL 500.3101 to 500.3179 or under chapter 31A of the act, MCL 500.3181 to 500.3189, and to the association. Nothing in these rules should be construed to limit the ability of insurers and the catastrophic claims association to contract with a medical review organization to perform utilization review activities on their behalf. An insurer that uses a medical review organization remains responsible for complying with the act and any rules promulgated thereunder.

PART 2. REQUESTS FOR EXPLANATION AND RECORD RETENTION

R 500.63. Requests for explanation.

Rule 63. (1) If a provider provides treatment, training, products, services, or accommodations to an injured person that are not usually associated with, are longer in duration than, are more frequent than, or extend over a greater number of days than the treatment, training, products, services, or accommodations usually required for the diagnosis or condition for which the injured person is being treated, the insurer or the association may request that the provider explain the necessity or indication for the treatment, training, products, services, or accommodations in writing. An insurer or the association may request that the provider include in its written explanation medical records, bills, and other information concerning the treatment, training, products, services, or accommodations.

(2) If an insurer or the association requests a provider to provide a written explanation under this rule, the request must be submitted to the provider within 30 days of the insurer’s or association’s receipt of the bill related to the treatment, training, products, services, or accommodations.

(3) A provider that receives a request for a written explanation from an insurer or the association must respond within 30 days of receipt of the insurer’s or association’s request.

(4) If an insurer’s or the association’s request for records under subrule (1) of this rule requires the provider to provide medical records, bills, or other information in excess of that which customarily accompany a bill submitted to the insurer or the association, the insurer or the association must reimburse the provider at a reasonable and customary fee, plus the actual costs of copying and mailing, within 30 days of the insurer’s or association’s request.

PART 3. INSURER AND ASSOCIATION DETERMINATIONS AND PROVIDER

APPEALS

History

History: 2020 MR 24, Eff. Dec. 18, 2020.
History: 2020 MR 24, Eff. Dec. 18, 2020.

Mich. Admin. Code R 500.64 Determinations by an insurer or the association {#sec-r-500.64 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.64}

Rule 64. (1) If, after reviewing a provider’s written explanation provided under part 2 of these rules, an insurer or the association determines that a provider overutilized or otherwise rendered or ordered inappropriate treatment, training, products, services, or accommodations, or that the cost of the treatment, training, products, services, or accommodations was inappropriate under chapter 31 of the act, MCL 500.3101 to 500.3179, the insurer or the association must issue a written notice of the determination to a provider within 30 days of receipt of the provider’s written explanation. The notice must include all of the following:

(a) The criteria or standards on which the insurer relied in making its determination, with specific reference to the insurer’s utilization review program.

(b) The amount of payment to the provider that has been made as a result of the determination, including an explanation for the difference between that amount and the amount billed by the provider.

(c) If applicable, a description of any additional records the provider must submit to the insurer in order for the insurer or the association to reconsider its determination.

(d) A copy of the form referenced in R 500.65(1).

(e) The date of the determination.

(2) The association’s determination may be used by an insurer as the criteria or standards identified in an insurer’s written notice described in subrule (1) of this rule.

(3) An insurer’s or the association’s denial of a provider’s bill on the basis that the provider overutilized or otherwise rendered or ordered inappropriate treatment, training, products, services, or accommodations, or that the cost of the treatment, training, products, services, or accommodations was inappropriate under chapter 31 of the act, MCL 500.3101 to 500.3179, is a determination from which a provider may appeal to the department under R 500.65, regardless of whether the insurer has requested a written explanation from the provider under this rule.

History

History: 2020 MR 24, Eff. Dec. 18, 2020.

Mich. Admin. Code R 500.65 Appeals to the department {#sec-r-500.65 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.65}

Rule 65. (1) A provider may appeal a determination made by an insurer or the association.

The appeal must be filed within 90 days of the date of the disputed determination and must be made on a form prescribed by the department.

(2) Within 14 days of receipt of a provider appeal, the department shall notify the insurer or the association and the injured person of the appeal and request any additional information necessary to review the appeal.

(3) An insurer or the association may file a reply to a provider’s appeal no later than 21 days after the date of the notice provided under subrule (2) of this rule.

(4) The director shall base his or her decision upon written materials submitted by the parties. Failure of any party to supply any information in a timely manner shall result in a decision based upon information available to the director at the time of the decision.

(5) The director shall issue a decision within 28 days after the insurer or the association files a reply to a provider’s appeal or, if a reply is not filed, within 28 days after the time for filing a reply has expired. The director may, upon written notice to the insurer or the association and the provider, take an additional 28 days to issue a decision under this rule.

(6) If a provider appeals a determination made by an insurer and the department issues a decision that the provider is entitled to payment, the provider is entitled to interest on any overdue payments as set forth in section 3142 of the act, MCL 500.3142.

(7) A decision issued by the department under these rules is subject to judicial review as provided in section 244(1) of the act, MCL 500.244(1).

PART 4. INSURER UTILIZATION REVIEW PROGRAM

History

History: 2020 MR 24, Eff. Dec. 18, 2020.

Mich. Admin. Code R 500.66 Required components of an insurer’s utilization review program {#sec-r-500.66 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.66}

Rule 66. (1) Within 60 days of the effective date of these rules, insurers must have in place a utilization review program to review records and bills for treatment, training, products, services, and accommodations provided to an injured person that is above the usual range of utilization based on medically accepted standards.

(2) The utilization review program must do all of the following:

(a) Provide for bill review, including whether provider charges for treatment, training, products, services, and accommodations comply with chapter 31 of the act, MCL 500.3101 to 500.3179, and rules promulgated thereunder.

(b) Make determinations regarding the appropriateness of treatment, training, products, services, and accommodations based on medically accepted standards.

(3) Insurers must submit information regarding their utilization review program to the director annually on a form prescribed by the department.

(4) No later than 90 days after the submission of the information required under subrule (3) of this rule, the director shall issue a certification of the insurer’s utilization review program.

Certification shall be either unconditional or conditional. The director may extend the time for review by an additional 30 days upon written notice to the insurer.

(5) The director may issue unconditional certification for a period of 3 years.

(6) The director may issue conditional certification if it determines that the insurer or other entity does not substantially satisfy the criteria in subrule (2) of this rule. If the insurer agrees to undertake corrective action, then conditional certification shall be granted by the department for a maximum period of 1 year.

(7) The director may at any time modify an unconditional certification to a conditional certification if the director determines that an insurer has failed to comply with any of these rules. The director shall provide written notice to the insurer in the event of such a modification.

The unconditional certification shall be reinstated upon satisfactory completion of a corrective action plan developed by the insurer and approved by the director.

(8) The director may revoke a certification upon a finding that an insurer has failed to comply with any of the rules and has failed to satisfactorily complete a corrective action plan.

The director shall provide written notice to an insurer upon revocation.

History

History: 2020 MR 24, Eff. Dec. 18, 2020.

Mich. Admin. Code R 500.67 Renewal of certification {#sec-r-500.67 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.67}

Rule 67. An insurer must apply for renewal of its certification on a form prescribed by the department. The application must be submitted no less than 90 days prior to the expiration of the insurer’s current certification.

PART 5. ANNUAL REPORT AND RECORD RETENTION

History

History: 2020 MR 24, Eff. Dec. 18, 2020.

Mich. Admin. Code R 500.68 Annual report {#sec-r-500.68 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.68}

Rule 68. (1) No later than March 31 of each year, each insurer shall submit a report on a form prescribed by the department regarding utilization review data and activities. The department shall provide instruction to insurers regarding completion of the report.

(2) The annual report is subject to disclosure under the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246.

History

History: 2020 MR 24, Eff. Dec. 18, 2020.

Mich. Admin. Code R 500.69 Record retention {#sec-r-500.69 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.69}

Rule 69. Insurers, the association, and providers must retain copies of all requests, explanations, and determinations issued under these rules for at least two years after the date of the request, explanation, or written notice, and must submit them to the department upon request.

History

History: 2020 MR 24, Eff. Dec. 18, 2020.

R 500.71 to R 500.91 Holding Companies

Mich. Admin. Code R 500.71 Definitions {#sec-r-500.71 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.71}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

HOLDING COMPANIES

(By authority conferred on the director of the department of insurance and financial services by sections 210 and 1361 of the insurance code of 1956, 1956 PA 218, MCL 500.210 and 500.1361, and Executive Reorganization Order No. 2013-1, MCL 550.991)

Rule 1. (1) As used in these rules:

(a) “Act” means the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.

(b) “Chapter 13” means chapter 13 of the act, MCL 500.1301 to 500.1379.

(c) “Executive officer” means chief executive officer, chief operating officer, chief financial officer, treasurer, secretary, controller, and another individual performing functions corresponding to those performed by the individuals described in this subdivision without regard to title.

(d) “Ultimate controlling person” means the person that is not controlled by another person.

(2) A term defined in the act has the same meaning when used in these rules, unless a more specific definition of a term is provided under chapter 13, in which case the term defined in chapter 13 has the same meaning when used in these rules. A term not defined in the act has meaning according to industry usage when used in these rules.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.72 Purpose {#sec-r-500.72 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.72}

Rule 2. These rules set forth requirements and procedures that the director considers necessary to carry out chapter 13. These rules are necessary and appropriate in the public interest and for the protection of the policyholders in this state.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.73 Severability {#sec-r-500.73 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.73}

Rule 3. If a provision of these rules, or the application of these rules to a person or circumstance, is held invalid by a court of competent jurisdiction, that determination does not affect other provisions or applications of these rules that can be given effect without the invalid provision or application, and to that end, the provisions of these rules are severable.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.74 Forms; general requirements {#sec-r-500.74 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.74}

Rule 4. (1) The department shall make available forms, titled Form A, Form B, Form C, Form D, and Form F, that must be used to prepare the statements required under chapter 13. The forms are not intended as blank forms to fill in. The statements filed must contain the numbers and captions of all items. The text of the items may be omitted, as long as the answers to the items clearly indicate the scope and coverage of each item. All instructions, whether appearing under the items of the form or elsewhere in the form, must be omitted. Unless expressly provided otherwise, if an item is inapplicable or the answer is in the negative, an appropriate statement to that effect must be made.

(2) One complete copy of each statement, including exhibits and all other papers and documents filed as part of the statement, must be filed with the director in a manner prescribed by the department. The copy must be signed in the manner prescribed on the form or otherwise prescribed by the department. If an individual or group of individuals are ultimate controlling persons, the individuals shall sign the Form A, Form B, Form C, and Form F statements. The director shall reject a copy that is not properly signed until it is conformed. If the signature of a person is affixed pursuant to a power of attorney or other similar authority, a copy of the power of attorney or other authority must be filed with the statement.

(3) Statements must be prepared electronically. Statements must be easily readable and suitable for review and reproduction. Debits in credit categories and credits in debit categories must be designated to make them clearly distinguishable on photocopies. Statements must be in the English language and monetary values must be stated in United States currency. If an exhibit or other paper or document filed with the statement is in a language other than English, it must be accompanied by a translation into the English language and a monetary value shown in a foreign currency must be converted into United States currency, unless the director allows the monetary value to be shown in a foreign currency.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.75 Forms; incorporation of information by reference; summaries and omissions {#sec-r-500.75 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.75}

Rule 5. (1) Information required by an item of Form A, Form B, Form D, or Form F may be incorporated by reference in an answer or partial answer to another item. Information contained in a financial statement, annual report, proxy statement, statement filed with a governmental authority, or another document may be incorporated by reference in an answer or partial answer to an item of Form A, Form B, Form D, or Form F, as long as the document is filed as an exhibit to the statement. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the director that were filed within 3 years are not required to be attached as exhibits. References to information contained in exhibits or in documents already on file must clearly identify the material and specifically indicate that the material is incorporated by reference in the answer to the item. Material must not be incorporated by reference if the incorporation renders the statement incomplete, unclear, or confusing.

(2) If an item requires a summary or outline of the provisions of a document, only a brief statement must be made as to the pertinent provisions of the document. In addition to the statement, the summary or outline may incorporate by reference particular parts of an exhibit or document currently on file with the director that was filed within 3 years and may be qualified in its entirety by the reference. If 2 or more documents that must be filed as exhibits are substantially identical in all material respects, except as to the parties, the dates of execution, or other details, a copy of only 1 of the documents must be filed with a schedule identifying the omitted documents and setting forth the material details in which the documents differ from the documents that have a copy filed.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.76 Forms; information unknown or unavailable; extension {#sec-r-500.76 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.76}

Rule 6. (1) If it is impractical to furnish any required information, document, or report when it must be filed, a separate document must be filed with the director that does all of the following:

(a) Identifies the information, document, or report in question.

(b) States why filing the information, document, or report when required is impractical.

(2) The request in subrule (1)(c) of this rule is considered granted unless the director denies the request within 60 days after receipt of the request.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.77 Forms; additional information and exhibits {#sec-r-500.77 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.77}

Rule 7. In addition to the information expressly required to be included in Form A, Form B, Form C, Form D, and Form F, the director may request additional material information as necessary to make the information contained in the form not misleading. Exhibits may be filed in addition to those expressly required by the statement. The exhibit must clearly indicate the subject matter that it refers to. Changes to Form A, Form B, Form C, Form D, or Form F must include on the top of the cover page the phrase: “Change No. [insert number] to” and indicate the date of the change, not the date of the original filing.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.78 Subsidiaries of domestic insurers {#sec-r-500.78 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.78}

Rule 8. The authority to invest in subsidiaries under section 1341a of the act, MCL 500.1341a, is in addition to any authority to invest in subsidiaries contained in another provision of the act.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.79 Acquisition of control; statement filing; Form A {#sec-r-500.79 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.79}

Rule 9. A person required to file a statement under section 1311 of the act, MCL 500.1311, shall furnish the required information on Form A.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.80 Amendments to Form A {#sec-r-500.80 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.80}

Rule 10. An applicant required to file Form A shall promptly advise the director of changes in the information furnished on Form A arising after the date the information was furnished but before the director’s disposition of the application.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.81 Acquisition of certain “domestic insurers”; Form A {#sec-r-500.81 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.81}

Rule 11. (1) If the person being acquired is determined to be a domestic insurer solely because of the provisions of section 1311(4) of the act, MCL 500.1311, the name of the domestic insurer on the cover page must be indicated as follows:

“ABC Insurance Company, a subsidiary of XYZ Holding Company.”

(2) If a domestic insurer described section 1311(4) of the act, MCL 500.1311, is being acquired, a reference to “the insurer” contained in Form A refers to both the domestic subsidiary insurer and the person being acquired.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.82 Annual registration of insurers; statement filing; Form B {#sec-r-500.82 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.82}

Rule 12. An insurer required to file an annual registration statement under section 1324 of the act, MCL 500.1324, shall furnish the required information on Form B by May 1 of each year for the immediately preceding calendar year, unless an extension is granted by the director under section 1324 of the act, MCL 500.1324.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.83 Summary of changes to registration; statement filing; Form C {#sec-r-500.83 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.83}

Rule 13. An insurer required to file an annual registration statement under section 1324 of the act, MCL 500.1324, shall furnish the required information on a summary of changes to registration statement, Form C, by May 1 of each year for the immediately preceding calendar year, unless an extension is granted by the director under section 1324 of the act, MCL 500.1324.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.84 Amendments to Form B {#sec-r-500.84 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.84}

Rule 14. (1) An amendment to Form B must be filed within 15 days after the end of a month in which there is a material change to the information provided in the annual registration statement.

(2) Amendments must be filed in the Form B format with only those items that are being amended reported. Each amendment must include “Amendment No. [insert number] to Form B for [insert year]” at the top of the cover page and indicate the date of the change, not the date of the original filings.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.85 Alternative and consolidated registrations {#sec-r-500.85 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.85}

Rule 15. (1) An authorized insurer may file a registration statement on behalf of an affiliated insurer or insurers that are required to register under section 1324 of the act, MCL 500.1324. A registration statement may include information not required by the act regarding an insurer in the insurance holding company system, even if the insurer is not authorized to do business in this state. Instead of filing a registration statement on Form B, the authorized insurer may file a copy of the registration statement or similar report that it must file in its state of domicile if both of the following are met:

(a) The statement or report contains substantially similar information required to be furnished on Form B.

(b) The filing insurer is the principal insurance company in the insurance holding company system.

(2) The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact, and an insurer filing a registration statement or report instead of Form B on behalf of an affiliated insurer shall set forth a brief statement of facts that substantiate the filing insurer’s claim that it, in fact, is the principal insurer in the insurance holding company system.

(3) With the prior approval of the director, an unauthorized insurer may follow any of the procedures that could be done by an authorized insurer under subrule (1) of this rule.

(4) An insurer may take advantage of the provisions of section 1329 or 1330 of the act, MCL 500.1329 and 500.1330, without obtaining the prior approval of the director. The director reserves the right to require individual filings if the director finds the filings necessary in the interest of clarity, ease of administration, or the public good.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.86 Disclaimer of affiliation and termination of registration {#sec-r-500.86 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.86}

Rule 16. (1) A petition for disclaimer of affiliation or a request for termination of registration claiming that a person does not, or will not upon the taking of some proposed action, control another subject person must contain the following information:

(a) The number of authorized, issued, and outstanding voting securities of the subject person.

(b) With respect to the person whose control is denied and all affiliates of that person, the number and percentage of shares of the subject person’s voting securities that are held of record or known to be beneficially owned, and the number of shares there is a right to acquire, directly or indirectly.

(c) All material relationships and bases for affiliation between the subject person and the person whose control is denied and all affiliates of that person.

(d) A statement explaining why the person must not be considered to control the subject person.

(2) The burden of proof for establishing that an affiliation does not exist rests with the petitioner and is subject to the director’s approval.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.87 Transactions subject to prior notice; notice filing; Form D {#sec-r-500.87 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.87}

Rule 17. (1) An insurer required to give notice of a proposed transaction pursuant to section 1341 of the act, MCL 500.1341, shall furnish the required information on Form D.

(2) Agreements for cost sharing services and management services must, at a minimum, do all of the following, as applicable:

(a) Identify the person providing services and the nature of the services.

(b) Set forth the methods to allocate costs.

(c) Require timely settlement, not less frequently than on a quarterly basis, and compliance with the requirements in the NAIC Accounting Practices and Procedures Manual.

(d) Prohibit advancement of money by the insurer to the affiliate except to pay for services defined in the agreement.

(e) State that the insurer shall maintain oversight for functions provided to the insurer by the affiliate and that the insurer shall monitor services annually for quality assurance.

(f) Define books and records of the insurer to include all books and records developed or maintained under or related to the agreement.

(g) Specify that all books and records of the insurer are and remain the property of the insurer, held for the benefit of the insurer and are subject to the control of the insurer.

(h) State that all money and invested assets of the insurer are the exclusive property of the insurer, held for the benefit of the insurer and are subject to the control of the insurer.

(i) Include standards for termination of the agreement with and without cause.

(j) Include provisions for indemnification of the insurer if there is gross negligence or willful misconduct on the part of the affiliate providing the services.

(k) Specify that if the insurer is placed in receivership or seized by the director under chapter 81 of the act, MCL 500.8101 to 500.8160, all of the following apply:

(i) All of the rights of the insurer under the agreement extend to the receiver or director.

(ii) All books and records must immediately be made available to the receiver or the director and must be turned over to the receiver or director immediately upon the receiver’s or director’s request.

(l) Specify that the affiliate has no automatic right to terminate the agreement if the insurer is placed in receivership pursuant to chapter 81 of the act, MCL 500.8101 to 500.8159.

(m) Specify that the affiliate shall continue to maintain any systems, programs, or other infrastructure notwithstanding a seizure by the director under chapter 81 of the act, MCL 500.8101 to 500.8159, and shall make them available to the receiver, for so long as the affiliate continues to receive timely payment for services rendered.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.88 Enterprise risk report; Form F {#sec-r-500.88 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.88}

Rule 18. The ultimate controlling person of an insurer required to file an enterprise risk report pursuant to section 1325a of the act, MCL 500.1325a, shall furnish the required information on Form F.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.89 Group capital calculation {#sec-r-500.89 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.89}

Rule 19. (1) If an insurance holding company system has previously filed the annual group capital calculation at least once, the lead state commissioner has the discretion to exempt the ultimate controlling person from filing the annual group capital calculation if the lead state commissioner makes a determination based upon that filing that the insurance holding company system meets all of the following criteria:

(a) Has annual direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, of less than $1,000,000,000.00.

(b) Has no insurers within its holding company structure that are domiciled outside of the United States or 1 of its territories.

(c) Has no banking, depository, or other financial entity that is subject to an identified regulatory capital framework within its holding company structure.

(d) The holding company system attests that there are no material changes in the transactions between insurers and non-insurers in the group that have occurred since the last filing of the annual group capital calculation.

(e) The non-insurers within the holding company system do not pose a material financial risk to the insurer’s ability to honor policyholder obligations.

(2) If an insurance holding company system has previously filed the annual group capital calculation at least once, the lead state commissioner has the discretion to accept instead of the group capital calculation a limited group capital filing if both of the following apply:

(a) The insurance holding company system has annual direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, of less than $1,000,000,000.00.

(b) All of the following additional criteria are met:

(i) Has no insurers within its holding company structure that are domiciled outside of the United States or 1 of its territories.

(ii) Does not include a banking, depository, or other financial entity that is subject to an identified regulatory capital framework.

(iii) The holding company system attests that there are no material changes in transactions between insurers and non-insurers in the group that have occurred since the last filing of the report to the lead state commissioner and the non-insurers within the holding company system do not pose a material financial risk to the insurer’s ability to honor policyholder obligations.

(3) For an insurance holding company that has previously met an exemption with respect to the group capital calculation pursuant to subrule (1) or (2) of this rule, the lead state commissioner may require at any time the ultimate controlling person to file an annual group capital calculation, completed in accordance with the group capital calculation instructions, if any of the following criteria are met:

(a) An insurer within the insurance holding company system is in a risk-based capital action level event, as prescribed by the director in an order issued under section 438 of the act, MCL 500.438, or otherwise prescribed by the director, or a similar standard for a non-United States insurer.

(b) An insurer within the insurance holding company system meets 1 or more of the standards of an insurer determined to be in hazardous financial condition as established under section 436a of the act, MCL 500.436a.

(c) An insurer within the insurance holding company system otherwise exhibits qualities of a troubled insurer as determined by the lead state commissioner based on unique circumstances including, but not limited to, the type and volume of business written, ownership and organizational structure, federal agency requests, and international supervisor requests.

(4) A non-United States jurisdiction is considered to recognize and accept the group capital calculation if it satisfies the following criteria:

(a) With respect to an exemption described under section 1325b(3)(d) of the act, MCL 500.1325b, either of the following:

(i) The non-United States jurisdiction recognizes the United States state regulatory approach to group supervision and group capital, by providing confirmation by a competent regulatory authority, in that jurisdiction, that insurers and insurance groups whose lead state is accredited by the NAIC under the NAIC Accreditation Program are subject only to worldwide prudential insurance group supervision including worldwide group governance, solvency and capital, and reporting, as applicable, by the lead state and shall not be subject to group supervision, including worldwide group governance, solvency and capital, and reporting, at the level of the worldwide parent undertaking of the insurance or reinsurance group by the non- United States jurisdiction.

(ii) Where no United States insurance groups operate in the non-United States jurisdiction, that non-United States jurisdiction indicates formally in writing to the lead state with a copy to the International Association of Insurance Supervisors that the group capital calculation is an acceptable international capital standard. This serves as the documentation otherwise required in paragraph (i) of this subdivision.

(b) The non-United States jurisdiction provides confirmation by a competent regulatory authority in that jurisdiction that information regarding insurers and their parent, subsidiary, or affiliated entities, if applicable, must be provided to the lead state commissioner in accordance with a memorandum of understanding or similar document between the commissioner and that jurisdiction, including, but not limited to, the International Association of Insurance Supervisors Multilateral Memorandum of Understanding or other multilateral memoranda of understanding coordinated by the NAIC. The commissioner shall determine, in consultation with the NAIC Committee Process, if the requirements of the information sharing agreements are in force.

(5) A list of non-United States jurisdictions that recognize and accept the group capital calculation must be published through the NAIC Committee Process as follows:

(a) A list of jurisdictions that recognize and accept the group capital calculation pursuant to section 1325b(3)(d) of the act, MCL 500.1325b, is published through the NAIC Committee Process to assist the lead state commissioner in determining which insurers shall file an annual group capital calculation. The list must clarify those situations in which a jurisdiction is exempted from filing under section 1325b(3)(d) of the act, MCL 500.1325b. To assist with a determination under section 1325b(4) of the act, MCL 500.1325b, the list must also identify whether a jurisdiction that is exempted under either sections 1325b(3)(c) and (d) of the act, MCL 500.1325b, requires a group capital filing for a United States based insurance group’s operations in that non-United States jurisdiction.

(b) For a non-United States jurisdiction where no United States insurance groups operate, the confirmation provided to meet the requirement of subrule (4)(a)(ii) of this rule serves as support for recommendation to be published as a jurisdiction that recognizes and accepts the group capital calculation through the NAIC Committee Process.

(c) If the lead state commissioner makes a determination pursuant to section 1325b(3)(d) of the act, MCL 500.1325b, that differs from the NAIC List, the lead state commissioner shall provide thoroughly documented justification to the NAIC and other states.

(d) Upon determination by the lead state commissioner that a non-United States jurisdiction no longer meets 1 or more of the requirements to recognize and accept the group capital calculation, the lead state commissioner may provide a recommendation to the NAIC that the non-United States jurisdiction be removed from the list of jurisdictions that recognize and accepts the group capital calculation.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.90 Extraordinary dividends and reporting of all dividends {#sec-r-500.90 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.90}

Rule 20. (1) Requests for approval of extraordinary dividends or another extraordinary distribution to shareholders must include all of the following:

(a) The amount of the proposed dividend.

(b) The date established for payment of the dividend.

(c) A statement as to whether the dividend is to be in cash or other property and, if in property, a description of the property, its cost, and its fair market value together with an explanation of the basis for valuation.

(d) A copy of the calculations determining whether the proposed dividend is extraordinary.

The work paper must include all of the following information:

(i) The amounts, dates, and form of payment of all dividends or distributions, including regular dividends but excluding distributions of the insurers own securities, paid within the period of 12 consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought and commencing on the day after the same day of the same month in the last preceding year.

(ii) Surplus as regards policyholders, which is the total capital and surplus, as of the preceding December 31.

(iii) If the insurer is a life insurer, the net gain from operations for the 12-month period ending the preceding December 31.

(iv) If the insurer is not a life insurer, the net income less realized capital gains for the 12month period ending the preceding December 31 and the 2 preceding 12-month periods.

(v) If the insurer is not a life insurer, the dividends paid to stockholders excluding distributions of the insurer’s own securities in the preceding 2 calendar years.

(e) A balance sheet and statement of income for the period intervening from the last annual statement filed with the director and the end of the month preceding the month in which the request for dividend approval is submitted.

(f) A brief statement as to the effect of the proposed dividend upon the insurer’s surplus and the reasonableness of surplus in relation to the insurer’s outstanding liabilities and the adequacy of surplus relative to the insurer’s financial needs.

(2) Subject to section 1343(4) of the act, MCL 500.1343, a domestic insurer that is a member of an insurance holding company system and declares a shareholder dividend shall report the dividend to the director within 5 business days after declaring the dividend and not less than 10 business days before the payment.

(3) Subject to section 1343(5) of the act, MCL 500.1343, an insurer subject to registration under section 1324 of the act, MCL 500.1324, shall not pay an extraordinary dividend or make another extraordinary distribution to its shareholders until 30 days after the director has received notice of the declaration and has not disapproved or has approved the payment within that period.

(4) All filings pursuant to section 1343 of the act, MCL 500.1343, that either report the declaration of all dividends before payment or request approval of an extraordinary dividend must be directed to the attention of the Office of Insurance Financial and Market Regulation.

History

History: 2024 MR 6, Eff. March 20, 2024.

Mich. Admin. Code R 500.91 Adequacy of Surplus {#sec-r-500.91 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.91}

Rule 21. The factors set forth in sections 403, 436a, 1341, 1342, and 1343 of the act, MCL 500.403, 500.436a, 500.1341, 500.1342, and 500.1343, are not an exhaustive list. In determining the adequacy and reasonableness of an insurer’s surplus, no single factor is necessarily controlling. Instead, the director considers the net effect of all of these factors, plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the director considers the extent to which each of these factors varies from company to company, and in determining the quality and liquidity of investments in subsidiaries, the director considers the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments warrant.

History

History: 2024 MR 6, Eff. March 20, 2024.

R 500.101 to R 500.111 Captive Insurance Company Rules

Mich. Admin. Code R 500.101 Definitions {#sec-r-500.101 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.101}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

CAPTIVE INSURANCE COMPANY RULES

(By authority conferred on the director of the department of insurance and financial services by sections 210, 4651, 4747, and 4813 of 1956 PA 218, 1969 PA 306, E.O. 2013-1;

MCL 500.210, MCL 500.4651, MCL 500.4747, MCL 500.4813, MCL 24.231 to MCL 24.233, MCL 550.991.)

Rule 1. As used in these rules:

(a) “Act” means the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.

(b) “Captive insurance company” means a captive insurance company as defined in section 4601 of the act, a special purpose financial captive as defined in section 4701 of the act, or a protected cell company as defined in section 4801 of the act.

(c) “Captive manager” means any person entering into a contract with a captive insurance company, or the parent or affiliate of a captive insurance company, for the purpose of managing the operations of the captive insurance company.

(d) “Director” means the director of the department of insurance and financial services unless otherwise noted.

(e) “Limited certificate of authority” means a limited certificate of authority issued by the director pursuant to chapter 46 or 47 of the act, MCL 500.4601 to 500.4673, MCL 500.4701 to 500.4747.

(f) “Person” means an individual, corporation, limited liability company, association, partnership, limited partnership, limited liability partnership, trust, business trust, entity, unincorporated organization, joint venture, or other legal or commercial entity.

(g) Terms defined in the insurance code of 1956, 1956 PA 218, MCL 500.100 to MCL 500.8302, have the same meanings when used in these rules.

History

History: 2015 AACS.

Mich. Admin. Code R 500.102 Severability {#sec-r-500.102 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.102}

Rule 2. If a provision of a rule or the application of a rule to any person or circumstance is held invalid by a court of competent jurisdiction, then the provision or application shall not affect other provisions that can be given effect without the invalid provision or application.

History

History: 2015 AACS.

Mich. Admin. Code R 500.103 Application for limited certificate of authority {#sec-r-500.103 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.103}

Rule 3. An application for a captive insurance company limited certificate of authority shall include all of the information requested on an application form prescribed by the director.

History

History: 2015 AACS.

Mich. Admin. Code R 500.104 Record retention {#sec-r-500.104 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.104}

Rule 4. (1) Each captive insurance company shall maintain, in a place secure from theft, loss, or destruction, the financial, investment, and business records of the captive insurance company. The records shall include accurate, complete, legible, and permanent records, in electronic or hard copy format, of any books, records, data, or documents pertaining to, prepared, or generated by the captive insurance company, including, but not limited to, all of the following:

(a) Accounting records.

(b) Actuarial reports and studies.

(d) Board, shareholder, member, audit, and claim committee meeting minutes.

(e) Captive insurance company formation documents.

(f) Claims records.

(g) Correspondence.

(h) Computer generated data.

(i) Contracts.

(j) Coverage applications, forms, and policies.

(k) Internal audit records.

(l) Investment records.

(m) Loss prevention plans.

(n) Segregated cell formation, financial, investment, and claims documents.

(2) Captive insurance companies shall do both of the following:

(a) Retain captive insurance company records for a minimum of 7 years.

(b) Make captive insurance company records available to the director or the director’s designee for review or examination at the principal Michigan office of the captive insurance company or, if requested by the director, provide copies of such records to the director in a format prescribed by the director.

History

History: 2015 AACS.

Mich. Admin. Code R 500.105 Captive manager {#sec-r-500.105 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.105}

Rule 5. (1) A captive insurance company desiring to utilize a captive manager shall ensure that the captive manager has submitted to the director for approval a complete captive manager application in a form prescribed by the director.

(2) A captive insurance company may utilize only a captive manager whose captive manager application has been approved by the director. A captive insurance company shall do both of the following:

(a) Submit a copy of the captive manager contract to the director.

(b) Ensure that the captive manager contract states that a captive manager is subject to the control of the captive insurance company’s board of directors or other supervisory management body.

(3) Captive manager contracts in effect prior to the effective date of these rules shall not be subject to prior approval by the director until such time as they are renewed by the captive manager and the captive insurance company. All new captive manager contracts and captive manager contracts renewed on or after the effective date of these rules are subject to subrules (1) and (2) of this rule.

(4) The director may withdraw or suspend approval of a captive manager if any of the following occur:

(a) The captive manager knows or should know the officers or directors of the company are or were engaged in any conduct that, in connection with the captive entity, violates state or federal laws, rules, or regulations.

(b) The captive manager engages in conduct that would otherwise threaten the solvency of the captive insurer and fails to report such conduct to the director in a timely manner.

(c) The captive manager knows or should know of actions of a captive under management that may lead to revocation or suspension of the limited certificate of authority under the act and fails to inform the captive board of directors and the director in a timely manner.

(d) The captive manager fails to perform the basic manager responsibilities or reporting requirements required under the act and these rules.

(e) The captive manager engages in conduct detrimental to the interests of the captive insurer, including but is not limited to, a conflict of interest or conduct that constitutes a breach of the fiduciary duty owed to the captive insurer.

History

History: 2015 AACS.

Mich. Admin. Code R 500.106 Audited financial statements {#sec-r-500.106 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.106}

Rule 6. (1) No later than 5 months after the fiscal year end of the captive insurance company, the captive insurance company shall file with the director audited financial statements of the captive insurance company prepared by an independent certified public accountant.

(2) An independent certified public accountant’s audit of a captive insurance company shall include the following:

(a) The independent certified public accountant’s opinion covering all years under audit.

The opinion shall be addressed to the captive insurance company on the independent certified public accountant’s stationary, shall bear the original handwritten signature of the independent certified public accountant, and shall be dated.

(b) A report of evaluation of the internal controls of the captive insurance company. This report shall include an evaluation of the internal controls of the company relating to the methods and procedures used in the securing of assets and the reliability of the financial records.

(c) An independent certified public accountant’s letter stating the independent certified public accountant is all of the following:

(i) Independent with respect to the captive insurance company and conforms to the standard of the profession as contained in the code of professional ethics and pronouncements of the American institute of certified public accountants and pronouncements of the financial accounting standards board.

(ii) Properly licensed by an appropriate state regulatory authority or similar regulatory authority.

(iii) A member in good standing with the American institute of certified public accountants or similar organization.

(iv) The general background and experience of the staff engaged in the audit, including the staff’s experience in auditing captive and other insurance companies.

(v) The independent certified public accountant agrees to make the audit work papers available to the director or the director’s designee.

(3) The captive insurance company shall require the independent certified public accountant to do both of the following:

(a) Make the work papers prepared in the conduct of the captive insurance company’s audit available to the director.

(b) Retain the audit work papers for a period not less than 7 years after the last day of the applicable reporting period.

(4) The director may, at his or her discretion, exempt a captive insurance company from the requirements of this rule.

History

History: 2015 AACS.

Mich. Admin. Code R 500.107 Scope of approval of certificate of authority {#sec-r-500.107 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.107}

Rule 7. If the director approves a captive insurance company limited certificate of authority application, the approval is only for the applicant’s qualification for the limited certificate of authority. The approval does not indicate or suggest that the director has considered, opined on, or approved any of the following:

(a) The qualifications or application of the applicant for any other purpose.

(b) Additional captive special purpose securitizations proposed by a special purpose financial captive.

History

History: 2015 AACS.

Mich. Admin. Code R 500.108 Duty to disclose changes in information {#sec-r-500.108 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.108}

Rule 8. The holder of a limited certificate of authority has an ongoing duty to promptly disclose any material changes in information to the director as soon as the holder of the limited certificate of authority becomes aware of the change. The holder of a limited certificate of authority shall submit to the director for review and approval before implementation of the following:

(a) Any material modifications to the captive’s plan of operation.

(b) Any proposed new special purpose securitization proposed by a special purpose financial captive.

History

History: 2015 AACS.

Mich. Admin. Code R 500.109 Obligation to report certain events {#sec-r-500.109 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.109}

Rule 9. An applicant for a limited certificate of authority and the holder of a limited certificate of authority shall provide written notice to the director at the time the applicant or holder becomes aware of any of the following:

(a) Any change in the officers, directors, or managers of the captive insurance company.

(b) Insolvency or impairment of capital or retained earnings.

(d) The suspension or revocation of the certificate of authority or equivalent authorization of a branch captive insurance company in the jurisdiction in which the company was formed.

(e) A captive insurance company that is a limited liability company is no longer in good standing under section 207a of 1993 PA 23, MCL 450.4207a.

(f) The captive insurance company fails to remove or discharge an officer or director of the company within 30 days after the director of the department of insurance and financial services makes a written request that the officer or director of the company should be removed or discharged.

(g) The captive insurance company fails to pay any final judgment rendered against it in this state on any policy, bond, recognizance, or undertaking issued or guaranteed by it within a reasonable period of time after entry of the final judgment.

History

History: 2015 AACS.

Mich. Admin. Code R 500.110 Investigative hearings {#sec-r-500.110 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.110}

Rule 10. (1) The director may initiate an investigation, undertake an examination, or take such other action as the director, in the exercise of discretion, determines is necessary or appropriate to assure the holder of a limited certificate of authority complies with all applicable provisions of the act.

(2) The director may conduct hearings for any of the following:

(a) To investigate an applicant, an application, or a holder of a limited certificate of authority.

(b) To gather information in furtherance of acting on an application for a limited certificate of authority.

(c) To investigate alleged violations of the applicable provisions of the act or these rules by a holder of a limited certificate of authority.

(3) The director may require captive managers, officers, directors, shareholders, members of an applicant, or holders of a limited certificate of authority to testify or to produce documents, records, or other materials at a proceeding conducted under this rule.

(4) The director may issue subpoenas for the production of persons, documents, or other items at a proceeding conducted under this rule.

(5) All testimony at proceedings conducted under this rule shall be given under oath or affirmation.

(6) All proceedings under this rule shall be conducted in compliance with the contested hearing procedures of the administrative procedures act, 1969 PA 306, MCL 24.201 to 24.328, and R 500.2101 to R 500.2142.

(7) The director shall direct the applicant or holder of a limited certificate of authority to pay the expenses and charges associated with an investigative hearing.

History

History: 2015 AACS.

Mich. Admin. Code R 500.111 Limited certificate of authority as a revocable privilege {#sec-r-500.111 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.111}

Rule 11. The holder of a limited certificate of authority has an ongoing duty to comply with all applicable provisions of the act. A limited certificate of authority is not a property right, but is a revocable privilege contingent upon compliance with all applicable provisions of the act and regulations promulgated thereunder.

History

History: 2015 AACS.

R 500.121 to R 500.128 Term and Universal Life Insurance Reserve Financing

Mich. Admin. Code R 500.121 Definitions {#sec-r-500.121 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.121}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

TERM AND UNIVERSAL LIFE INSURANCE RESERVE FINANCING

(By authority conferred on the director of the department of insurance and financial services by sections 210 and 1106 of the insurance code of 1956, 1956 PA 218, MCL 500.210 and 500.1106, and Executive Reorganization Order No. 2013-1, MCL 550.991)

Rule 1. (1) As used in these rules:

(a) “Accounting practices and procedures manual” means the NAIC accounting practices and procedures manual described in section 1106(3)(c) of the act, MCL 500.1106.

(b) “Act” means the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.

(c) “Actuarial method” means the methodology used to determine the required level of primary security pursuant to R 500.126.

(d) “Covered policy” or “covered policies” means 1 or more policies of the following types that are not grandfathered policies, unless exempted from these rules under R 500.125:

(i) Life insurance policies with guaranteed nonlevel gross premiums, guaranteed nonlevel benefits, or both, except for flexible premium universal life insurance policies.

(ii) Flexible premium universal life insurance policies with provisions that enable a policyholder to keep a policy in force over a secondary guarantee period.

(e) “Grandfathered policies” means policies of the types described in subdivision (d)(i) and (ii) of this subrule that were issued before January 1, 2015, and ceded, as of December 31, 2014, as part of a reinsurance treaty that would not have met an exemption under R 500.125 if that rule was effective.

(f) “Non-covered policies” means a policy or policies that are not covered policies, including grandfathered policies.

(g) “Primary security” means the following forms of security:

(i) Cash, to the extent that this form of security would meet the requirements described in section 1105 of the act, MCL 500.1105.

(ii) Securities listed by the Securities Valuation Office of the NAIC meeting the requirements of section 1105(b) of the act, MCL 500.1105, excluding the following:

(A) A synthetic letter of credit, contingent note, credit-linked note, or other similar security that operates in a manner similar to a letter of credit.

(B) Securities issued by the ceding insurer or any of its affiliates.

(iii) For security held in connection with funds withheld and modified coinsurance reinsurance treaties, the following:

(A) Commercial loans in good standing of CM3 quality and higher, as assigned by the NAIC and prescribed by the director.

(B) Policy loans.

(C) Derivatives acquired in the normal course and used to support and hedge liabilities pertaining to the actual risks in the policies ceded pursuant to the reinsurance treaty.

(h) “Other security” means any security that is not primary security and is acceptable to the director.

(i) “Required level of primary security” means the dollar amount determined by applying the actuarial method to the risks ceded with respect to covered policies, but not more than the total reserve ceded.

(j) “Risk-based capital” or “RBC” means the requirements described in section 410 of the act, MCL 500.410, as prescribed by the director.

(k) “Valuation manual” means the valuation manual described in section 1106(2) of the act, MCL 500.1106, as prescribed by the director pursuant to section 836b of the act, MCL 500.836b, in effect for the financial statement date on which credit for reinsurance is claimed.

(l) “VM-20” means the requirements for principle-based reserves for life products and all relevant definitions under the valuation manual.

(2) A term defined in the act has the same meaning when used in these rules.

History

History: 2025 MR 9, Eff. April 29, 2025.

Mich. Admin. Code R 500.122 Purpose {#sec-r-500.122 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.122}

Rule 2. (1) With respect to reserve financing arrangements pertaining to life insurance policies containing guaranteed nonlevel gross premiums, guaranteed nonlevel benefits, and universal life insurance policies with secondary guarantees, these rules ensure that funds consisting of primary security and other security are held by or on behalf of ceding insurers in the forms and amounts required under these rules.

(2) These rules create requirements in this state that support establishment of uniform, national standards governing the reserve financing arrangements described in subrule (1) of this rule.

(3) As used in this rule, reserve financing arrangements include reinsurance ceded for reserve financing purposes where some or all of the assets used to secure the reinsurance treaty, or to capitalize the reinsurer, meet 1 or more of the following:

(a) Are issued by the ceding insurer or its affiliates.

(b) Are not unconditionally available to satisfy the general account obligations of the ceding insurer.

(c) Create a reimbursement, indemnification, or another similar obligation of the ceding insurer or any if its affiliates, excluding a payment obligation under a derivative contract acquired in the normal course and used to support and hedge liabilities pertaining to the actual risks in the policies ceded pursuant to the reinsurance treaty.

History

History: 2025 MR 9, Eff. April 29, 2025.

Mich. Admin. Code R 500.123 Severability {#sec-r-500.123 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.123}

Rule 3. If any provision of this regulation is held invalid, the remainder is not affected.

History

History: 2025 MR 9, Eff. April 29, 2025.

Mich. Admin. Code R 500.124 Applicability {#sec-r-500.124 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.124}

Rule 4. (1) These rules apply to reinsurance treaties that cede liabilities pertaining to covered policies issued by a life insurance company domiciled in this state.

(2) These rules and R 500.1121 to R 500.1134 apply to reinsurance treaties described in subrule (1) of this rule. However, if there is a direct conflict between a provision of these rules and R 500.1121 to R 500.1134, the provision of these rules applies to the extent of the conflict.

(3) These rules apply to covered policies in force on or after the effective date of these rules.

History

History: 2025 MR 9, Eff. April 29, 2025.

Mich. Admin. Code R 500.125 Exemptions {#sec-r-500.125 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.125}

Rule 5. (1) These rules do not apply to the following situations:

(a) Reinsurance of any of the following:

(i) Policies that satisfy the criteria for the exemption described in section 838(7)(g) or (h) of the act, MCL 500.838, if issued before the later of the following dates:

(A) The effective date of these rules.

(B) The date the ceding insurer begins to apply the provisions of VM-20 to establish the ceded policies’ statutory reserves, but not later than January 1, 2020.

(ii) Portions of policies that satisfy the criteria for the exemption described in section 838(7)(f) of the act, MCL 500.838, if issued before the later of the following dates:

(A) The effective date of these rules.

(B) The date the ceding insurer begins to apply the provisions of VM-20 to establish the ceded policies’ statutory reserves, but not later than January 1, 2020.

(iii) Any universal life policy that meets all of the following requirements:

(A) The secondary guarantee period, if any, is 5 years or less.

(B) The specified premium for the secondary guarantee period is not less than the net level reserve premium for the secondary guarantee period based on the commissioners standard ordinary valuation tables and valuation interest rate applicable to the issue year of the policy.

(C) The initial surrender charge is not less than 100% of the first year annualized specified premium for the secondary guarantee period.

(iv) Credit life insurance.

(v) A variable life insurance policy that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account or accounts.

(vi) A group life insurance certificate unless the certificate provides for a stated or implied schedule of maximum gross premiums required in order to continue coverage in force for a period in excess of 1 year.

(b) Reinsurance ceded to an assuming insurer that meets the applicable requirements of section 1103(4) of the act, MCL 500.1103.

(c) Reinsurance ceded to an assuming insurer that meets the applicable requirements of section 1103(1) of the act, MCL 500.1103, with respect to reinsurance ceded to an assuming insurer that is licensed to transact insurance or reinsurance in this state, or of section 1103(2) or (3) of the act, MCL 500.1103. This subdivision does not apply unless both of the following are met with respect to the assuming insurer:

(i) Statutory financial statements are prepared in compliance with the accounting practices and procedures manual, without any departures from NAIC statutory accounting practices and procedures pertaining to the admissibility or valuation of assets or liabilities that increase the assuming insurer’s reported surplus and are material enough that they need to be disclosed in the financial statement of the assuming insurer pursuant to statement of statutory accounting principles number 1.

(ii) Is not in a company action level event, regulatory action level event, authorized control level event, or mandatory control level event, as those terms are defined in RBC, when its risk-based calculation is calculated in accordance with the life risk-based capital report, including overview and instructions for companies, without deviation.

(d) Reinsurance ceded to an assuming insurer that meets the applicable requirements of section 1103(1) of the act, MCL 500.1103, with respect to reinsurance ceded to an assuming insurer that is licensed to transact insurance or reinsurance in this state, or of section 1103(2) or (3) of the act, MCL 500.1103. This subdivision does not apply unless all of the following are met with respect to the assuming insurer:

(i) Is not an affiliate, as that term is defined in section 115 of the act, MCL 500.115, of either of the following:

(A) The insurer ceding the business to the assuming insurer.

(B) An insurer that directly or indirectly ceded the business to that ceding insurer.

(ii) Prepares statutory financial statements in compliance with the accounting practices and procedures manual.

(iii) Is both of the following:

(A) Licensed or accredited in at least 10 states, including its state of domicile.

(B) Not licensed in a state as a captive, special purpose vehicle, special purpose financial captive, special purpose life reinsurance company, limited purpose subsidiary, or another similar licensing regime.

(iv) Is not, or would not be, below 500% of the authorized control level risk-based capital, as that term is defined in RBC, when its risk-based calculation is calculated in accordance with the life risk-based capital report, including overview and instructions for companies, without deviation or recognition of a departure from NAIC statutory accounting practices and procedures pertaining to the admission or valuation of assets or liabilities that increase the assuming insurer’s reported surplus.

(e) Reinsurance ceded to an assuming insurer that meets the requirements of section 1106(3) of the act, MCL 500.1106.

(f) Reinsurance not otherwise exempt under subdivisions (a) to (e) of this subrule if the director, after consulting with the NAIC Financial Analysis Working Group or other group of regulators designated by the NAIC, as applicable, determines under all the facts and circumstances that all of the following apply:

(i) The risks are clearly outside of the purpose of these rules, as established in R 500.122.

(ii) The risks are included within the scope of these rules only as a technicality.

(iii) The application of these rules to those risks is not necessary to provide appropriate protection to policyholders.

(2) The director shall publicly disclose any decision made pursuant to subrule (1)(f) of this rule to exempt a reinsurance treaty from these rules. The disclosure must state the general basis for the decision, including a summary description of the treaty.

History

History: 2025 MR 9, Eff. April 29, 2025.

Mich. Admin. Code R 500.126 Actuarial method {#sec-r-500.126 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.126}

Rule 6. (1) The actuarial method used to establish the required level of primary security for each reinsurance treaty subject to these rules must be VM-20, applied on a treaty-bytreaty basis, including all relevant definitions, from the valuation manual. The actuarial method must be applied as follows:

(a) For covered policies described in R 500.121(1)(d)(i) the actuarial method is the greater of the deterministic reserve or the net premium reserve regardless of whether the criteria for exemption testing can be met. However, if the covered policies do not meet the requirements of the stochastic reserve exclusion test in the valuation manual, the actuarial method is the greatest of the deterministic reserve, the stochastic reserve, or the net premium reserve. In addition, if the covered policies are reinsured in a reinsurance treaty that also contains covered policies described in R 500.121(1)(d)(ii), the ceding insurer may elect to instead apply subdivision (b) of this subrule as the actuarial method for the entire reinsurance agreement. The actuarial method must comply with any requirements or restrictions that the valuation manual imposes when aggregating these policy types as used in principle-based reserve calculations when applying this subdivision or subdivision (b) of this subrule.

(b) For covered policies described in R 500.121(1)(d)(ii), the actuarial method is the greatest of the deterministic reserve, the stochastic reserve, or the net premium reserve regardless of whether the criteria for exemption testing can be met.

(c) Except as provided in subdivision (d) of this subrule, the actuarial method must be applied on a gross basis to all risks with respect to the covered policies as originally issued or assumed by the ceding insurer.

(d) If the reinsurance treaty cedes less than 100% of the risk, with respect to the covered policies, the required level of primary security may be reduced as follows:

(i) If a reinsurance treaty cedes only a quota share of some or all of the risks pertaining to the covered policies, the required level of primary security, and any adjustment under paragraph (iii) of this subdivision, may be reduced to a pro rata portion in accordance with the percentage of the risk ceded.

(ii) If the reinsurance treaty in a non-exempt arrangement cedes only the risks pertaining to a secondary guarantee, the required level of primary security may be reduced by an amount determined by applying the actuarial method on a gross basis to all risks, other than risks related to the secondary guarantee, pertaining to the covered policies. However, for covered policies for which the ceding insurer did not elect to apply the provisions of VM- 20 to establish statutory reserves, the required level of primary security may be reduced by the statutory reserve retained by the ceding insurer on those covered policies, where the retained reserve of those covered policies is reflective of any reduction pursuant to the cession of mortality risk on a yearly renewable term basis in an exempt arrangement.

(iii) If a portion of the covered policy risk is ceded to another reinsurer on a yearly renewable term basis in an exempt arrangement, the required level of primary security may be reduced by the amount resulting by applying the actuarial method, including the reinsurance section of VM-20, to the portion of the covered policy risks ceded in the exempt arrangement. However, for covered policies issued before January 1, 2017, the adjustment must not exceed [c x / (2 * number of reinsurance premiums per year)] where “c x ” is calculated using the same mortality table used in calculating the Net Premium Reserve.

(iv) For any other treaty ceding a portion of risk to a different reinsurer, including, but not limited to, stop loss, excess of loss, and other non-proportional reinsurance treaties, there is no reduction in the required level of primary security.

(e) For the purposes of applying subdivision (d) of this subrule, any combination of subdivision (d)(i) to (iv) of this subrule may apply, in which case the adjustments to the required level of primary security must be done in the sequence that accurately reflects the portion of the risk ceded by the treaty. In addition, the ceding insurer shall document the rationale and steps taken to accomplish the adjustments to the required level of primary security due to the cession of less than 100% of the risk. The adjustments for other reinsurance must be made only with respect to reinsurance treaties entered into directly by the ceding insurer. The ceding insurer shall not make an adjustment as a result of a retrocession treaty entered into by the assuming insurers.

(f) Without exception, the required level of primary security resulting from applying the actuarial method must not exceed the amount of statutory reserves ceded.

(g) Without exception, if the ceding insurer cedes risks with respect to covered policies, including any riders, in more than 1 reinsurance treaty subject to these rules, the aggregate required level of primary security for those reinsurance treaties must not be less than the required level of primary security calculated using the actuarial method as if all risks ceded in those treaties were ceded in a single treaty subject to these rules.

(h) If a reinsurance treaty subject to these rules cedes risk on both covered policies and non-covered policies, credit for the ceded reserves must be determined as follows:

(i) The actuarial method must be used to determine the required level of primary security for the covered policies, and R 500.127 must be used to determine the reinsurance credit for the covered policy reserves.

(ii) Credit for the non-covered policy reserves must be granted only to the extent that security, in addition to the security held to satisfy the requirements of paragraph (i) of this subdivision, is held by or on behalf of the ceding insurer in accordance with sections 1103 and 1105 of the act, MCL 500.1103 and 500.1105. Any primary security used to meet the requirements of this paragraph must not be used to satisfy the required level of primary security for the covered policies.

(2) For the purposes of calculating the required level of primary security pursuant to the actuarial method and determining the amount of primary security and other security, as applicable, held by or on behalf of the ceding insurer, the following apply:

(a) For assets, including assets held in trust, that would be admitted under the accounting practices and procedures manual if they were held by the ceding insurer, the valuations must be determined according to statutory accounting procedures as if the assets were held in the ceding insurer’s general account and without taking into consideration the effect of any prescribed or allowed practices.

(b) For all other assets, the valuations must be the valuations that were assigned to the assets for the purpose of determining the amount of reserve credit taken. In addition, the asset spread tables and asset default cost tables required by VM-20 must be included in the actuarial method if the director adopts the requirement following its adoption by the NAIC’s Life Actuarial (A) Task Force no later than the December 31 that occurs on or immediately preceding the valuation date for which the required level of primary security is calculated. The tables of asset spreads and asset default costs must be incorporated into the actuarial method in the manner specified in VM-20.

History

History: 2025 MR 9, Eff. April 29, 2025.

Mich. Admin. Code R 500.127 Credit for reinsurance for covered policies; requirements; remediation {#sec-r-500.127 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.127}

Rule 7. (1) Subject to the exemptions described in R 500.125 and subrules (2) to (4) of this rule, credit for reinsurance must be allowed with respect to ceded liabilities pertaining to covered policies pursuant to section 1103 or 1105 of the act, MCL 500.1103 and 500.1105, only if, in addition to all other requirements imposed by law or regulation, all of the following requirements are met on a treaty-by-treaty basis:

(a) The ceding insurer’s statutory policy reserves with respect to the covered policies are established in full and in accordance with the applicable requirements of the standard valuation law that is described in section 1106(2) of the act, MCL 500.1106, and adopted under chapter 8 of the act, MCL 500.808 to 500.842, including related regulation or rules and actuarial guidelines, and credit claimed for any reinsurance treaty subject to these rules does not exceed the proportionate share of those reserves ceded under the contract.

(b) The ceding insurer determines the required level of primary security with respect to each reinsurance treaty subject to these rules and provides support for its calculation as determined acceptable to the director.

(c) Funds consisting of primary security, in an amount at least equal to the required level of primary security, are held by or on behalf of the ceding insurer, as security under the reinsurance treaty within the meaning of section 1105 of the act, MCL 500.1105, on a funds withheld, trust, or modified coinsurance basis.

(d) Funds consisting of other security, in an amount at least equal to any portion of the statutory reserves as to which primary security is not held pursuant to subdivision (c) of this subrule, are held by or on behalf of the ceding insurer as security under the reinsurance treaty within the meaning of section 1105 of the act, MCL 500.1105.

(e) Any trust used to satisfy the requirements of this rule must comply with all of the conditions and qualifications of R 500.1123 and R 500.1133, subject to the following:

(i) Funds consisting of primary security or other security held in trust, for the purposes identified in R 500.126(2), must be valued according to the valuation rules set forth in R 500.126(2), as applicable.

(ii) There are no affiliate investment limitations with respect to any security held in the trust if the security is not needed to satisfy the requirements of subdivision (c) of this subrule.

(iii) The reinsurance treaty must prohibit withdrawals or substitutions of trust assets that would leave the fair market value of the primary security within the trust, when aggregated with primary security outside the trust that is held by or on behalf of the ceding insurer in the manner required by subdivision (c) of this subrule, below 102% of the level required by subdivision (c) of this subrule at the time of the withdrawal or substitution.

(iv) The determination of reserve credit under R 500.1123(3) must be determined according to the valuation rules set forth in R 500.126(2), as applicable.

(f) The reinsurance treaty has been approved by the director.

(2) The requirements of subrule (1) of this rule must be satisfied as of the date that risks under covered policies are ceded, if that date is on or after the effective date of these rules, and on an ongoing basis afterward. With no exception, a ceding insurer shall not take or consent to any action or series of actions that would result in a deficiency under subrule (1)(c) or (d) of this rule with respect to any reinsurance treaty under which covered policies have been ceded, and if a ceding insurer becomes aware at any time that a deficiency described in this subrule exists, the ceding insurer shall use best efforts to arrange for the deficiency to be eliminated as expeditiously as possible.

(3) Before the due date of each quarterly or annual statement, each life insurance company that has ceded reinsurance within the scope of R 500.124 shall perform an analysis, on a treaty-by-treaty basis, to determine, as to each reinsurance treaty under which covered policies have been ceded, whether as of the end of the immediately preceding calendar quarter (the valuation date) the requirements of subrule (1)(c) and (d) of this rule were satisfied. The ceding insurer shall establish a liability equal to the excess of the credit for reinsurance taken over the amount of primary security actually held pursuant to subrule (1)(c) of this rule, unless either of the following apply:

(a) The requirements of subrule (1)(c) and (d) of this rule were fully satisfied as of the valuation date as to the reinsurance treaty.

(b) Any deficiency has been eliminated before the due date of the quarterly or annual statement to which the valuation date relates through the addition of primary security or other security, as applicable, in the amount and form as would have caused the requirements of subrule (1)(c) and (d) of this rule to be fully satisfied as of the valuation date.

(4) Subrule (3) of this rule does not allow a ceding company to maintain any deficiency under subrule (1)(c) and (d) of this rule for any period of time longer than is reasonably necessary to eliminate it.

History

History: 2025 MR 9, Eff. April 29, 2025.

Mich. Admin. Code R 500.128 Prohibition against avoidance {#sec-r-500.128 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.128}

Rule 8. An insurer that has covered policies applicable to these rules shall not take any action or series of actions or enter into any transaction or arrangement or series of transactions or arrangements, if the purpose is to avoid the requirements of these rules or to circumvent the purpose of these rules, as established in R 500.122.

History

History: 2025 MR 9, Eff. April 29, 2025.

R 500.201 to R 500.206 No-Fault Fee Schedule

Mich. Admin. Code R 500.201 Definitions {#sec-r-500.201 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.201}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

NO-FAULT FEE SCHEDULE

(By authority conferred on the director of the department of insurance and financial services by section 210 of the insurance code, 1956 PA 218, MCL 500.210)

Rule 1. As used in these rules:

(a) “Act” means the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.

(b) “Charge description master” means that term as defined in section 3157(15)(a) of the act, MCL 500.3157.

(c)“Department” means the department of insurance and financial services.

(d) “Director” means the director of the department.

(e) “Medicare” means that term as defined in section 3157(15)(f) of the act, MCL 500.3157.

(f) “Neurological rehabilitation clinic” means that term as defined in section 3157(15)(g) of the act, MCL 500.3157.

(g) “Provider” means a physician, hospital, clinic, or other person lawfully rendering a service to an injured person.

(h) “Fee schedule” means, as applicable, the Medicare fee schedule or prospective payment system in effect on March 1 of the service year in which the service is rendered and for the area in which the service was rendered. The applicable fee schedule applies to services rendered during that service year, notwithstanding any subsequent change made to the fee schedule.

(i) “Service” means “treatment,” as that term is defined in section 3157(15)(k) of the act, MCL 500.3157, and also includes training and rehabilitative occupational training, as described in section 3157 of the act, MCL 500.3157.

(j) “Service year” means the period from July 2 through July 1 of the following year.

History

History: 2021 MR 18, Eff. Oct. 1, 2021.

Mich. Admin. Code R 500.202 Scope and applicability {#sec-r-500.202 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.202}

Rule 2. These rules do the following:

(a) Define the applicable Medicare fee schedule.

(b) Establish procedures for determining which providers are eligible for enhanced reimbursement.

(c) Establish procedures for the department to collect information related to amounts charged by providers as of January 1, 2019, for the purposes of resolving provider appeals under R 500.65.

(d) Establish a date and methodology for determining the adjustment of payment or reimbursement under section 3157(9) of the act, MCL 500.3157.

(e) Establish procedures for the department to administer the accreditation requirements under section 3157(12) of the act, MCL 500.3157.

History

History: 2021 MR 18, Eff. Oct. 1, 2021.

Mich. Admin. Code R 500.203 Medicare calculation {#sec-r-500.203 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.203}

Rule 3. When calculating the amount payable to a provider for a service under Medicare part A or part B, as referenced in section 3157 of the act, MCL 500.3157, the amounts payable to participating providers under the applicable fee schedule shall be utilized. An amount payable pursuant to the fee schedule may not exceed the average amount charged by the provider for the service on January 1, 2019.

History

History: 2021 MR 18, Eff. Oct. 1, 2021.

Mich. Admin. Code R 500.204 Eligibility for enhanced reimbursement {#sec-r-500.204 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.204}

Rule 4. (1) No less frequently than annually, the department shall issue a bulletin designating not more than 2 freestanding rehabilitation facilities pursuant to section 3157(4)(b) of the act, MCL 500.3157. A freestanding rehabilitation clinic that seeks to be recognized by the department shall submit an application for recognition on a form prescribed by the department.

The department’s designation remains in effect until revoked by the department.

(2) No less frequently than annually, the department shall issue a bulletin that lists which providers are entitled to enhanced reimbursement under section 3157(4)(a) or section 3157(5) of the act, MCL 500.3157. To determine whether a provider qualifies for enhanced reimbursement under section 3157(4)(a) or section 3157(5) of the act, MCL 500.3157, the department shall rely on data provided by the department of health and human services related to the provider’s indigent volume factor as of July 1 of the immediately preceding year.

(3) No less frequently than annually, the department shall issue a bulletin that lists which hospitals are Level I or Level II trauma centers for purposes of enhanced reimbursement under section 3157(6) of the act, MCL 500.3157. This list must be based on the hospital’s designation on January 1 of that year.

History

History: 2021 MR 18, Eff. Oct. 1, 2021.

Mich. Admin. Code R 500.205 Charge description master; average amount charged; average charge; submissions to department in connection with an appeal under R 500.65 {#sec-r-500.205 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.205}

Rule 5. (1) Upon the department’s request, a provider that appeals a determination to the department under R 500.65, shall make the following submissions to the department, in a form and manner prescribed by the department, as applicable:

(a) If a provider has a charge description master that was in effect on January 1, 2019, the provider shall submit to the department the provider’s charge description master that was in effect on January 1, 2019.

(b) If a provider offered or rendered services on January 1, 2019, and does not have a charge description master that was in effect on January 1, 2019, or has a charge description master that was in effect on January 1, 2019 that does not list all of the provider’s services offered or rendered on January 1, 2019, the provider shall submit to the department the provider’s average amount charged for any service offered or rendered on January 1, 2019, that is not included in a charge description master submitted to the department under subdivision (a) of this subrule.

(c) If a provider does not meet the criteria under subdivision (a) or (b) of this subrule, the department shall consult the FAIR Health benchmarking database to determine the average amount charged in the applicable geozip for the service or services at issue based on FAIR Health’s most recently published data that includes dates of service on January 1, 2019, as adjusted in accordance with subrule (6) of this rule.

(2) A provider that submits information under subrules (1)(a) or (b) must also submit an attestation that the information provided is accurate.

(3) A provider must retain its charge description master in effect on January 1, 2019 and documentation containing the average amount charged for services on January 1, 2019, as applicable, until the provider permanently ceases to render services to injured persons for accidental bodily injuries covered by personal protection insurance under chapter 31 of the act, MCL 500.3101 to 500.3179.

(4) Upon request by the department, a provider submitting its charge description master in effect on January 1, 2019 or average amount charged for services on January 1, 2019 shall also submit to the department any documents, materials, and information the department considers necessary to assess the submission’s accuracy and to resolve the provider’s appeal under R 500.65.

(5) Any proprietary information or sensitive personally identifiable information regarding a patient that is submitted to the department under this rule must be afforded the same level of protection by the department as the information described under section 3157b of the act, MCL 500.3157b.

(6) An average amount charged for each service on January 1, 2019, or amount listed on a charge description master in effect on January 1, 2019, must be adjusted annually by the percentage change in the medical care component of the consumer price index for the year preceding the adjustment. Beginning in 2021, and annually thereafter, the department shall issue a bulletin no later than March 1 of each year setting forth the applicable percentage change in the medical care component of the consumer price index for the year preceding the adjustment. This percentage change applies to services rendered between July 2 of that year and July 1 of the following year.

History

History: 2021 MR 18, Eff. Oct. 1, 2021.

Mich. Admin. Code R 500.206 Neurological rehabilitation clinic accreditation; information submission {#sec-r-500.206 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.206}

Rule 6. (1) The department shall issue a bulletin recognizing the organizations it deems similar to the Commission on Accreditation of Rehabilitation Facilities (CARF) for the accreditation of neurological rehabilitation clinics pursuant to section 3157(12) of the act, MCL 500.3157. The department’s recognition remains in effect until revoked.

(2) A neurological rehabilitation clinic that seeks payment or reimbursement for services rendered to an injured person for an accidental bodily injury covered by personal protection insurance under chapter 31 of the act, MCL 500.3101 to 500.3179, shall, upon the department’s request, submit on a form prescribed by the department the following information, as applicable:

(a) Proof of accreditation by CARF or a similar organization recognized by the director as referenced in subrule (1) of this rule.

(b) If a neurological rehabilitation clinic is in the process of becoming accredited on July 1, 2021, information concerning its status in the accreditation process with updates provided to the department every 6 months thereafter until the neurological rehabilitation clinic is accredited.

(3) A neurological rehabilitation clinic that is in the process of becoming accredited on July 1, 2021, is entitled to payment or reimbursement for services for 3 years after the date on which the neurological rehabilitation clinic submitted its application for accreditation. A neurological rehabilitation clinic is not entitled to payment or reimbursement after three years have elapsed since the date its application for accreditation was submitted and is not entitled to payment or reimbursement unless and until it becomes accredited.

History

History: 2021 MR 18, Eff. Oct. 1, 2021.

R 500.241 to R 500.245 Surprise Medical Billing

Mich. Admin. Code R 500.241 Definitions {#sec-r-500.241 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.241}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

SURPRISE MEDICAL BILLING

(By authority conferred on the director of the department of insurance and financial services by section 24517 of the public health code, 1978 PA 368, MCL 333.24517)

Rule 1. (1) As used in these rules:

(a) “Act” means the public health code, 1978 PA 368, MCL 333.1101 to 333.25211.

(b) “Median amount” means the median amount negotiated by the carrier for the region and provider specialty, excluding any in-network coinsurance, copayments, or deductibles. The carrier shall determine the region and provider specialty.

(2) A term defined in the act for the purposes of article 18 of the act, MCL 333.24501 to 333.24517, has the same meaning when used in these rules.

History

History: 2021 MR 12, Eff. June 24, 2021.

Mich. Admin. Code R 500.242 Scope and applicability {#sec-r-500.242 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.242}

Rule 2. These rules do the following:

(a) Establish procedures for the department to review and resolve requests for calculation review submitted pursuant to section 24510 of the act, MCL 333.24510.

(b) Establish procedures for approving arbitrators to provide binding arbitration pursuant to section 24511 of the act, MCL 333.24511.

History

History: 2021 MR 12, Eff. June 24, 2021.

Mich. Admin. Code R 500.243 Requests for calculation review {#sec-r-500.243 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.243}

Rule 3. (1) A nonparticipating provider must make a request for a review of the calculation described in section 24510(1) of the act, MCL 333.24510, on a form provided by the department.

(2) In response to a request from a nonparticipating provider for a calculation review under section 24510 of the act, MCL 333.24510, the department shall do the following within 14 days of the date of the request:

(a) Notify the carrier of the request for a calculation review.

(b) Request data on the carrier’s median amount or any documents, materials, or other information the department believes is necessary to assist in reviewing the calculation described in section 24510(1) of the act, MCL 333.24510.

(3) A carrier must respond within 14 days of the date of the department’s request under subrule (2)(b) of this rule. If the information provided is incomplete, the department may, at its discretion, request additional information, or issue a determination based solely on the information provided as of the date on which the carrier’s response was due. If the department makes 1 or more requests for additional information, the carrier must respond within 14 days of the date of the department’s request.

(4) The department shall issue a determination resolving the request for a calculation review no later than 14 days after the carrier submits a timely and complete response under subrule (3) of this rule or after the expiration of the time period within which the carrier was required to respond, including any extensions provided following the department’s request for additional information under subrule (3) of this rule.

History

History: 2021 MR 12, Eff. June 24, 2021.

Mich. Admin. Code R 500.244 Median amount; access to database {#sec-r-500.244 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.244}

Rule 4. (1) Subject to subrule (3) of this rule, a carrier may satisfy the requirement under R 500.243 by providing the department with access to a database that contains all of the carrier’s median amounts. The database must meet all of the following requirements:

(a) Be updated no less frequently than quarterly.

(b) Be searchable by region, provider specialty, and health care service.

(d) Be continuously accessible to the department.

(2) For the purposes of conducting a calculation review under section 24510 of the act, MCL 333.24510, the department may, at its discretion, consult any external database described under section 24510(2) of the act, MCL 333.24510, without regard to whether a carrier made the database accessible to the department or whether the database otherwise meets the requirements under subrule (1) of this rule.

(3) A carrier’s provision of access to a database under this rule does not preclude the department from requesting any documents, materials, or other information the department believes is necessary to assist in reviewing the calculation described in section 24510(1) of the act, MCL 333.24510.

History

History: 2021 MR 12, Eff. June 24, 2021.

Mich. Admin. Code R 500.245 Approval of arbitrators {#sec-r-500.245 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.245}

Rule 5. (1) The department shall create and maintain a list of arbitrators trained by the American Arbitration Association or American Health Lawyers Association and approved by the director. This list must be updated no less frequently than annually and must be posted on the department’s website.

(2) Arbitrators seeking to be included in the list under subrule (1) of this rule must apply on a form prescribed by the department.

(3) The department shall approve or disapprove an application no later than 60 days after the date of receipt of the application. Applicants whose application has been disapproved may reapply at any time.

(4) If approved for inclusion in the list under subrule (1) of this rule, arbitrators must annually provide to the department, on a form prescribed by the department, an attestation acknowledging that the information provided to the department in the arbitrator’s application under subrule (2) of this rule remains complete and accurate.

(5) Arbitrators included on the department’s list under subrule (1) of this rule must notify the department of any changes to the information contained in the arbitrator’s application under subrule (2) of this rule within 30 days of the change. An arbitrator’s failure to inform the department of these changes may result in revocation of the arbitrator’s approval and removal from the list under subrule (1) of this rule.

History

History: 2021 MR 12, Eff. June 24, 2021.

R 500.351 to R 500.351 Refund Of Unearned Premium Adjustment

Mich. Admin. Code R 500.351 Unearned premium refunds from insolvent insurers; annual adjustment {#sec-r-500.351 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.351}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

REFUND OF UNEARNED PREMIUM ADJUSTMENT

(By authority conferred on the commissioner of insurance by sections 210 and 7925 of Act No. 218 of the Public Acts of 1956, as amended, being SS500.210 and 500.7925 of the Michigan Compiled Laws)

Rule 1. Annually, the commissioner of insurance shall adjust the maximum amount of unearned premiums which shall constitute a covered claim prescribed in section 7925(2)(a) of Act No. 218 of the Public Acts of 1956, as amended, being S500.7925(2)(a) of the Michigan Compiled Laws, by the ratio of the national consumer price index as calculated by the United States department of labor for all items for March of each year to the corresponding consumer price index 1 year earlier, rounded to the nearest dollar. If the index is unavailable, the commissioner shall make a reasonable approximation. The effective date of the adjustment shall be July 1 of each year. The commissioner shall notify all interested parties of the adjustment.

History

History: 1981 AACS.

R 500.521 to R 500.545 Regulations Under Section 5283 of The Act

Mich. Admin. Code R 500.521 Exemption of transactions in connection with a distribution {#sec-r-500.521 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.521}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

GENERAL RULES

(By authority conferred on the commissioner of insurance by sections 210 and 4424(6) of Act No. 218 of the Public Acts of 1956, as amended, being SS500.210 and 500.4424(6) of the Michigan Compiled Laws)

REGULATIONS UNDER SECTION 5283 OF THE ACT

Rule 521. (1) Any transaction of purchase and sale, or sale and purchase of a security which is effected in connection with the distribution of a substantial block of securities is exempt from the provisions of section 5283 of the act to the extent specified in this rule as not comprehended within the purpose of section 5283, upon the following conditions:

(a) The person effecting the transaction is engaged in the business of distributing securities and is participating in good faith, in the ordinary course of such business, in the distribution of such block of securities.

(b) The security involved in the transaction is a part of such block of securities and is acquired by the person effecting the transaction, with a view to the distribution thereof, from the insurer or other person on whose behalf such securities are being distributed or from a person who is participating in good faith in the distribution of such block of securities or a security purchased in good faith by or for the account of the person effecting the transaction for the purpose of stabilizing the market price of securities of the class being distributed or to cover an over-allotment or other short position created in connection with such distribution.

(c) Other persons not within the purview of section 5283 of the act are participating in the distribution of such block of securities on terms at least as favorable as those on which the person is participating and to an extent at least equal to the aggregate participation of all persons exempted from the provisions of section 5283 of the act by this rule. The performance of the functions of manager of a distributing group and the receipt of a bona fide payment for performing such functions shall not preclude an exemption which would otherwise be available under this rule.

(2) The exemption of a transaction pursuant to this rule with respect to the participation therein of 1 party thereto shall not render the transaction exempt with respect to participation of any other party therein unless the other party also meets the conditions of this rule.

History

History: 1979 AC.

Mich. Admin. Code R 500.522 Exemption of acquisition under certain stock plans {#sec-r-500.522 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.522}

Rule 522. Any acquisition of shares of stock, other than stock acquired upon the exercise of an option, warrant or right, pursuant to a stock bonus, profit sharing, retirement, incentive, thrift, savings or similar plan, or any acquisition of a qualified or a restricted stock option pursuant to a qualified or a restricted stock option plan, or a stock option pursuant to an employee stock purchase plan, by a director or officer of an insurer issuing the stock or stock option is exempt from the operation of section 5283 of the act if the plan meets the conditions of R 500.523 and R 500.526.

History

History: 1979 AC.

Mich. Admin. Code R 500.523 Approval of plans; proxies {#sec-r-500.523 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.523}

Rule 523. The plan has been approved, directly or indirectly, by the affirmative votes of the holders of a majority of the securities of such insurer present, or represented, and entitled to a vote at a meeting duly held in accordance with the applicable laws of the state or by the written consent of the holders of a majority of the securities of the insurer entitled to vote. If the vote or written consent was not solicited substantially in accordance with the proxy rules and regulations prescribed by the commissioner in effect at the time of the vote or written consent, the insurer shall furnish in writing to the holders of record of the securities entitled to vote for the plan substantially the same information concerning the plan which would be required by such rules and regulations in effect at the time the information is furnished, if proxies to be voted with respect to the approval or disapproval of the plan were then being solicited, on or prior to the date of the first annual meeting of security holders held subsequent to the later of the date the act first applies to the insurer, or the acquisition of an equity security for which exemption is claimed. The written information may be furnished by mail to the last known address of the security holders of record within 30 days prior to the date of mailing. Four copies of the written information shall be filed with the commissioner not later than the date on which it is first sent or given to security holders of the insurer. For the purposes of this rule, the term "insurer" includes a predecessor corporation if the plan or obligations to participate thereunder were assumed by the insurer in connection with the succession.

History

History: 1979 AC.

Mich. Admin. Code R 500.524 Selection of participants in plan {#sec-r-500.524 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.524}

Rule 524. (1) If the selection of any director or officer of the insurer to whom stock may be allocated or to whom qualified, restricted or employee stock purchase plan stock options may be granted pursuant to the plan, or the determination of the number or maximum number of shares of stock which may be allocated to any director or officer or which may be covered by qualified, restricted or employee stock purchase plan stock options granted to any director or officer, is subject to the discretion of any person, then such discretion shall be exercised only as prescribed in this rule.

(2) With respect to the participation of directors:

(a) By the board of directors of the insurer, a majority of which board and a majority of the directors acting in the matter are disinterested persons.

(b) By, or only in accordance with the recommendations of, a committee of 3 or more persons having full authority to act in the matter, all of the members of which committee are disinterested persons.

(c) In accordance with the plan, if it specifies the number or maximum number of shares of stock which directors may acquire or which may be subject to qualified, restricted or employee stock purchase plan stock options granted to directors and the terms upon which, and the times at which, or the periods within which, such stock may be acquired or such options may be acquired and exercised; or sets forth, by formula or otherwise, effective and determinable limitations with respect to the foregoing based upon earnings of the insurer, dividends paid, compensation received by participants, option prices, market value of shares, outstanding shares or percentages thereof outstanding from time to time, or similar factors.

(3) With respect to the participation of officers who are not directors:

(a) By the board of directors of the insurer or a committee of 3 or more directors.

(4) For the purpose of this rule, a director or committee member shall be deemed to be a disinterested person only if he is not eligible at the time the discretion is exercised and has not been eligible at any time within 1 year prior thereto for selection as a person to whom stock may be allocated or to whom qualified, restricted or employee stock purchase plan stock options may be granted pursuant to the plan or any other plan of the insurer or any of its affiliates entitling the participants therein to acquire stock or qualified, restricted or employee stock purchase plan stock options of the insurer or any of its affiliates.

(5) The provisions of this rule shall not apply with respect to any option granted, or other equity security acquired, prior to the date that sections 5282, 5283 and 5284 of the act first become applicable with respect to any class of equity securities of any insurer.

History

History: 1979 AC.

Mich. Admin. Code R 500.525 Limitations required in plans {#sec-r-500.525 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.525}

Rule 525. As to each participant or as to all participants the plan effectively limits the aggregate dollar amount or the aggregate number of shares of stock which may be allocated or which may be subject to qualified, restricted or employee stock purchase plan stock options granted pursuant to the plan. The limitations may be established on an annual basis, or for the duration of the plan, whether or not the plan has a fixed termination date; and may be determined either by fixed or maximum dollar amounts or fixed or maximum numbers of shares or by formulas based upon earnings of the insurer, dividends paid, compensation received by participants, option prices, market value of shares, outstanding shares or percentages thereof outstanding from time to time or similar factors which will result in an effective and determinable limitation. Such limitations may be subject to any provisions for adjustment of the plan or of stock allocable or options outstanding thereunder to prevent dilution or enlargement of rights.

REGULATIONS UNDER SECTION 5283 OF THE ACT

History

History: 1979 AC.

Mich. Admin. Code R 500.526 Definitions for R 500.522 to R 500.526 {#sec-r-500.526 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.526}

Rule 526. Unless the context otherwise requires, all terms used in R 500.522 to R 500.526 shall have the same meaning as in the act or elsewhere in these rules. In addition, the following definitions apply:

(a) "Plan" includes any plan, whether or not set forth in any formal written document or documents and whether or not approved in its entirety at 1 time.

(b) The definition of the terms "qualified stock option" and "employee stock purchase plan" that are set forth in sections 422 and 423 of the internal revenue code of 1954, as amended, are to be applied to those terms where used in R 500.523 to R 500.526. The term "restricted stock option" as defined in section 424(b) of the internal revenue code of 1954, as amended, shall be applied to that term as used in R 500.523 to R 500.526, but an option which meets all of the conditions of section 424(b), other than the date of issuance shall be deemed to be a "restricted stock option."

(c) The term "exercise of an option, warrant or right" contained in R 500.522 shall not include (i) the making of any election to receive under any plan and award of compensation in the form of stock or credits therefor if the election is made prior to the making of the award and if the election is irrevocable until at least 6 months after termination of employment; (ii) the subsequent crediting of the stock; (iii) the making of any election as to time for delivery of the stock after termination of employment if the election is made at least 6 months prior to any delivery; (iv) the fulfillment of any condition to the absolute right to receive stock; or (v) the acceptance of certificates for shares of stock.

History

History: 1979 AC.

Mich. Admin. Code R 500.527 Exemption of transactions in which securities are received by redemption {#sec-r-500.527 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.527}

Rule 527. Any acquisition of an equity security, other than a convertible security or right to purchase a security, by a director or officer of the insurer issuing such security is exempt from the operation of section 5283 of the act upon condition that:

(a) The equity security is acquired by way of redemption of another security of an insurer substantially all of whose assets other than cash or government bonds consist of securities of the insurer issuing the equity security so acquired, and which:

(i) Represented substantially and in practical effect a stated or readily ascertainable amount of the equity security;

(ii) Had a value which was substantially determined by the value of such equity security; and (iii) Conferred upon the holder the right to receive such equity security without the payment of any consideration other than the security redeemed.

(b) No security of the same class as the security redeemed was acquired by the director or officer within 6 months prior to the redemption or is acquired within 6 months after the redemption.

(c) The insurer issuing the equity security acquired has recognized the applicability of subdivision (a) of this rule by appropriate corporate action.

History

History: 1979 AC.

Mich. Admin. Code R 500.528 Exemption of long-term profits incident to sales within 6 months of the exercise of an option {#sec-r-500.528 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.528}

Rule 528. (1) To the extent specified in subrule (2) of this rule, the commissioner exempts as not comprehended within the purposes of section 5283 of the act any transaction or transactions involving the purchase and sale, or sale and purchase, of any equity security where such purchase is pursuant to the exercise of an option or similar right either acquired more than 6 months before its exercise, or acquired pursuant to the terms of an employment contract entered into more than 6 months before its exercise.

(2) In respect of transactions specified in subrule (1) the profits inuring to the insurer shall not exceed the difference between the proceeds of sale and the lowest market price of any security of the same class within 6 months before or after the date of sale. Nothing in this section shall be deemed to enlarge the amount of profit which would inure to the insurer in the absence of this rule.

(3) The commissioner also exempts, as not comprehended within the purposes of section 5283 of the act, the disposition of a security, purchased in a transaction specified in subrule (1) of this rule, pursuant to a plan or agreement for merger or consolidation, or reclassification of the insurer's securities, or for the exchange of it securities for the securities of another person which has acquired its assets, or which is in control, as defined in section 368(c) of the internal revenue code of 1954, of a person which has acquired its assets, where the terms of the plan or agreement are binding upon all stockholders of the insurer except to the extent that dissenting stockholders may be entitled, under statutory provisions or provisions contained in the certificate of incorporation, to receive the appraised or fair value of their holdings.

(4) The exemptions provided by this rule shall not apply to any transaction made unlawful by section 5284 of the act or by any rules thereunder.

(5) The burden of establishing market price of a security for the purpose of this rule rests upon the person claiming the exemption.

History

History: 1979 AC.

Mich. Admin. Code R 500.529 Exemption of transactions pursuant to mergers or consolidations {#sec-r-500.529 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.529}

Rule 529. (1) The following transactions are exempt from the provisions of section 5283 of the act as not comprehended within the purpose of the section:

(a) The acquisition of a security of an insurer, pursuant to a merger or consolidation, in exchange for a security of a company which, prior to the merger or consolidation, owned 85% or more of the equity securities of all other companies involved in the merger or consolidation except, in the case of consolidation, the resulting company.

(b) The disposition of a security, pursuant to a merger or consolidation of an insurer which, prior to the merger or consolidation, owned 85% or more of the equity securities of all other companies involved in the merger or consolidation except, in the case of consolidation, the resulting company.

(c) The acquisition of a security of an insurer, pursuant to a merger or consolidation, in exchange for a security of a company which, prior to the merger or consolidation, held over 85% of the combined assets of all the companies undergoing merger or consolidation, computed according to their book values prior to the merger or consolidation, as determined by reference to their most recent available financial statements for a 12month period prior to the merger or consolidation.

(d) The disposition of a security, pursuant to a merger or consolidation, of an insurer which, prior to the merger or consolidation, held over 85% of the combined assets of all the companies undergoing merger or consolidation, computed according to their book values prior to merger or consolidation, as determined by reference to their most recent available financial statements for a 12-month period prior to the merger or consolidation.

(2) A merger within the meaning of this rule includes the sale or purchase of substantially all the assets of 1 insurer by another in exchange for stock which is then distributed to the security holders of the insurer which sold its assets.

(3) Notwithstanding the provisions of subrules (1) and (2), if an officer, director or stockholder makes any purchase, other than a purchase exempted by this rule, of a security in any company involved in the merger or consolidation and any sale, other than a sale exempted by this rule, of a security in any other company involved in the merger or consolidation within any period of less than 6 months during which the merger or consolidation took place, the exemption provided by this rule is unavailable to the officer, director or stockholder to the extent of the purchase and sale.

History

History: 1979 AC.

Mich. Admin. Code R 500.530 Exemption of transactions in securities under voting trusts or deposit agreements {#sec-r-500.530 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.530}

Rule 530. Any acquisition or disposition of an equity security involved in the deposit of the security under, or the withdrawal of the security from, a voting trust or deposit agreement, and the acquisition or disposition in connection therewith of the certificate representing the security, is exempt from the operation of section 5283 of the act if substantially all of the assets held under the voting trust or deposit agreement immediately after the deposit or immediately prior to the withdrawal, consisted of equity securities of the same class as the security deposited or withdrawn. This rule shall not apply to the extent that there have been either (a) a purchase of an equity security of the class deposited and a sale of any certificate representing an equity security of that class, or (b) a sale of an equity security of the class deposited and purchase of any certificate representing an equity security of that class, otherwise than in a transaction involved in the deposit or withdrawal or in a transaction exempted by any other provision of R 500.521 to R 500.531, within a period of less than 6 months which includes the date of the deposit or withdrawal.

History

History: 1979 AC.

Mich. Admin. Code R 500.531 Exemption of transactions involving conversion of equity securities {#sec-r-500.531 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.531}

Rule 531. (1) Any acquisition or disposition of an equity security involved in the conversion of an equity security which, by its terms or pursuant to the terms of the insurer's charter or other governing instruments, is convertible immediately or after a stated period of time into another equity security of the same insurer, is exempt from the operation of section 5283 of the act. This rule shall not apply to the extent that there shall have been either (a) a purchase of any equity security of the class convertible, including any acquisition of or change in a conversion privilege, and a sale of any equity security of the class issuable upon conversion, or (b) a sale of any equity security of the class convertible and any purchase of any equity security issuable upon conversion, otherwise than in a transaction involved in the conversion or in a transaction exempted by any other provision of R 500.521 to R 500.531, within a period of less than 6 months which includes the date of conversion.

(2) For the purpose of this rule, an equity security shall not be deemed to be acquired or disposed of upon conversion of an equity security if the terms of the equity security converted require the payment or entail the receipt, in connection with such conversion, of cash or other property other than equity securities involved in the conversion, equal in value at the time of conversion to more than 15% of the value of the equity security issued upon conversion.

(3) For the purpose of this rule, an equity security shall be deemed convertible if it is convertible at the option of the holder or of some other person or by operation of the terms of the security or the governing instruments.

History

History: 1979 AC.

Mich. Admin. Code R 500.532 Exemption of transactions involving sale of subscription rights {#sec-r-500.532 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.532}

Rule 532. (1) Any sale of a subscription right to acquire any subject security of the same insurer is exempt from the provisions of section 5283 of the act, to the extent prescribed in this rule, as not comprehended within the purpose of section 5283 of the act, if all of the following occur:

(a) The subscription right is acquired, directly or indirectly, from the insurer without the payment of consideration.

(b) The subscription right by its terms expires within 45 days after the issuance thereof.

(c) The subscription right by its terms is issued on a pro rata basis to all holders of the beneficiary security of the insurer.

(d) A registration statement under the securities act of 1933 is in effect as to each subject security or the applicable terms of any exemption from such registration have been met in respect to each subject security.

(2) When used in this rule:

(a) "Subscription right" means any warrant or certificate evidencing a right to subscribe to or otherwise acquire an equity security.

(b) "Beneficiary security" means a security registered pursuant to section 12 of the securities exchange act, to the holders of which a subscription right is granted.

(3) Notwithstanding any provision of this rule, if a person purchases subscription rights for cash or other consideration, a sale by that person of subscription rights otherwise exempted by this rule will not be so exempted to the extent of such purchases within the 6month period preceding or following the sale.

REGULATIONS UNDER SECTION 5284 OF THE ACT

History

History: 1979 AC.

Mich. Admin. Code R 500.541 Exemption of certain securities {#sec-r-500.541 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.541}

Rule 541. Any security is exempt from the operation of section 5284 of the act to the extent necessary to render lawful under section 5284 the execution by a broker of an order for an account in which he has no direct or indirect interest.

History

History: 1979 AC.

Mich. Admin. Code R 500.542 Exemption of transactions in connection with a distribution {#sec-r-500.542 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.542}

Rule 542. Any security is exempt from the operation of section 5284 of the act to the extent necessary to render lawful under section 5284 any sale made by or on behalf of a dealer in connection with a distribution of a substantial block of securities, upon the following conditions:

(a) The sale is represented by an over-allotment in which the dealer is participating as a member of an underwriting group, or the dealer or a person acting on his behalf intends in good faith to offset such sale with a security to be acquired by or on behalf of the dealer as a participant in an underwriting, selling or soliciting-dealer group of which the dealer is a member at the time of the sale, whether or not the security to be so acquired is subject to a prior offering to existing security holders or some other class of persons; and (b) Other persons not within the purview of section 5284 of the act are participating in the distribution of the block of securities on terms at least as favorable as those on which the dealer is participating and to an extent at least equal to the aggregate participation of all persons exempted from the provisions of section 5284 of the act by this rule. The performance of the functions of manager of a distributing group and the receipt of a bona fide payment for performing such functions shall not preclude an exemption which would otherwise be available under this rule.

History

History: 1979 AC.

Mich. Admin. Code R 500.543 Exemption of sales of securities to be acquired {#sec-r-500.543 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.543}

Rule 543. (1) Whenever any person is entitled, as an incident to his ownership of an issued security and without the payment of consideration, to receive another security "when issued" or "when distributed," the security to be acquired is exempt from the operation of section 5284 if:

(a) The sale is made subject to the same conditions as those attaching to the right of acquisition; and (b) The person exercises reasonable diligence to deliver the security to the purchaser promptly after his right of acquisition matures; and (c) The person reports the sale on the appropriate form for reporting transactions by persons subject to section 5282 of the act.

(2) This rule shall not be construed as exempting transactions involving both a sale of a security "when issued" or "when distributed" and a sale of the security by virtue of which the seller expects to receive the "when-issued" or "when-distributed" security, if the 2 transactions combined result in a sale of more units than the aggregate of those owned by the seller plus those to be received by him pursuant to his right of acquisition.

REGULATION UNDER SECTION 5286 OF THE ACT

History

History: 1979 AC.

Mich. Admin. Code R 500.545 Arbitrage transactions {#sec-r-500.545 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.545}

Rule 545. It is unlawful for any director or officer of an insurer to effect any foreign or domestic arbitrage transaction in any equity security of the insurer, unless he includes the transaction in the statements required by section 5282 of the act and accounts to the insurer for the profits arising from the transaction, as provided in section 5283.The provisions of section 5284 do not apply to such arbitrage transactions. The provisions of the act do not apply to any bona fide foreign or domestic arbitrage transaction insofar as it is effected by any person other than a director or officer of the insurer.

History

History: 1979 AC.

R 500.551 to R 500.560 Standards for Safeguarding Customer Financial Information

Mich. Admin. Code R 500.551 Authority {#sec-r-500.551 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.551}

DEPARTMENT OF LABOR AND ECONOMIC GROWTH

OFFICE OF FINANCIAL AND INSURANCE SERVICES

STANDARDS FOR SAFEGUARDING CUSTOMER INFORMATION

(By the authority conferred on the Office of Financial and Insurance Services by Section 547 of 1956 PA 215, MCL 500.547, by Section 210 of 1956 PA 218, MCL 500.210, and E.R.O.

No. 2003-1, and pursuant to 15 U.S.C. 6801, 6805(a)(6), 6805(b), 6805(c))

Rule 1. (a) These rules establish standards for developing and implementing administrative, technical, and physical safeguards to protect the security, confidentiality, and integrity of customer information, pursuant to Sections 501, 505(b), and 507 of the Gramm- Leach-Bliley Act, codified at 15 U.S.C. 6801, 6805(b) and 6807, Chapter 5 of the Insurance Code, MCL 500.501 to 500.547, with penalties for violation specified in Chapter 20 of the Insurance Code, MCL 500.2001 to 500.2050.

(b) Section 501(a) of the Gramm-Leach-Bliley Act provides that it is the policy of the Congress that each financial institution has an affirmative and continuing obligation to respect the privacy of its customers and to protect the security and confidentiality of those customers' nonpublic personal information. Section 501(b) of the Gramm-Leach-Bliley Act requires the state insurance regulatory authorities to establish appropriate standards relating to all of the following administrative, technical, and physical safeguards:

(i) To ensure the security and confidentiality of customer records and information.

(ii) To protect against any anticipated threats or hazards to the security or integrity of such records.

(iii) To protect against unauthorized access to or use of records or information that may result in substantial harm or inconvenience to a customer.

(c) Section 505(b)(2) calls on state insurance regulatory authorities to implement by rule the standards prescribed under Section 501(b) with respect to persons engaged in providing insurance; and the Governor signed 2001 PA 24 on June 18, 2001, creating Chapter 5 of the Insurance Code, titled "Privacy of Financial Information."

(d) Section 507 provides, among other things, that a state may afford persons greater privacy protections than those provided by subtitle A of Title V of the Gramm-Leach-Bliley Act. MCL 500.501(3) provides that Chapter 5 of the Insurance Code - applicable to financial information - does not modify, limit, or supersede statute or rules governing the confidentiality or privacy of individually identifiable health or medical information under state law. To release such private or privileged health or medical information in Michigan generally requires the informed, written consent of the patient or his or her authorized representative.

Nothing in these rules shall be construed to diminish state law, recent federal HIPAA standards (45 CFR Parts 160 and 164) that govern the privacy and security of protected health and medical information, or fair credit reporting act protections for medical information (15 U.S.C. 1681 et seq.). The safeguards established pursuant to these rules apply only to nonpublic personal financial information and do not diminish the duty of any licensee to comply with other more stringent state or federal laws affecting other types of customer information in the licensee's possession. For example, licensees are notified that MCL 750.410 (2) establishes criminal penalties for any person, firm, or corporation that buys, sells, furnishes, or receives "for any consideration" the identity of a patient or any information concerning treatment unless otherwise authorized by law, administrative rule, or valid legal process.

History

History: 2004 AACS.

Mich. Admin. Code R 500.552 Definitions {#sec-r-500.552 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.552}

Rule 2. As used in these rules:

(a) "Customer" means a customer of the licensee as the term customer is defined in MCL 500.503(h).

(b) "Customer information" means nonpublic personal financial information as defined in MCL 500.503(n) and (p) about a customer, whether in paper, electronic, or other form, that is maintained by or on behalf of the licensee.

(c) "Customer information systems" means the electronic or physical methods used to access, collect, store, use, transmit, protect, or dispose of customer information.

(d) "Licensee" means a licensee, as that term is defined in MCL 500.503(l), including third-party administrators under MCL 550.920.

(e) "Service provider" means a person that maintains, processes, or otherwise may access customer information through its provision of services directly to the licensee.

History

History: 2004 AACS.

Mich. Admin. Code R 500.553 Information security program {#sec-r-500.553 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.553}

Rule 3. Each licensee shall implement a comprehensive written information security program that includes administrative, technical, and physical safeguards for the protection of customer information. The administrative, technical, and physical safeguards included in the information security program shall be appropriate to the size and complexity of the licensee and the nature and scope of its activities.

History

History: 2004 AACS.

Mich. Admin. Code R 500.554 Objectives of information security program {#sec-r-500.554 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.554}

Rule 4. A licensee's information security program shall be designed to do all of the following:

(a) Ensure the security and confidentiality of customer information.

(b) Protect against any anticipated threats or hazards to the security or integrity of the information.

(c) Protect against unauthorized access to or use of the information that could result in substantial harm or inconvenience to any customer.

History

History: 2004 AACS.

Mich. Admin. Code R 500.555 Examples of methods of development and implementation {#sec-r-500.555 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.555}

Rule 5. (1) The actions and procedures described in R 500.556 to R 500.559 are examples of methods of implementation of the requirements of R 500.553 and R500.554.

These examples are non-exclusive illustrations of actions and procedures that licensees may follow to implement R 500.553 and R 500.554.

(2) A licensee who performs all actions and procedures of implementation specified in R 500.556 through R 500.559 shall be considered in compliance with R 500.553 and R 500.554.

History

History: 2004 AACS.

Mich. Admin. Code R 500.556 Assess risk; example {#sec-r-500.556 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.556}

Rule 6. To assess risk, a licensee may do all of the following:

(a) Identify reasonably foreseeable internal or external threats that could result in unauthorized disclosure, misuse, alteration, or destruction of customer information or customer information systems.

(b) Assess the likelihood and potential damage of these threats, taking into consideration the sensitivity of customer information.

(c) Assess the sufficiency of policies, procedures, customer information systems and other safeguards in place to control risks.

History

History: 2004 AACS.

Mich. Admin. Code R 500.557 Manage and control risk; example {#sec-r-500.557 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.557}

Rule 7. To manage and control risk, a licensee may do all of the following:

(a) Design its information security program to control the identified risks, commensurate with the sensitivity of the information, as well as the complexity and scope of the licensee's activities.

(b) Train staff, as appropriate, to implement the licensee's information security program.

(c) Regularly test or otherwise regularly monitor the key controls, systems, and procedures of the information security program. The frequency and nature of these tests or other monitoring practices are determined by the licensee's risk assessment.

History

History: 2004 AACS.

Mich. Admin. Code R 500.558 Oversee service provider arrangements; example {#sec-r-500.558 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.558}

Rule 8. To oversee service provider arrangements, a licensee may do both of the following:

(a) Exercise appropriate due diligence in selecting its service providers.

(b) Require its service providers to implement appropriate measures designed to meet the objectives of these rules, and, where indicated by the licensee's risk assessment, take appropriate steps to confirm that its service providers have satisfied these obligations.

History

History: 2004 AACS.

Mich. Admin. Code R 500.559 Adjust program; example {#sec-r-500.559 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.559}

Rule 9. To adjust its program, a licensee monitors, evaluates, and adjusts, as appropriate, the information security program in light of any relevant changes in technology, the sensitivity of its customer information, internal or external threats to information, and the licensee's own changing business arrangements, such as mergers and acquisitions, alliances, and joint ventures, outsourcing arrangements and changes to customer information systems.

History

History: 2004 AACS.

Mich. Admin. Code R 500.560 Violations {#sec-r-500.560 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.560}

Rule 10. (a) As provided in MCL 500.2013, a violation of any requirement of this regulation is an unfair method of competition or an unfair or deceptive act and practice in the conduct of the business of insurance in this state.

(b) If a licensee complies with all requirements of the federal health insurance portability and accountability (HIPAA) privacy rule, including security standards and any more stringent laws, 45 CFR parts 160 and 164, for all customer information in the licensee's possession financial, health, and medical - such compliance shall also constitute compliance with chapter 5 of the insurance code, MCL 500.501 to 500.547, and these safeguarding rules.

History

History: 2004 AACS.

R 500.601 to R 500.641 Replacement of Life Insurance Policies

Mich. Admin. Code R 500.601 Definitions {#sec-r-500.601 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.601}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

REPLACEMENT OF LIFE INSURANCE POLICIES

Rule 601. As used in these rules:

(a) "Conservation" means any attempt by the existing insurer or its agent to continue existing life insurance in force when the existing insurer has received the information statement as required by R 500.604 from a replacing insurer. A conservation effort does not include routine administrative procedures such as late payment reminders, late payment offers, or reinstatement offers.

(b) "Life insurance" does not mean fixed or variable annuity contracts.

(c) "Replacement of life insurance" means any transaction in which life insurance is to be purchased and in which, as part of the transaction, with respect to existing life insurance, any of the following has occurred or will occur:

(i) Lapse, forfeiture, surrender, or termination.

(ii) Conversion to reduced paid-up insurance, continuation as extended term insurance, or a reduction in value by the use of nonforfeiture benefits or other policy values.

(iii) Amendment to effect a reduction in either benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid.

(iv) Reissuance with any reduction in cash value.

(v) Pledging as collateral or subjecting to borrowing, whether in a single loan or under a schedule of borrowing over a period of time for amounts in the aggregate exceedng 25% of tne loan value set forth in the policy.

(d) "Sales proposal" means an individualized, written sales aid of any kind, excluding the information statement, which is used by an insurer or agent in comparing existing life insurance to proposed life insurance in order to recommend the replacement or conservation of existing life insurance. Sales aids of a generally descriptive nature which are maintained in the insurer's advertising compliance file shall not be considered a sales proposal within the meaning of this definition.

History

History: 1979 AC; 1984 AACS.

Mich. Admin. Code R 500.602 Duties of agents {#sec-r-500.602 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.602}

Rule 602. (1) A life insurance agent shall obtain, with, or as a part of, each application for life insurance, a statement signed by the applicant as to whether the insurance for which application is made will replace existing life insurance.

(2) A life insurance agent shall submit to the insurer, in connection with each application for life insurance, a statement as to whether, to the best of his or her knowledge, replacement is involved in the transaction.

(3) If replacement is involved in a transaction, the life insurance agent shall do all of the following:

(a) Obtain, with, or as a part of, each application, a list of all existing life insurance policies proposed to be replaced.

(b) Present to the applicant, not later than at the time of taking the application, a completed information statement signed by the agent and a notice to applicants regarding replacement of life insurance, in such forms as are prescribed by the commissioner, and leave the forms with the applicant for his or her records.

(d) Have the applicant acknowledge receipt of the completed information statement and the notice to applicant regarding replacement of life insurance.

(e) Submit with the application to the insurer a copy of any sales proposal used, the completed information statement, and the name of each insurer which issued any life insurance proposed to be replaced.

(4) Each agent who uses a sales proposal when conserving existing life insurance shall do both of the following:

(a) Leave with the applicant the original or a copy of all sales proposals used in the conservation effort.

(b) Submit to the existing insurer a copy of all sales proposals used in the conservation effort.

History

History: 1979 AC; 1984 AACS.

Mich. Admin. Code R 500.603 Duties of insurers {#sec-r-500.603 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.603}

Rule 603. (1) A life insurer shall inform its field representatives of the requirements of this rule and R 500.601, R 500.602, and R 500.604 to R 500.606.

(2) A life insurer shall require, with, or as a part of, each application for life insurance, a statement signed by the applicant as to whether the insurance for which application is made will replace existing life insurance.

(3) A life insurer shall require, in connection with each application for life insurance, a statement signed by the agent as to whether, to the best of his or her knowledge, replacement is involved in the transaction.

History

History: 1979 AC; 1984 AACS.

Mich. Admin. Code R 500.604 Duties where replacement involved; notice; filing {#sec-r-500.604 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.604}

Rule 604. If a replacement is involved in a transaction, the life insurer shall do all of the following:

(a) Require, with, or as part of each application, a list prepared by the agent representing, to the best of his or her knowledge, all of the existing life insurance policies proposed to be replaced.

(b) Obtain all of the following:

(i) A copy of any sales proposal used.

(ii) The completed information statement.

(iii) Proof of receipt by the applicant of the information statement and the notice to applicants regarding replacement of life insurance.

(iv) The name of each insurer which issued any life insurance being replaced.

(c) Within 3 business days following the receipt of the application in the home or regional office of the replacing insurer, or on the day the life insurer issues the proposed policy, whichever is sooner, notify the existing insurer and furnish a copy of any sales proposal used and a copy of the completed information statement.

(d) Examine any proposal used and the completed information statement and ascertain that the information statement meets the requirements of this rule, R 500.601 to R 500.603, R 500.605, and R 500.606.

(e) Verify the substantial accuracy of information concerning the proposed policy furnished to the applicant.

(f) Maintain in the life insurer's home office, for not less than 3 years or until the conclusion of the next succeeding regular examination by the insurance regulatory authority of the life insurer's state of domicile, whichever is later, all of the following:

(i) Copies of any proposal used.

(ii) The completed information statement.

(iii) Proof of receipt by the applicant of the information statement and the notice to applicants regarding replacement of life insurance.

(iv) The applicant's signed statement with respect to replacement.

History

History: 1979 AC; 1984 AACS.

Mich. Admin. Code R 500.605 Exceptions {#sec-r-500.605 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.605}

Rule 605. (1) R 500.602, R 500.603, and R 500.604 do not apply to transactions in which the application for the new life insurance is made to the same insurer that issued the existing life insurance or to an affiliate of the existing insurer.

(2) R 500.602, R 500.603, and R 500.604 do not apply to transactions in which the new life insurance is to be provided under any of the following plans, if full and complete disclosure of all material facts is made to the administrator of any plan to be replaced:

(a) A group term life insurance policy.

(b) Policies covering employees of an employer, debtors of a creditor, or members of an association or other eligible organization, which policies are distributed on a mass merchandising basis and which do not involve direct contact between the covered person and the agent.

(c) Life insurance policies issued in connection with a pension, profit sharing, or other benefit plan qualifying for tax-deductibility of premiums.

(3) R 500.602, R 500.603, and R 500.604 do not apply to transactions in which the existing life insurance is a nonconvertible term policy which cannot be renewed and which would expire within 5 years after the initiation of the transaction.

History

History: 1979 AC; 1984 AACS.

Mich. Admin. Code R 500.606 Penalties {#sec-r-500.606 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.606}

Rule 606. An agent who fails to comply with R 500.601, R 500.602, and R 500.605 is rebuttably presumed to have given cause for revocation or suspension of his or her license or for imposition of a civil penalty for each such failure within the meaning of sections 1242 and 1244 of Act No.218 of the Public Acts of 1956, as amended, being SS500.1242 and 500.1244 of the Michigan Compiled Laws.

DISCRETIONARY GROUP LIFE INSURANCE AND GROUP LIFE INSURANCE

History

History: 1979 AC; 1984 AACS.

Mich. Admin. Code R 500.611 Discretionary group life insurance; procedures {#sec-r-500.611 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.611}

Rule 1. (1) A group life insurance policy shall not be issued under section 4424 of Act No. 218 of the Public Acts of 1956, as amended, being S500.4424 of the Michigan Compiled Laws, until the commissioner has issued a certificate of authority to purchase discretionary group life insurance to the applicant group and has given written notice of issuance of the certificate of authority to the insurer which is to provide the group life insurance.

(2) Application for a certificate of authority shall be made to the commissioner on forms prescribed by the commissioner by the person who is to serve as policyholder for the proposed discretionary group. If a trustee is to serve as policyholder, he or she shall submit with the application written evidence of his or her authority to act as trustee. If the applicant group is party to or results from a trust agreement or a bargaining agreement, a copy of the agreement shall be submitted with the application. If the applicant group has a constitution or bylaws, or both, a certified copy of each such document shall be submitted with the application.

(3) If the commissioner determines, based upon representations made in the application and in the documents accompanying it, that granting permission to the group to purchase group life insurance would be consonant with the dictates of public policy as expressed in section 4424 of Act No. 218 of the Public Acts of 1956, as amended, being S500.4424 of the Michigan Compiled Laws, he or she shall issue a preliminary certificate of eligibility, which certificate indicates that the group is qualified to negotiate with insurers for group life insurance coverage.

(4) The policies, certificates, and schedule of rates which an insurer proposes to use in providing insurance coverage for a group holding a certificate of eligibility shall be submitted to the commissioner by the insurer. If the commissioner determines, after review of the materials submitted, that the proposed plan of insurance meets the requirements of Act No. 218 of the Public Acts of 1956, as amended, being S500.100 et seq.of the Michigan Compiled Laws, he or she shall issue a certificate of authority to the group and shall notify the insurer in writing that the certificate has been issued.

(5) A group holding a certificate of authority shall not make any material change in the composition or size of the group and shall not make any material change in the benefits provided by the plan of insurance approved by the commissioner, until the commissioner has approved the changes in writing. If a change is made without the prior written approval of the commissioner, the certificate of authority may be terminated.

(6) An insurer providing coverage for a group holding a certificate of authority shall file any change in its schedule of rates for that coverage with the commissioner not later than 30 days after the effective date of the change. An insurer shall not issue any group life insurance policy for which the premium rate exceeds that determined by the schedule of such group as then on file with the commissioner.

(7) The commissioner may require that each discretionary group holding a certificate of authority file a report with the commissioner at the conclusion of each policy year, on a form prescribed by the commissioner.

History

History: 1979 AC; 1981 AACS.

Mich. Admin. Code R 500.612 Grounds of eligibility {#sec-r-500.612 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.612}

Rule 612. (1) The commissioner shall not issue a certificate of eligibility to a group having no logical reason for existence except to fraction or partition a risk.

(3) The commissioner shall not issue a certificate of eligibility if the insurance is not to be available to all members of the group who are not excluded under the provisions of the insurer's acceptability criteria for the group.

History

History: 1979 AC; 1997 AACS.

Mich. Admin. Code R 500.615 Group term life insurance; contributions of certificate holders {#sec-r-500.615 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.615}

Rule 615. Whenever the insurance code of 1956 or a rule issued pursuant thereto requires that premiums on group term life insurance be paid jointly by the certificate holder and some other person, the contract of insurance shall limit the contributions of the certificate holders so that the contributions do not exceed 75% of the total premium for the coverage, and do not exceed the amounts specified in the following schedule:

Maximum Contribution to Life Premium from Certificate Holder Rate at Which Per Thousand of Life Insurance Policy is Written Monthly Weekly Standard 60 cents 14 cents Standard plus $1.00 70 cents 16 cents Standard plus $2.00 75 cents 17 cents Standard plus $3.00 or more 80 cents 18 cents

History

History: 1979 AC.

Mich. Admin. Code R 500.616 Rescinded {#sec-r-500.616 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.616}

VARIABLE CONTRACTS

History

History: 1982 AACS; 2017 AACS.

Mich. Admin. Code R 500.621 Contracts on a variable basis; authorization {#sec-r-500.621 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.621}

Rule 621. A contract on a variable basis authorized by section 925 of the insurance code of 1956 shall not be delivered or issued for delivery in this state unless the insurer is acting under a certificate of authority which specifically provides for issuance of contracts on a variable basis, and the insurer has filed with the commissioner, within 30 days after adoption, the latest resolution of its board of directors governing the separate account which is to be used in connection with the contract on a variable basis.

History

History: 1979 AC.

Mich. Admin. Code R 500.622 Certificates of authority; applications {#sec-r-500.622 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.622}

Rule 622. Application for a certificate of authority which specifically provides for issuance of contracts on a variable basis shall be made to the commissioner in writing and shall be accompanied by all of the following:

(a) A certified copy of the resolution of the insurer's board of directors establishing the separate account.

(b) A written general description of the kinds of variable contracts the insurer intends to issue.

History

History: 1979 AC.

Mich. Admin. Code R 500.623 Certificates of authority; issuance {#sec-r-500.623 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.623}

Rule 623. (1) The commissioner shall not issue a certificate of authority which specifically provides for issuance of contracts on a variable basis to an insurer unless all of the following are true:

(a) The insurer possesses capital and surplus, if a stock insurer, or surplus, if a mutual insurer, of at least $1,500,000.00.

(b) The insurer, if an alien insurer, has established a separate trust account for contracts on a variable basis under a trust indenture approved by the commissioner.

(c) The commissioner is satisfied that the insurer's condition or method of operation in connection with the issuance of contracts on a variable basis will not render its operation hazardous to its policyholders or the public.

(2) In determining whether to issue a certificate of authority which specifically provides for issuance of contracts on a variable basis, the commissioner will consider, among other relevant matters, the history and financial condition of the insurer; the character, responsibility and fitness of the officers, directors and employees of the insurer and any affiliation by common management or ownership of the insurer with an insurer authorized to transact life insurance in this state.

History

History: 1979 AC.

Mich. Admin. Code R 500.624 Separate accounts {#sec-r-500.624 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.624}

Rule 624. (1) An insurer issuing contracts on a variable basis shall not use the same separate account for both annuity contracts on a variable basis and contracts of life insurance on a variable basis.

(2) An insurer issuing contracts on a variable basis shall maintain in each separate account assets having a value equal to the reserves and other reasonable liabilities and obligations with respect to the account.If the securities and exchange commission requires that an account have a minimum balance before solicitation is permitted, the insurer may participate in the separate account in order to comply with the requirement but the initial value of the amount so invested shall not exceed by more than 25% the amount required by the securities and exchange commission, and the insurer shall redeem the units so purchased within 6 months after the account acquires other assets sufficient to satisfy the requirements of the securities and exchange commission. Any surplus or deficit which occurs in a separate account because of mortality experience guaranteed by the insurer shall be adjusted at least annually at the end of each calendar year by withdrawals from or additions to the separate account so that the assets of the account equal the liabilities.

(3) A separate account shall not be charged with liabilities arising out of other separate accounts or out of other business of the insurer unless the liabilities have a specific and determinable relation to or dependence upon the separate account.

(4) Assets allocated to a separate account shall be valued at their market value on the date of valuation. Where possible, market values of common stocks shall be established by quotations of securities exchanges located in the United States or Canada or by credible over-the-counter market quotations. Where such quotations are not available, the assets shall be valued in accordance with reasonable rules applicable to the separate account or if there are no reasonable rules to be applicable, in accordance with reasonable valuation procedures prescribed by the commissioner.

History

History: 1979 AC.

Mich. Admin. Code R 500.625 Separate account committees {#sec-r-500.625 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.625}

Rule 625. Any provisions of the insurance code of 1956 or of rules promulgated pursuant thereto which concern conflicts of interest of officers or directors of insurers are equally applicable to members of any separate account's committee, board or other similar body. An officer, director or trustee of an insurer or any member of the board of managers, board of trustees, or board of directors of a separate account shall not receive, either directly or indirectly, any commission or other forms of emolument which is related to the purchase or disposal of assets of the insurer or of any of its separate accounts.

History

History: 1979 AC.

Mich. Admin. Code R 500.626 Insurance law applicable {#sec-r-500.626 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.626}

Rule 626. Provisions of the insurance code of 1956 which apply to contracts of life insurance or to annuity contracts also apply to similar contracts on a variable basis but computation of reserves and cash values and other nonforfeiture benefits shall be in accordance with actuarial procedures that recognize the variable nature of the contract.

Section 4070 of the insurance code of 1956 does not apply to contracts for annuities on a variable basis.

History

History: 1979 AC.

Mich. Admin. Code R 500.627 Approvals required {#sec-r-500.627 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.627}

Rule 627. A contract on a variable basis shall not be delivered or issued for delivery in this state and an application for such a contract or a group certificate in connection with any such contract shall not be delivered or issued for delivery in this state, unless it has been approved by the commissioner pursuant to section 2236 of the insurance code of 1956.

History

History: 1979 AC.

Mich. Admin. Code R 500.628 Contracts and certificates; contents {#sec-r-500.628 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.628}

Rule 628. A contract on a variable basis shall not be delivered or issued for delivery in this state and a group certificate in connection with any such contract shall not be delivered or issued for delivery in this state, unless:

(a) It contains a statement of the essential procedures to be followed by the insurer in determining the dollar amount of variable benefits or other contractual payments or values under the contract.

(b) It contains on its first page, in a prominent position, a clear statement that the benefits or other contractual payments of values are on a variable basis and will decrease or increase to reflect investment experience.

History

History: 1979 AC.

Mich. Admin. Code R 500.629 Variable annuity; contract requirements {#sec-r-500.629 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.629}

Rule 629. (1) A contract for an annuity on a variable basis shall not be delivered in this state unless it stipulates the investment increment factors to be used in computing the dollar amount of variable benefits or other variable contractual payments or values thereunder. An individual contract for an annuity on a variable basis shall not be delivered or issued for delivery in this state, unless all of the following provisions are complied with:

(a) It contains a provision specifying the options available in the event of default in a periodic stipulated payment, which options may include an option to surrender the contract for a cash value as determined by the contract and shall include an option to receive a paid-up annuity if the contract is not surrendered for cash.

(b) It stipulates the expense and mortality components used in determining the factor which is used in calculating the first annuity payment. Expense may exclude some or all taxes as may be provided by the contract.

(d) The mortality factor is determined from an annuity mortality table authorized by section 835 of the insurance code of 1956, as amended, being S500.835 of the Michigan Compiled Laws, or any modification of the table approved by the commissioner, or any other table so approved.

(2) The insurer shall disclose, in writing, before or at the time of delivery of the policy, the actual or maximum charges to be applied each year against variable annuity contracts for investment management expenses, including internal costs attributable to the investment management of assets of the separate account.

Aug. 12, 1988.

History

History: 1954 ACS 67, Eff. Mar. 26, 1971; 1954 ACS 98, Eff. Dec. 23, 1978; 1979 AC; 1988 MR 7, Eff.

Mich. Admin. Code R 500.631 Advertising and illustrations {#sec-r-500.631 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.631}

Rule 631. (1) Except as exempted in writing by the commissioner, an insurer which delivers or issues for delivery contracts on a variable basis shall file with the commissioner at least 30 days prior to use copies of advertising, illustrations and other printed materials to be used in connection with the sale of individual contracts on a variable basis in this state.

(2) Advertising, illustrations, and other disseminations of information concerning contracts on a variable basis are subject to the provisions of sections 2005 and 2007 of the insurance code of 1956. An illustration of benefits under a contract on a variable basis violates those provisions if it includes projections of past investment experience into the future or attempted predictions of future investment experience. However, those provisions do not prohibit the use of hypothetical assumed rates of interest to illustrate possible levels of benefits.

(3) Advertising, illustrations, and other disseminations of information concerning group variable annuity contracts on a variable basis satisfy the provisions of sections 2005 and 2007 of the insurance code of 1956 if they are subject to review by the securities and exchange commission of the United States government or by the national association of securities dealers and the review has not resulted in disapproval.

History

History: 1954 ACS 67, Eff. Mar. 26, 1971; 1954 ACS 98, Eff. Dec. 23, 1978; 1979 AC.

Mich. Admin. Code R 500.632 Statements {#sec-r-500.632 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.632}

Rule 632. (1) An insurer shall mail to each of its holders of an annuity contract on a variable basis, at least once in each contract year after the first at his last address known to the insurer, a statement reporting the investments held in the separate annuity account (S), in a form acceptable to the commissioner.

(2) An insurer shall mail to each of its holders of an annuity contract on a variable basis under which payments have not yet begun, at least once in each contract year after the first at his last address known to the insurer, a statement reporting the number of accumulation units credited to the contract and the dollar value of a unit or a statement reporting the value of the contract holder's account, as of a date not more than 4 months prior to the date of mailing.

(3) Annually an insurer issuing contracts on a variable basis shall submit to the commissioner a statement of the business of its separate accounts in the form prescribed by the commissioner.

History

History: 1979 AC.

Mich. Admin. Code R 500.633 Licensing of agents {#sec-r-500.633 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.633}

Rule 633. (1) A person shall not act as an agent in the solicitations or sale of contracts on a variable basis unless he is a licensed agent of a life insurer whose certificate of authority specifically provides for the issuance of contracts on a variable basis and unless his life insurance agent's license has been extended to permit him to solicit and sell variable contracts. A licensed agent of a life insurer may solicit and sell contracts on a variable basis without extension of his life insurance agent's license if the contract is based on an account which is excluded from the definition of investment company by section 3(c)11 of the investment company act of 1940.

(2) A licensed agent of a life insurer whose certificate of authority specifically provides for the issuance of contracts on a variable basis may apply for extension of his license to permit the solicitation and sale of variable contracts by a letter request directed to the commissioner through the home office of the life insurer. Letter requests may be for 1 or more of the life insurer's licensed agents.

(3) The licensing procedures prescribed by R 500.633 to R 500.636 shall not apply to the solicitation or sale of life insurance contracts on a variable basis as defined by R 500.841.

History

History: 1979 AC.

Mich. Admin. Code R 500.634 Examinations for agents {#sec-r-500.634 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.634}

Rule 634. (1) The commissioner shall schedule an examination and notify the agent of the date, time and place of the examination. The examination fee may be submitted with the letter request or may be paid at the time of examination.

(2) The examination has 2 parts. Part 1 deals with securities in general. Part 2 deals with the history, purpose, regulation and sale of variable contracts. An examinee shall achieve a grade of at least 70% in each part in order to pass the examination. Certain sales supervisory and home office employees shall achieve a grade of at least 80% in part 1.

History

History: 1979 AC.

Mich. Admin. Code R 500.635 Waiver of examination; alternatives; nonresidents {#sec-r-500.635 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.635}

Rule 635. (1) The commissioner shall waive part 1 of the examination for any agent who applies for extension of his license if the letter request from the insurer is accompanied by evidence that the agent has passed an acceptable alternative examination, that the agent currently is registered with the securities and exchange commission as a broker-dealer or that the agent currently is associated with a broker-dealer and has met the qualification requirements for such association. The following examinations are acceptable alternative examinations:

(a) Any state securities sales examination accepted by the securities and exchange commission.

(b) The national association of securities dealers' examination for principals, or its examination for qualification as a registered representative.

(c) The various securities examinations required by the New York stock exchange, the American stock exchange, the Pacific stock exchange, or any other registered national securities exchange.

(d) The securities and exchange commission test given pursuant to section 15(b)(8) of the securities and exchange act of 1934.

(e) The examination recommended for the testing of variable contract agents by the national association of insurance commissioners, when adopted by the insurance department of any state or territory of the United States and approved for use by such department by the securities and exchange commission.

(2) The commissioner shall waive the examination for a licensed nonresident agent if the insurance regulatory authority in the state in which the agent resides certifies to the commissioner that the agent is licensed to solicit and sell contracts on a variable basis in that state.

History

History: 1979 AC.

Mich. Admin. Code R 500.636 Rewriting and passing examinations; termination of agents' authority {#sec-r-500.636 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.636}

Rule 636. (1) An agent who fails to pass part 1 of the examination may rewrite it after a waiting period in accordance with securities and exchange commission requirements but the waiting period shall be not less than 20 days. An agent who fails to pass part 2 of the examination may rewrite it after a waiting period of not less than 20 days.

(2) When an agent successfully completes the examination, the commissioner shall notify the sponsoring insurer and instruct the insurer to return the agent's license to be amended.

Amending a license consists of adding the designation including variable contracts to the license and making the appropriate notations on the agent's control card in the commissioner's files. There is no additional charge to the sponsoring insurer for amending a license.

(3) If an insurer terminates the authority of an agent to solicit and sell contracts on a variable basis but maintains the agent's authority to act as a life insurance agent for the company, the insurer shall notify the commissioner immediately and return the license to the commissioner for deletion of the including variable contracts designation.

History

History: 1979 AC.

Mich. Admin. Code R 500.637 Waivers of compliance with rules {#sec-r-500.637 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.637}

Rule 637. (1) If the statutes or rules of the place of domicile of an insurer prevent compliance with part of these rules, the insurer may advise the commissioner in writing. If the insurer demonstrates that the statute or rules of the place of domicile provide protection to the policyholders and the public which is substantially equal to that provided by these rules, the commissioner may waive compliance with these rules to the extent necessary to remove the conflict.

(2) If an insurer domiciled in this state or an alien insurer entered in this state is prohibited from transacting a variable contract business in another jurisdiction because a conflict exists between these rules and the rules or laws or both of that jurisdiction, the insurer may advise the commissioner in writing. The commissioner may waive compliance with these rules to the extent necessary to remove the conflict if he determines that the waiver will not substantially reduce the protection to the policyholders and the public provided by these rules.

History

History: 1979 AC.

Mich. Admin. Code R 500.641 Suspension or modification of filing requirements; standards {#sec-r-500.641 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.641}

Rule 641. Before issuing a written order suspending or modifying the requirement of filing as to any kind of insurance, subdivision, or combination thereof, or as to classes of risks, the commissioner shall take into account all of the following:

(a) The magnitude of the coverages and premiums involved.

(b) Whether the policies involved are of a unique or unusual character.

(d) The information available to, or the knowledge of, the parties negotiating the coverage as pertains to the risk involved and the rates for such coverage.

(e) Whether such filing requirement is necessary or desirable for the protection of the public.

History

History: 1981 AACS.

R 500.651 to R 500.669 Accident and Sickness Insurance Advertising

Mich. Admin. Code R 500.651 Definitions {#sec-r-500.651 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.651}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

ACCIDENT AND SICKNESS INSURANCE ADVERTISING

(By authority conferred on the commissioner of insurance by sections 210 and 2007 of Act No. 218 of the Public Acts of 1956, being SS500.210 and 500.2007 of the Michigan Compiled Laws)

Rule 1. As used in these rules:

(a) "Accident and sickness insurance" means disability insurance as defined in section 606 of the code, coverage comparable to that defined in section 606 of the code offered by multiple employer welfare arrangements, and credit accident and health insurance as defined in section 3 of Act No. 173 of the Public Acts of 1958, as amended, being S550.603 of the Michigan Compiled Laws.

(b) "Advertisement" means all of the following:

(i) Printed and published material, audiovisual material, and descriptive literature used by or on behalf of an insurer in any of the following:

(A) Direct mail.

(B) Newspapers.

(D) Radio scripts.

(E) Television scripts.

(F) Billboards.

(G) Other similar displays.

(ii) Descriptive literature and sales aids of all kinds issued or used by an insurer, agent, or other person for presentation to members of the public, including any of the following:

(A) Circulars.

(B) Leaflets.

(D) Depictions.

(E) Illustrations.

(F) Form letters.

(G) Lead-generating devices of all kinds.

(iii) Prepared sales talks, presentations, and material for use by agents or other persons, whether prepared for or by the insurer, agent, or other person.

(iv) Advertising material included with a policy when the policy is delivered.

(v) Advertising material used in the solicitation of renewals, reinstatements, and alterations.

(d) "Code" means Act No. 218 of the Public Acts of 1956, as amended, being S500.101 et seq. of the Michigan Compiled Laws.

(e) "Exception" means a provision in a policy whereby coverage for a specified hazard is entirely eliminated; it is a statement of a risk not assumed under the policy.

(f) "Institutional advertisement" means an advertisement that has as its sole or primary purpose the promotion of the reader's, viewer's, or listener's interest in the concept of accident and sickness insurance or the promotion of the insurer.

(g) "Insurer" means an entity that is defined as an insurer or a multiple employer welfare arrangement in the code.

(h) "Invitation to contract" means an advertisement which is neither an invitation to inquire nor an institutional advertisement.

(i) "Invitation to inquire" means an advertisement which is limited to a brief description of coverage, which has as its objective the creation of a desire to inquire further about accident and sickness insurance, and which shall contain a provision in the following or substantially similar form: "This policy has exclusions, reduction of benefits or terms under which the policy may be continued in force or discontinued. For costs and complete details of the coverage, call or write your insurance agent or the insurance company."

(j) "Lead-generating device" means any communication directed to the public which, regardless of form, content, or stated purpose, is intended to result in the compilation or qualification of a list containing names and other personal information to be used to solicit residents of this state for the purchase of accident and sickness insurance.

(k) "Limitation" means a provision which restricts coverage under a policy, other than an exception or a reduction.

(l) "Person" means any of the following entities:

(i) A natural person.

(ii) An association.

(iii) An organization.

(iv) A partnership.

(v) A trust.

(vi) A group.

(vii) A discretionary group.

(viii) A corporation.

(ix) Any other entity.

(m) "Policy" means a policy, plan, certificate, contract, agreement, statement of coverage, rider, or endorsement which provides accident or sickness benefits or medical, surgical, or hospital expense benefits, whether on an indemnity, reimbursement, service, or prepaid basis, except when issued in connection with another kind of insurance other than life and except for disability, waiver of premium, and double indemnity benefits included in life and annuity contracts.

(n) "Reduction" means a provision which reduces the amount of the benefit; a risk of loss is assumed, but payments upon the occurrence of the loss are limited to some amount or period less than would be otherwise payable had the reduction not been used.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.652 Purpose and applicability {#sec-r-500.652 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.652}

Rule 2. (1) These rules shall be construed to provide insureds and prospective purchasers with clear and unambiguous statements in the advertisement of accident and sickness insurance and to assure the clear and truthful disclosure of the benefits, limitations, and exclusions of policies sold as accident and sickness insurance.

(2) Unless otherwise specified, these rules apply to any accident and sickness insurance advertisement which the insurer knows or reasonably should know is intended for presentation, distribution, or dissemination in this state, either directly or indirectly by or on behalf of an insurer, agent, or other person as defined in the code and these rules.

(3) Every advertisement covered by these rules shall be presumed to have been caused, directly or indirectly, to be created, published, disseminated, circulated, or placed before the public by the insurer whose policy or policies are the subject of the advertisement.

Every insurer shall establish, and at all times maintain, a system of control over the content, form, and method of dissemination of all of its accident and sickness insurance advertisements. All such advertisements, regardless of by whom written, created, designed, or presented, shall be the responsibility of the insurer or insurers whose policies are so advertised.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.653 Method of disclosure of required information {#sec-r-500.653 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.653}

Rule 3. Information required to be disclosed by these rules shall be set out conspicuously and in close conjunction with the statements to which the information relates or under appropriate captions of such prominence that it shall not be minimized, rendered obscure, presented in an ambiguous fashion, or intermingled with the context of the advertisement so as to be confusing or misleading.

History

History: 1979 AC.

Mich. Admin. Code R 500.654 Form and content of advertisements {#sec-r-500.654 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.654}

Rule 4. (1) The format and content of an advertisement of an accident or sickness insurance policy shall be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive. Whether an advertisement has a capacity or tendency to mislead or deceive shall be determined by the commissioner from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which the advertisement is directed.

(2) An advertisement shall be truthful and not misleading in fact or in implication. Words or phrases, the meaning of which is clear only by implication or by familiarity with insurance terminology, shall not be used.

(3) An insurer shall clearly identify its accident and sickness insurance as an insurance policy. A policy trade name shall be followed by the words "insurance policy" or similar words which clearly identify the fact that an insurance policy is being offered.

(4) An insurer, agent, or other person shall not solicit a resident of this state for the purchase of accident and sickness insurance in connection with, or as the result of, the use of any advertisement by such person or any other person where the advertisement does either of the following:

(a) Contains any misleading representations or misrepresentations or is otherwise untrue, deceptive, or misleading with regard to the information imparted, the status, character, or representative capacity of such person, or the true purpose of the advertisement.

(b) Otherwise violates the provisions of these rules.

(5) An insurer, agent, or other person shall not solicit residents of this state for the purchase of accident and sickness insurance through the use of a true or fictitious name which is deceptive or misleading with regard to the status, character, or proprietary or representative capacity of such person or the true purpose of the advertisement.

(6) An insurer, agent, or other person shall not use a lead-generating device or list of prospective insureds compiled therefrom unless such lead-generating device contains the following or substantially similar language in the same size of type as the rest of the information and is not hidden or placed in a position to render it obscure:"This request for information is insurance related and if you respond you may be contacted in an attempt to sell you insurance."

(7) An insurer, agent, or other person shall not use a lead-generating device or list of prospective insureds compiled therefrom if the insurer, agent, or other person knew or reasonably should have known that the lead-generating device or list of prospective members was obtained in a manner which violates any provision of the Michigan insurance code or otherwise violates the provisions of these rules. A list of prospective insureds shall not be purchased unless the purchaser requests from the seller any leadgenerating device that was used to compile the list and obtains a specimen copy of any such device that is disclosed. An agent or insurer may use a list obtained through lead-generating devices before the effective date of these rules for up to 6 months after the effective date if the lead-generating devices used to compile the lists are retained on file by the agent or insurer for inspection by the insurance bureau.

(8) The contents of all advertisements, including lead-generating devices, regardless of by whom prepared, created, designed, or presented, shall be the responsibility of any insurer benefiting directly or indirectly from their use.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.655 Deceptive words, phrases, or illustrations prohibited {#sec-r-500.655 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.655}

Rule 5. (1) An advertisement shall not omit information or use words, phrases, statements, references, or illustrations if the omission of the information or use of the words, phrases, statements, references, or illustrations has the capacity, tendency, or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of a policy benefit payable, loss covered, or premium payable. The fact that the policy offered is made available to a prospective insured for inspection before consummation of the sale or that an offer is made to refund the premium if the purchaser is not satisfied does not remedy misleading statements.

(2) An advertisement shall not contain or use words or phrases such as "all," "full,"

"comprehensive," "complete," "unlimited," "up to," "as high as," "this policy will help fill some of the gaps that medicare and your present insurance leave out," or "the policy will help to replace your income" or any similar words and phrases in a manner which exaggerates any benefits beyond the terms of the policy.

(3) An advertisement for a medicare supplement policy shall not contain or use words or phrases such as "this policy pays all that medicare doesn't" or any similar words and phrases in a manner which exaggerates any benefit beyond the terms of the policy.

(4) An advertisement shall not contain a description of a policy limitation, exception, or reduction that is worded in a positive manner to imply that it is a benefit, such as describing a waiting period as a "benefit builder" or stating "even preexisting conditions are covered after 2 years." Words and phrases used in an advertisement to describe these policy limitations, exceptions, and reductions shall fairly and accurately describe the negative features of the limitations, exceptions, and reductions of the policy offered.

(5) An advertisement of a benefit for which payment is conditional upon confinement in a hospital or similar facility shall not use language which has the tendency or capacity to lead a potential insured to believe that the policy's purpose is to enable him or her to make a net profit from being hospitalized or confined. The advertisement shall not use words or phrases such as "tax free," "extra cash," "extra income," or "extra pay" or similar words or phrases.

(6) An advertisement of a hospital or other similar facility confinement benefit shall not advertise that the amount of the benefit is payable on a monthly or weekly basis when, in fact, the amount of the benefit payable is based upon a daily pro rata basis relating to the number of days of confinement, unless the daily amount is emphasized and precedes the weekly or monthly benefit amounts. When the policy contains a limit on the number of days of coverage provided, the limit shall appear in the advertisement.

(7) An advertisement for a policy providing benefits for specified illnesses only, such as cancer, or for specified accidents only, such as automobile accidents, shall clearly, and in type which is not less than 2 points larger than the type in the body of the advertisement, state the limited nature of the policy. The statement shall be worded in language identical to, or substantially similar to, the following: "this is a limited policy," "this is a cancer only policy," or "this is an automobile accident only policy."

(8) An advertisement shall not contain a claim stating or implying that acquisition and servicing costs for the plan advertised are lower than equivalent costs for other generally used means of marketing similar insurance, unless that is the fact. An example of a misleading phrase is:"We deal directly with you so our costs are lower," when the acquisition and servicing costs for the advertised plan are actually not lower than equivalent costs for other similar plans.

(9) An advertisement which also is an invitation to join an association, trust, or discretionary group shall solicit insurance coverage on a separate and distinct application. Each of these applications shall require separate signatures, but need not be in a separate document or contained in a separate mailing. The insurance program shall be presented so as not to mislead or deceive the prospective members that they are purchasing insurance as well as applying for membership, if that is the case.

(10) Notwithstanding the provisions of subrule (8) of this rule, an advertisement of accident and sickness insurance sold by direct response shall not state or imply that because no insurance agent will call and no commissions will be paid to agents, it is a low-cost plan or use other similar words or phrases.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.655a Specified disease policies {#sec-r-500.655a omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.655a}

Rule 5a. In addition to the other provisions of these rules, an advertisement for a policy that covers only 1 disease or a list of specified diseases shall be in compliance with both of the following provisions:

(a) An advertisement shall not imply coverage beyond the terms of the policy. Synonymous terms shall not be used to refer to any single disease so as to imply broader coverage than is the fact.

(b) An advertisement shall not be used if the purpose of the advertisement appears to be to induce or create fear in prospective policyholders. An advertisement shall not use statistics, words, phrases, symbols, insignias or characteristics which are calculated to arouse fear, alarm, anxiety, dread, shock, fright, or panic.

History

History: 1991 AACS.

Mich. Admin. Code R 500.656 Exceptions, reductions, and limitations {#sec-r-500.656 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.656}

Rule 6. (1) When an advertisement which is an invitation to contract refers to a dollar amount, a period of time for which a benefit is payable, the cost of the policy, a specific policy benefit, or the loss for which the benefit is payable, the advertisement shall also disclose those exceptions, reductions, and limitations affecting the basic provisions of the policy without which the advertisement would have the capacity or tendency to mislead or deceive.

(2) When a policy contains a waiting, elimination, probationary, or similar time period between the effective date of the policy and the effective date of coverage under the policy at a time period between the date a loss occurs and the date benefits begin to accrue for the loss, an advertisement which is subject to the requirements of subrule (1) of this rule shall disclose the existence of the period.

(3) The use of words or phrases in a context which understates the extent of the policy's exceptions, reductions, or limitations is considered misleading. An advertisement shall not use the word "only," "just," "merely," "minimum," or "necessary" or similar words or phrases to describe the applicability of any exceptions and reductions.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.657 Preexisting conditions {#sec-r-500.657 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.657}

Rule 7. (1) An advertisement which is an invitation to contract shall disclose, in negative terms, the extent to which a loss is not covered if the cause of the loss is traceable to a condition that existed before the effective date of the policy. The term "preexisting condition," without an appropriate definition or description, shall not be used.

(2) When a policy does not cover losses resulting from a preexisting condition, an advertisement of the policy shall not state or imply that the applicant's physical condition or medical history will not affect the issuance of the policy or payment of a claim thereunder.

Within this context, the advertisement shall not contain the phrase "no medical examination required" or phrases of similar import. This rule does not prohibit explaining the phrase "automatic issue." If an insurer requires a medical examination for a specified policy, the advertisement, if it is an invitation to contract, shall disclose that a medical examination is required.

(3) When an advertisement contains an application form to be completed by the applicant and returned by mail, the application form shall contain a question or statement appearing in upper case type or contrasting color which reflects the preexisting condition provisions of the policy immediately preceding the blank space for the applicant's signature. An application form shall be in compliance with either of the following provisions:

(a) Contain a question or statement substantially as follows:

Do you understand that this policy will not pay __________ benefits during the first __________ month(s) after __________ the issued date for a disease or physical condition YES which you now have or have had in the past.

(b) Contain a statement substantially as follows: I understand that the policy applied for will not pay benefits for any loss incurred during the first month(s) after the issue date on account of disease or physical condition which I now have or have had in the past.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.658 Disclosure of renewability, cancellability, termination, and modification {#sec-r-500.658 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.658}

Rule 8. An advertisement which is an invitation to contract shall disclose the provisions relating to renewability, cancellability, termination, and a modification of benefits, losses covered, or premiums because of age or for other reasons in a manner which shall not minimize or render the qualifying conditions obscure.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.659 Rescinded {#sec-r-500.659 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.659}

History

History: 1979 AC; 1991 AACS; 1997 AACS.

Mich. Admin. Code R 500.660 Use of statistics {#sec-r-500.660 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.660}

Rule 10. (1) An advertisement relating to the dollar amounts of claims paid, the number of persons insured, or similar statistical information relating to an insurer or policy shall not be used unless it accurately reflects all material facts necessary to fairly apprise potential purchasers of the significance of the statistics. An advertisement shall not imply that statistics are derived from the policy advertised unless true and, when applicable to other policies or plans, shall specifically so state.

(2) An advertisement shall specifically identify the sickness and accident insurance policy to which statistics relate and, where statistics are given which are applicable to a different policy, it shall be stated clearly that the data do not relate to the policy being advertised.

(3) An advertisement that uses statistics which describe aspects of an insurer, such as assets, corporate structure, financial standing, age, product lines, or relative position in the insurance business, shall not be used unless relevant to the product being advertised.

(4) An advertisement shall not represent or imply that a claim settlement by the insurer is "liberal" or "generous" or use words of similar import, or that a claim settlement is or will be beyond the actual terms of the contract. An unusual amount paid for a unique claim for the policy advertised is misleading and shall not be used.

(5) The source of statistics used in an advertisement shall be identified in the advertisement.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.661 Identification of plan or number of policies {#sec-r-500.661 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.661}

Rule 11. (1) When a choice of the amount of benefits is referred to, an advertisement which is an invitation to contract shall disclose that the amount of benefits provided depends upon the plan selected and that the premium will vary with the amount of the benefits selected.

(2) When an advertisement which is an invitation to contract refers to various benefits which may be contained in 2 or more policies, other than group master policies, the advertisement shall disclose that the benefits are provided only through a combination of the policies.

History

History: 1954 ACS 84, Eff. Aug. 22, 1975; 1979 AC.

Mich. Admin. Code R 500.662 Disparaging comparisons and statements {#sec-r-500.662 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.662}

Rule 12. An advertisement shall not directly or indirectly make unfair or incomplete comparisons of policies or benefits or comparisons of noncomparable policies of other insurers, and shall not disparage competitors, their policies, services, or business methods, and shall not disparage or unfairly minimize competing methods of marketing business.

History

History: 1979 AC.

Mich. Admin. Code R 500.663 Jurisdictional licensing and status of insurer {#sec-r-500.663 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.663}

Rule 13. (1) An advertisement which is intended to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed shall not imply licensing beyond those limits.

(2) An advertisement shall not create the impression, directly or indirectly, that the insurer, its financial condition or status, the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds or plans of insurance are approved, endorsed, or accredited by a division or agency of this state or the federal government.

(3) An advertisement shall not imply or state that approval, endorsement, or accreditation of policy forms or advertising has been granted by any division or agency of this state or the federal government."Approval" of either policy forms or advertising shall not be used by an insurer to imply or state that a governmental agency has endorsed or recommended the insurer, its policies, its advertising, or its financial condition.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.664 Identity of insurer {#sec-r-500.664 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.664}

Rule 14. (1) The name of the actual insurer shall be stated conspicuously in all of its advertisements. The form number of the policy advertised shall be stated in an advertisement which is an invitation to contract. An advertisement shall not use any of the following without disclosing the name of the actual insurer:

(a) A trade name.

(b) An insurance group designation.

(d) Name of a particular division of the insurer.

(e) Service mark.

(f) Slogan.

(g) Symbol.

(h) Any other device which would have the capacity and tendency to mislead or deceive as to the true identity of the insurer.

(2) An advertisement shall not use a combination of words, symbols, or physical material which, by content, phraseology, shape, color, or other characteristics, is so similar to combinations of words, symbols, or physical materials used by agencies of the federal government or of this state or which otherwise appear to be of such a nature that it tends to confuse or mislead prospective insureds into believing that the solicitation is in some manner connected with an agency of the municipal, state, or federal government.

(3) Advertisements, envelopes, or stationery which employs color, words, letters, initials, symbols, or other devices which are similar to those used by governmental agencies is not permitted if it may lead the public to believe either of the following:

(a) That the advertised coverages are somehow provided or endorsed by such governmental agencies.

(b) That the advertiser is the same as, is connected with, or is endorsed by, such governmental agencies.

(4) Advertisements, envelopes, or stationery which employs words, letters, initials, symbols, or other devices which are similar to those used by other insurers is not permitted if it may lead the public to believe either of the following:

(a) That the advertised coverages are somehow provided by or are endorsed by such other insurers.

(b) That the advertiser is the same as, is connected with, or is endorsed by, such other insurers.

(5) An advertisement shall not use the name of a state or political subdivision thereof in a policy name or description.

(6) An advertisement in the form of envelopes or stationery of any kind shall not use any color, name, service mark, slogan, symbol, or any device in a manner that implies that the insurer or the policy advertised, or that any agent who may call upon the consumer in response to the advertisement, is connected with a governmental agency, such as the social security administration or the veterans administration.

(7) An advertisement shall not incorporate the word "medicare" in the title of the plan or policy being advertised, unless, wherever it appears, it is qualified by language differentiating it from medicare. An advertisement shall not use the phrase " __________ medicare department of the __________ insurance company," or similar language of similar import.

(8) An advertisement for medicare supplement insurance shall include a disclaimer similar to the following: "Not connected with or endorsed by the United States Government or the Federal Medicare Program."

(9) An advertisement shall not imply that the reader may lose a right or privilege or benefit under federal, state, or local law if he or she fails to respond to the advertisement.

(10) The use of letters, initials, or symbols of the corporate name or trademark that would have the tendency or capacity to mislead or deceive the public as to the true identity of the insurer is prohibited, unless the true, correct, and complete name of the insurer is in close conjunction to, and in the same size type as, the letters, initials, or symbols of the corporate name or trademark.

(11) The use of the name of an agency or "__________ underwriters" or "__________ plan" in a type, size, and location that has the capacity and tendency to mislead or deceive as to the true identity of the insurer is prohibited.

(12) The use of an address so as to mislead or deceive as to the true identity of the insurer, its location, or licensing status is prohibited.

(13) An insurer shall not use, in the trade name of its insurance policy, any terminology or words so similar to the name of a governmental agency or governmental program as to have the tendency to confuse, deceive, or mislead a prospective purchaser.

(14) All advertisements used by agents of an insurer shall have prior written approval of the insurer before they may be used.

(15) An agent who makes contact with a consumer as a result of acquiring that consumer's name from a lead-generating device shall disclose such fact in the initial contact with the consumer.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.665 Group or quasi-group implications {#sec-r-500.665 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.665}

Rule 15. (1) An advertisement of a particular policy shall not state or imply that prospective insureds become group or quasi-group members covered under a group policy and as such enjoy special rates or underwriting privileges, unless that is the fact.

(2) This rule prohibits the solicitation of a particular class, such as governmental employees, by use of advertisements which state or imply that its occupational status entitles it to reduced rates on a group or other basis when, in fact, the policy being advertised is sold only on an individual basis at regular rates.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.666 Introductory, initial, or special offers {#sec-r-500.666 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.666}

Rule 16. (1) An advertisement of an individual policy shall not directly or by implication represent that a contract or combination of contracts is an introductory, initial, or special offer, that applicants will receive substantial advantages not available at a later date, or that the offer is available only to a specified group of individuals, unless that is the fact. An advertisement shall not contain phrases describing an enrollment period as "special" or "limited" or use similar words or phrases when the insurer uses the enrollment periods as the usual method of advertising accident and sickness insurance. The use of such words or phrases is permitted if the enrollment periods for a policy are separated by not less than 3 months.

(2) An enrollment period during which a particular insurance product may be purchased on an individual basis shall not be offered within this state unless there has been a lapse of not less than 3 months between the close of the immediately preceding enrollment period for the same product and the opening of the new enrollment period with not more than 2 enrollment periods in 1 calendar year for a particular insurance product. The advertisement shall indicate the date by which the applicant shall mail the application, which shall be not less than 10 days and not more than 40 days from the date that the enrollment period is advertised for the first time. This rule applies to all advertising media by any insurer. This rule does not apply to solicitations of employees or members of a particular group or association which otherwise would be eligible under specific provisions of the code for group, blanket, or franchise insurance. The phrase "any insurer" includes all the affiliated companies of a group of insurance companies under common management or control.

(3) This rule prohibits a statement or implication to the effect that only a specific number of policies will be sold or that a time is fixed for the discontinuance of the sale of the particular policy advertised because of special advantages available in the policy, unless that is the fact.

(4) The phrase "a particular insurance product" in subrule (2) of this rule means an insurance policy which provides substantially different benefits than those contained in any other policy. Different terms of renewability, an increase or decrease in the dollar amounts of benefits, or an increase or decrease in an elimination period or waiting period from those policies available during an enrollment period for another policy shall not be sufficient to constitute the product being offered as a different product eligible for concurrent or overlapping enrollment periods.

(5) Special awards, such as a safe driver award, shall not be used in connection with advertisements of accident or accident and sickness insurance.

(6) An advertisement shall not offer a policy which utilizes a reduced initial premium in a manner which overemphasizes the availability and the amount of the reduced initial premium.

When an insurer charges an initial premium that differs in amount from the renewal premium payable on the same mode, the advertisement shall not display the amount of the reduced initial premium either more frequently or more prominently than the renewal premium, and both the reduced initial premium and the renewal premium shall be stated in juxtaposition in each portion of the advertisement where the reduced initial premium appears. The term "juxtaposition" means side by side or immediately above or below.

History

History: 1979 AC; 1991 AACS.

Mich. Admin. Code R 500.667 Statements about insurer {#sec-r-500.667 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.667}

Rule 17. An advertisement shall not contain a statement which is untrue, in fact, or by implication misleading with respect to the assets, corporate structure, financial standing, age, or relative position of the insurer in the insurance business. An advertisement shall not contain a recommendation of a commercial rating organization unless the limitations of the scope and extent of the recommendation are fully explained.

History

History: 1979 AC.

Mich. Admin. Code R 500.668 Enforcement {#sec-r-500.668 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.668}

Rule 18. (1) Each insurer shall maintain, at its home or principal office, a complete file containing every printed, published, or prepared advertisement of its individual policies and typical printed, published, or prepared advertisements of its blanket, franchise, and group policies and certificates disseminated in this state, with a notation attached to each advertisement which indicates the manner and the extent of distribution and the form number of any policy advertised. The files shall be made available for periodic inspection by the bureau. All advertisements shall be maintained in the file for a period from the previous regular report on examination through the next report on examination.

Following the completion of a regular report on examination, noncurrent advertising material may be removed from the file.

(2) Each agent shall maintain, at the home agency or principal office, a complete file containing every printed, published, or prepared advertisement which is generated by the agency and which is not product or company specific. Each advertisement on file shall have a notation attached which indicates the manner and the extent of distribution and shall be kept on file by the agency for at least 3 years beyond its last date of use.

(3) Each insurer that is required to file an annual statement which now is, or which hereafter becomes, subject to these rules shall file with the bureau, with its annual statement, a certificate of compliance executed by an authorized officer of the insurer. The certificate shall contain a statement that, to the best of the officer's knowledge, information, and belief, the advertisements which were disseminated by the insurer during the preceding statement year complied, or were made to comply, in all respects with these rules and the insurance laws of this state.

(4) Advertising intended for use in this state shall meet the standards of these rules. National advertising that is not intended for use in this state shall contain a disclaimer for this state.

History

History: 1979 AC; 1991 AACS; 1997 AACS.

Mich. Admin. Code R 500.669 Rescinded {#sec-r-500.669 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.669}

History

History: 1979 AC; 1997 AACS.

R 500.801 to R 500.806 Loss Ratios Applicable to Individual or Family Expense Coverage

Mich. Admin. Code R 500.801 Applicability {#sec-r-500.801 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.801}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

LOSS RATIOS APPLICABLE TO INDIVIDUAL OR FAMILY EXPENSE

COVERAGE

(By authority conferred on the commissioner of insurance by sections 210 and 2242 of Act No. 218 of the Public Acts of 1956, as amended, being SS500.210 and 500.2242 of the Michigan Compiled Laws)

Rule 1. These rules apply to individual policies of disability insurance as defined in section 3400 of the act and family expense insurance policies as defined in section 3620 of the act. These rules do not apply to credit accident and health policies as defined in section 3 of Act No. 173 of the Public Acts of 1958, being S550.603 of the Michigan Compiled Laws, or a policy of insurance with an annual premium of $7.50 or less. Where a policy covers a contingency for a period of coverage less than a year, the premium for that period is considered the annual premium.

History

History: 1979 AC.

Mich. Admin. Code R 500.802 Definitions {#sec-r-500.802 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.802}

Rule 2. (1) "Act" means Act No. 218 of the Public Acts of 1956, as amended, being SS500.100 to 500.8302 of the Michigan Compiled Laws.

(2) "Anticipated loss ratio" means the ratio at the time of policy filing, or at a time of subsequent rate revisions, of the present value of all expected future benefits, excluding dividends, to the present value of all future premiums, less dividends, based on a credible premium volume over a reasonable period of time with proper weight given to trends and other relevant factors. Statistical data relating to expected future benefits shall be obtained from policies of insurance sold or to be sold in this state when available.

(3) "Collectively renewable insurance" means all insurance which is made available on an individual basis under mass enrollment procedures to groups of persons under a plan sponsored by an employer, an association or a union or affiliated associations or unions or a group of individuals supplying materials to a central point of collection or handling a common product or commodity, under which the insurer has agreed that renewal will not be refused, subject to any specified age limit, while the insured remains a member of the group specified in the agreement unless the insurer simultaneously refuses renewal to all other policies in the same group, or all policies bearing the same form number.

(4) "Guaranteed renewable insurance" means all individual insurance which grants an insured the right to continue the policy in force by the timely payment of premiums until at least age 50, or in the case of a policy issued after age 44, for at least 5 years from the date of issue of the policy, during which period the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force, except that the insurer may make changes in premium rates by classes.

(5) "Individual accident insurance" means all insurance which covers such losses as are due to accident only.

(6) "Noncancellable insurance" or "noncancellable and guaranteed renewable insurance" means all insurance which gives the insured the right to continue the insurance in force by the timely payment of premiums set forth in the policy until at least age 50, or in the case of a policy issued after age 44, for at least 5 years from its date of issue, during which period the insurer has no right to make unilaterally any change in any provision of the policy while it is in force.

(7) "Nonrenewable for stated reasons only insurance" means all individual insurance which limits the insurer's right of nonrenewal to stated reasons other than deterioration of health.

(8) "Optionally renewable insurance: means all individual insurance which allows the insurer unhampered right of nonrenewal.

(9) "Rated by age insurance" means all individual insurance where the issue age is 65 years or more.

History

History: 1979 AC.

Mich. Admin. Code R 500.803 Benefits unreasonable in relation to premiums {#sec-r-500.803 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.803}

Rule 3. (1) The policy or rate filings shall include an actuarial certification that the benefits provided are reasonable in relation to the premium charged and shall show the anticipated loss ratio. The benefits provided are presumed unreasonable in relation to the premiums charged if the anticipated loss ratio does not equal or exceed the following standards:

(a) Sixty-five percent for rated by age insurance.

(b) Sixty percent for collectively renewable insurance or optionally renewable insurance.

(d) Fifty percent for noncancellable insurance, noncancellable and guaranteed renewable insurance or individual accident insurance.

(e) Fifty-five percent for all other insurance.

(2) The presumption of unreasonableness which exists where anticipated loss ratios are lower than those indicated in subrule (1) may be rebutted pursuant to the provisions of R 500.805.

History

History: 1979 AC.

Mich. Admin. Code R 500.804 Actuarial certification {#sec-r-500.804 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.804}

Rule 4. The actuarial certification shall include a description of the gross premiums, the anticipated loss ratios and certification that, to the best of the actuary's knowledge and belief, the benefits provided are reasonable in relation to the premiums charged. The information used to support the certification should include the following and shall be available on request:

(a) The specific formula and assumptions used in calculating gross premiums.

(b) The expected claim costs.

(c) Identification of morbidity and mortality tables or experience studies used, sufficient explanation for evaluation of their validity, including copies of such tables if they are not currently published.

(d) The experience of the insurer on similar coverages or on the same policy if the policy is in effect on the date these rules take effect.

(e) The applicability of the filing to in-force business on substantially similar forms.

(f) Lapse rate experience.

History

History: 1979 AC.

Mich. Admin. Code R 500.805 Withdrawal and withholding of approval {#sec-r-500.805 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.805}

Rule 5. (1) Approval is withdrawn on September 30, 1974, from policies of individual insurance which bear an approval date prior to the effective date of these rules, where the anticipated loss ratio percentage of such insurance policies does not satisfy requirements stated in R 500.804 or where the anticipated loss ratio percentage of such insurance policies satisfies the requirement stated in R 500.804 but the loss ratio experience indicates to the insurance bureau that the minimum anticipated loss ratio required by R 500.804 will not be achieved.

(2) Approval will not be granted for new policies of individual insurance which are submitted to the insurance bureau for approval after the effective date of these rules where the anticipated loss ratio percentage of the policies is not at least equal to the minimum loss ratio percentage stated in R 500.804.

(3) Approval shall be withdrawn from such policies of insurance which are submitted to the insurance bureau for approval after the effective date of these rules where experience data show the insurance does not appear capable of developing the anticipated loss ratio projected in the actuarial certification filed.

(4) Approval shall not be withdrawn or withheld where it has been demonstrated to the satisfaction of the insurance bureau that the benefits of the insurance are reasonable in relation to the premiums charged even though the anticipated loss ratio for the insurance does not equal the minimum loss ratio percentage stated in R 500.804. The insurance bureau's decision to withdraw or withhold approval may be contested pursuant to the administrative procedures act, Act No. 306 of the Public Acts of 1969, as amended, being SS24.201 to 24.328 of the Michigan Compiled Laws.

History

History: 1979 AC.

Mich. Admin. Code R 500.806 Identification of policies {#sec-r-500.806 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.806}

Rule 6. To record whether or not approval has been withdrawn by these rules each insurer shall identify for the insurance bureau before September 30, 1974, all policies of individual insurance which have been previously approved by the insurance bureau and which meet the standards set forth in R 500.804 and shall furnish the bureau with an actuarial certification and experience data for all such policies. Experience data shall relate to policies of insurance in force in this state when possible.

History

History: 1979 AC.

R 500.811 to R 500.811 Personal Protection Insurance

Mich. Admin. Code R 500.811 Work loss benefit; annual adjustment {#sec-r-500.811 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.811}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

PERSONAL PROTECTION INSURANCE

(By authority conferred on the commissioner of insurance by section 3107 of Act No. 218 of the Public Acts of 1956, as amended, being S500.3107 of the Michigan Compiled Laws)

Rule 1. Annually the commissioner shall adjust the maximum work loss benefit prescribed in subdivision (b) of section 3107 of the insurance code by the ratio of the national consumer price index as calculated by the United States department of labor for all items for June of each year to the corresponding consumer price index 1 year earlier, rounded to the nearest dollar. If the index is unavailable, the commissioner shall make a reasonable approximation. The effective date of the adjustment is October 1 of each year. The commissioner shall notify all interested parties of the adjustment.

History

History: 1979 AC.

R 500.821 to R 500.824 Excess Loss Insurance for Multiple Employer Welfare Arrangements (MEWAS)

Mich. Admin. Code R 500.821 Definitions {#sec-r-500.821 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.821}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

EXCESS LOSS INSURANCE FOR MULTIPLE EMPLOYER WELFARE

ARRANGEMENTS (MEWAS)

(By authority conferred on the commissioner of insurance by section 210 of Act No. 218 of the Public Acts of 1956, as amended, being S500.210 of the Michigan Compiled Laws)

Rule 1. As used in these rules:

(a) "Annual aggregate retention amount or attachment point" for any 1 policy year, or fraction thereof if the policy terminates during the policy year, means the cumulative total of the number of covered units each month for which premium has been accepted, multiplied by such covered units' corresponding monthly aggregate retention amount factor, applied each month, or the minimum annual aggregate retention amount, whichever is greater.

(b) "Code" means Act No. 218 of the Public Acts of 1956, as amended, being S500.100 et seq. of the Michigan Compiled Laws.

(c) "Plan" means an employee benefit plan of a multiple employer welfare arrangement authorized under chapter 70 of the code. Reference to actions of a plan includes actions by the plan's designated agents.

(d) "Policy" is the excess insurance policy issued by the insurer to the MEWA which indemnifies the MEWA for losses incurred under a plan in excess of a specified retention amount.

(e) "Policyholder" means the covered entity to which the policy is issued.

(f) "Policy year" means a 12-consecutive-month period, or fraction thereof, beginning on the effective date of the policy and ending on the expiration date of the policy.

(g) "Specific retention amount" means the uninsured deductible amount or specific attachment point specified in the policy; that is, the amount of risk retained by the contract holder per covered individual in excess of which coverage applies.

History

History: 1990 AACS.

Mich. Admin. Code R 500.822 Maintenance of excess loss insurance policies with specific retention amount; maintenance of aggregate excess loss insurance; expiration dates of multiple excess loss insurance policies {#sec-r-500.822 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.822}

Rule 2. All of the following requirements are applicable to a MEWA which seeks authorization in this state or which has authorization to operate in this state:

(a) A MEWA shall submit, for approval by the commissioner, a policy or policies of specific excess loss insurance, as required by section 7011(c) of the code.

(b) Except as provided in subdivision (c) of this rule, a MEWA shall demonstrate to the commissioner that the proposed specific retention amount would not be detrimental to the solvency and stability of the MEWA, considering the plan's past and expected experience, size, reserves, contribution rates, and proposed excess rates.

(c) A MEWA which submits a policy for excess loss insurance with a specific retention level of not more than $25,000.00 shall not be required to meet the requirements set forth in subdivision (b) of this rule.

(d) A MEWA shall not change the retention level for a specific excess policy without the prior written approval of the insurance commissioner.

(e) A MEWA shall not be required to purchase an aggregate excess loss policy unless the commissioner determines that coverage is necessary. The determination shall be based upon the financial solvency and stability of the MEWA, considering the plan's past and expected experience, size, reserves, expenses, and contribution rates. An aggregate excess loss policy purchased by a MEWA shall provide for the insurer to assume all liability in excess of an annual aggregate attachment point.

(f) If more than 1 excess loss insurance policy is obtained in fulfillment of the excess loss requirements, the policy expiration dates shall be the same.

History

History: 1990 AACS.

Mich. Admin. Code R 500.823 Excess loss policy provisions; minimum requirements {#sec-r-500.823 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.823}

Rule 3. Excess loss policies issued to a MEWA in this state for the purposes of section 7040(1)(c) of the code shall be in compliance with all of the following requirements:

(a) All specific excess loss policies shall provide for the insurer to indemnify the MEWA for all losses in excess of a specified amount per covered person, per year, for all medical, surgical, hospital care, accident, disability, or death benefits the MEWA offers.

(b) The specific excess loss insurance policy may be in the form of incurred basis stoploss insurance or paid basis stop-loss insurance. Plans using paid basis stop-loss insurance shall provide for the liability in excess of the specified amount of losses incurred while the paid basis stop-loss insurance was in force, but paid after its termination or nonrenewal.

The reporting period under paid basis insurance shall be not less than 3 months after the MEWA year conclusion. An expense will be considered to be incurred by the policyholder at the time service has been rendered or the service to which it relates is provided. Incurred losses include both reported and unreported losses. "Paid losses" means the total amount of money actually paid for benefits for which eligible employees and dependents who are covered under the employee benefit plan become entitled under the plan.

(c) Required excess loss insurance policies shall be noncancelable for a minimum of 1 year for any cause except nonpayment of premium, for which the MEWA shall be given a minimum grace period of 31 days.

(d) The insurer shall have neither the right nor obligation under the excess loss policy to directly pay any covered person or provider of professional services or supplies for any benefit which the policyholder has agreed to provide under the terms of the employee benefit plan. The insurer's sole liability shall be to the policyholder, subject to the terms, conditions, and limitations of the agreement.

History

History: 1990 AACS.

Mich. Admin. Code R 500.824 Liability indemnified by insurer {#sec-r-500.824 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.824}

Rule 4. A liability that is indemnified by an insurer under these rules shall not, directly or indirectly, be returned to a MEWA, a member, or a member's parent, subsidiary, or affiliate.

This does not prohibit the insurer from seeking reimbursement from the MEWA or a member.

History

History: 1990 AACS.

R 500.841 to R 500.866 Life Insurance Contracts On Variable Basis

Mich. Admin. Code R 500.841 Definitions {#sec-r-500.841 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.841}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

LIFE INSURANCE CONTRACTS ON VARIABLE BASIS

(By authority conferred on the commissioner of insurance by section 210 of Act No. 218 of the Public Acts of 1956, as amended, being S500.210 of the Michigan Compiled Laws)

Rule 1. As used in these rules:

(a) "Affiliate" of an insurer means any of the following:

(i) Any person, directly or indirectly, controlling, controlled by, or under common control with, such insurer.

(ii) Any person who regularly furnishes investment advice to an insurer with respect to its variable life insurance separate accounts for which a specific fee or commission is charged.

(iii) Any person who is a director, officer, partner, or employee, or a member of the immediate family of any person who is a director, officer, partner or employee of any person described in paragraph (i) or (ii) of this subdivision.

(b) "Agent" means any person, corporation, partnership, or other legal entity which is licensed by this state as a life insurance agent.

(c) "Assumed investment rate" means the rate of investment return which would be required to be credited to a variable life insurance policy, after deduction of charges for taxes, investment expenses, and mortality and expense guarantees, to maintain the variable death benefit equal, at all times, to the amount of the death benefit, other than incidental insurance benefits, which would be payable under the plan of insurance if the death benefit did not vary according to the investment experience of the separate account.

(d) "Benefit base" means the amount to which the net investment return is applied.

(e) "Control," including the terms "controlling," "controlled by," and "under common control with," means the possession, direct or indirect, of the power to direct, or cause the direction of, the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with, or corporate office held by, the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing more than 10% of the voting securities of any other person. This presumption may be rebutted by a showing, to the satisfaction of the commissioner, that control does not exist in fact. The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

(f) "Flexible premium policy" means any variable life insurance policy other than a scheduled premium policy as specified in subdivision (1) of this rule.

(g) "General account" means all assets of the insurer other than assets in separate accounts established pursuant to section 925 of Act No. 218 of the Public Acts of 1956, as amended, being S500.925 of the Michigan Compiled Laws, or pursuant to the corresponding section of the insurance law of the state of domicile of a foreign or alien insurer, whether or not for variable life insurance.

(h) "Incidental insurance benefit" means all insurance benefits in a variable life insurance policy, other than the variable death benefit and the minimum death benefit, including, but not limited to, any of the following:

(i) Accidental death and dismemberment benefits.

(ii) Disability benefits.

(iii) Guaranteed insurability options.

(iv) Family income.

(v) Term riders.

(i) "Minimum death benefit" means the amount of the guaranteed death benefit, other than incidental insurance benefits, payable under a variable life insurance policy regardless of the investment performance of the separate account.

(j) "Net investment return" means the rate of investment return actually credited to a variable life insurance policy, after deduction of any charges in accordance with the terms of the policy.

(k) "Policy processing day" means the day on which charges authorized in the policy are deducted from the policy's cash value.

(l) "Scheduled premium policy" means any variable life insurance policy under which both the amount and timing of premium payments are fixed by the insurer.

(m) "Separate account" means a separate account for variable life insurance established under section 925 of Act No. 218 of the Public Acts of 1956, as amended, being S500.925 of the Michigan Compiled Laws, or pursuant to the corresponding section of the insurance law of the state of domicile of a foreign or alien insurer.

(n) "Variable death benefit" means the amount of the death benefit, other than incidental insurance benefits, which is payable under a variable life insurance policy dependent on the investment performance of the separate account and which the insurer would have to pay in the absence of the minimum death benefit.

(o) "Variable life insurance policy" means any individual policy which provides for life insurance with the amount or duration of the death benefit varying according to the investment experience of any separate account or accounts established and maintained by the insurer as to such policy, as provided for in section 925 of Act No. 218 of the Public Acts of 1956, as amended, being S500.925 of the Michigan Compiled Laws, or pursuant to the corresponding section of the insurance law of the state of domicile of a foreign or alien insurer.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.843 Qualification of insurer to issue life insurance contracts on variable basis {#sec-r-500.843 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.843}

Rule 3. All of the following requirements are applicable to all insurers that are seeking authority to issue variable life insurance in this state or that have authority to issue variable life insurance in this state:

(a) An insurer shall not deliver or issue for delivery in this state any variable life insurance policy unless both of the following requirements are satisfied:

(i) The insurer has a certificate of authority to engage in the life insurance business in this state.

(ii) The insurer has obtained the written approval of the commissioner for the issuance of variable life insurance policies in this state.

(b) The commissioner shall grant written approval for the issuance of variable life insurance only after he or she has found that all of the following requirements are satisfied:

(i) The plan of operation for the issuance of variable life insurance policies is not unsound.

(ii) The general character, reputation, and experience of the management and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer are such as to reasonably assure competent operation of the variable life insurance business of the insurer in this state.

(iii) The present and foreseeable future financial condition of the insurer and its method of operation in connection with the issuance of such policies are not likely to render its operation hazardous to the public or its policyholders in this state. The commissioner shall consider all of the following factors:

(A) The history of operation and financial condition of the insurer.

(B) The qualifications, fitness, character, responsibility, reputation, and experience of the officers and directors and other management of the insurer and those persons or firms proposed to supply consulting, investment, administrative, or custodial services to the insurer.

(C) The applicable law and regulations under which the insurer is authorized in its state of domicile to issue variable life insurance policies. The state of entry of an alien insurer shall be deemed its state of domicile for this purpose.

(D) If the insurer is a subsidiary of, or is affiliated by common management or ownership with, another company, its relationship to such other company and the degree to which the requesting insurer, as well as the other company, meets these standards.

(E) Other relevant information.

(c) Before any insurer shall deliver or issue for delivery any variable life insurance policy in this state, it shall submit all of the following information for the consideration of the commissioner in making the determination required by subdivision (b) of this rule:

(i) Copies and a general description of the variable life insurance policies it intends to issue.

(ii) A general description of the methods of operation of the variable life insurance business of the insurer, including methods of distribution of policies, and the names of those persons or firms proposed to supply consulting, investment, administrative, distributive, or custodial services to the insurer.

(iii) With respect to any separate account maintained by an insurer for any variable life insurance policy, a statement of the investment policy the insurer intends to follow for the investment of the assets held in such separate account. The statement shall include a description of the investment objective and orientation intended for the separate account.

(iv) A description of any investment advisory services contemplated as required by R 500.862.

(v) If requested by the commissioner, a copy of the statutes and regulations of the state of domicile of the insurer under which it is authorized to issue variable life insurance policies.

(vi) A certification by the domiciliary regulatory authority that the insurer is in compliance with the laws and regulations applicable to variable life insurance.

(vii) If requested by the commissioner, biographical data of officers and directors of the insurer, which shall be submitted on the national association of insurance commissioners uniform biographical data form.

(viii) A statement describing the procedures for changing the investment policy of any separate account maintained by an insurer for any variable life insurance policy.

(ix) A statement of the insurer's actuary describing the mortality and expense risks which the insurer will bear under the policy.

(x) Such additional information as the commissioner may require.

(d) After the commissioner finds that the law or regulation in the place of domicile of a foreign company provides protection to the policyholders and the public which is substantially equal to that provided by these rules, the commissioner may determine that compliance with such law or regulation of the domiciliary constitutes compliance with these rules.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.844 Standards of suitability {#sec-r-500.844 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.844}

Rule 4. (1) Every insurer seeking approval to enter into the variable life insurance business in this state shall establish, maintain, and file with the commissioner a written statement specifying the standards of suitability to be used by the insurer. Such standards of suitability shall be binding on the insurer and those to whom the standards of suitability refer and shall specify that no recommendation shall be made to an applicant to purchase a variable life insurance policy and that no variable life insurance policy shall be issued in the absence of reasonable grounds to believe that the purchase of such policy is suitable for such applicant on the basis of information furnished after reasonable inquiry of such applicant concerning the applicant's insurance and investment objectives, financial situation and needs, and any other information known to the insurer or to the agent making the recommendation.

(2) "Suitability" means the likelihood that the purchase of variable life insurance is reasonably consistent with all of the following:

(a) The expressed insurance objectives and needs as perceived by the prospective insured.

(b) The reasonable objectives and needs of the prospective insured as determined objectively by a professional agent after a diligent reasonable inquiry into relevant financial, family, and other background information concerning the prospective insured.

(c) The potential that the prospective insured will persist with the policy for such a period of time that the insurer's acquisition costs are amortized over a reasonable period of time.

(3) All pertinent factors, including, but not limited, to all of the following shall be considered when determining suitability:

(a) Age.

(b) Earnings.

(d) Number and age of dependents.

(e) The value of savings and other assets.

(f) And current life insurance program.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.845 Rescinded {#sec-r-500.845 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.845}

History

History: 1979 AC; 1997 AACS

Mich. Admin. Code R 500.845a Sales illustrations {#sec-r-500.845a omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.845a}

Rule 5a. Any sales illustration shown or furnished in connection with the sale of variable life insurance shall conform to all of the following requirements:

(a) All of the following requirements apply only to the variable portion of contracts with fixed and variable funding options:

(i) The hypothetical interest rates used to illustrate accumulated policy values shall be the rates which would actually be credited to the policy after deduction for taxes, management fees, and any other contract charges.

(ii) Illustrations of accumulated policy values shall include 1 illustration based solely on the policy contract guarantees. Such illustration shall include, among other guarantees, the effect of the maximum mortality and administrative charges specified in the contract.

(iii) Except for illustrations contained in the prospectus, the pattern of premium payments used in an illustration shall be the initial pattern requested by the proposed policyholder at inception or upon changes in fact amount requested by the policyholder.

(iv) If the illustrated policy contact provides for a variety of investment options, the illustration may use an asset charge which is reasonably representative of a typical blend of such options or it may use the asset charge of a particular option.

(v) The illustration shall disclose the transaction charges which will be levied against the contract because of transactions requested in accordance with rights and privileges specified in the policy contract.Any charge for the exercise of a right or privilege upon which the illustration is based shall be reflected in the illustrated values. The nature of any such charges shall be disclosed in a clear statement accompanying such illustrations.

(vi) A clear statement shall be made following the table of illustrated accumulated policy values that use of hypothetical investment results does not in any way represent actual results or suggest that such results will be achieved and shall indicate that the policy values which actually arise will differ from those shown when the actual investment results differ from the hypothetical rates illustrated. Assumptions upon which illustrations are based shall be clearly disclosed.

(vii) Any sales illustration to a prospective policyholder shall accurately reflect the policy being presented. Misleading statements or captions or other misrepresentations are prohibited.

(viii) The requested sales illustration shall be printed clearly and legibly on hard paper copy. An illustration displayed on a computer screen may be used in addition to, but not as a substitute for, hard paper copy.

(b) All of the following requirements apply to variable life insurance contracts offering both fixed and variable funding options:

(i) An illustration of the variable funding option shall comply with these rules.

(ii) If an illustration of the fixed funding option is shown, accumulated policy values shall be shown on the basis of guaranteed rates.One or more additional rates may also be shown, but such rates shall not exceed current rates.

(iii) A summary illustration may be given in which results from comparable illustrated and hypothetical interest rates are combined. Such summary shall cross-reference to the accompanying separate illustrations of the fixed and variable funding options.

(c) Nothing in this rule shall prohibit the distribution, to the prospective policyholder, of illustrations in addition to those required by R 500.863 if, except for the requirements of subdivision (a)(iii) of this rule which apply to required illustrations under R 500.863, such additional illustrations comply with the standards set forth in these rules.

History

History: 1988 MR 7, Eff.

Mich. Admin. Code R 500.846 Service contracts between insurer and supplier; requirements {#sec-r-500.846 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.846}

Rule 6. Any contract between an insurer and suppliers of consulting, investment, administrative, sales, marketing, custodial, or other services which are material with respect to variable life insurance operations shall be in writing and provide that the supplier of such services shall furnish the commissioner with any information or reports in connection with such services which the commissioner may request in order to ascertain whether the variable life insurance operations of the insurer are being conducted in a manner consistent with these rules and any other applicable law or regulations; shall be fair and equitable to all policyholders of the insurer in this state; shall not relieve the insurer from any responsibilities or obligations imposed upon the operations of its variable life insurance business by this rule or any law or regulation.

History

History: 1979 AC.

Mich. Admin. Code R 500.847 Reports to the commissioner {#sec-r-500.847 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.847}

Rule 7. (1) Any insurer authorized to transact the business of variable life insurance in this state shall submit to the commissioner, in addition to any other materials which may be required by this rule or any other applicable laws or regulations, all of the following:

(a) An annual statement of the business of its variable life insurance separate account or accounts in such form as shall be prescribed by the commissioner.

(b) Prior to the use in this state, a copy of any information furnished to applicants as provided for in R 500.863.

(c) Prior to the use in this state, a copy of any of the forms required by subdivision (a) of R 500.865 and a copy of any of the reports to policyholders as used to satisfy subdivision (b) of R 500.865.

(d) Such additional information concerning its variable life insurance operations or its variable life insurance separate accounts as the commissioner shall deem necessary.

(2) Any material submitted to the commissioner under this rule shall be disapproved if it is found to be false, misleading, incomplete, deceptive, or inaccurate in any material respect and, if previously distributed, the commissioner shall require the distribution of an amended report, which shall previously have been approved after submission pursuant to this subrule.

(3) Any material required to be filed with the commissioner, or approved by him, shall be subject to disapproval if at any time it is found by him not to comply with the standards established by this rule.

History

History: 1979 AC.

Rule 8. (1) All forms of variable life insurance policies, riders, endorsements, applications, and other related documents which are to be attached to and made a part of the policy shall be filed with the commissioner and shall be subject to approval before delivery or issuance for delivery in this state. The procedures and requirements for filing and approval shall be, to the extent appropriate and not inconsistent with this rule, the same as those otherwise applicable to other life insurance policies.

(2) The commissioner may approve variable life insurance policies and related forms with provisions the commissioner deems to be not less favorable to the policyholder and the beneficiary than those required by this rule.

(3) The requirements of R 500.849(a) do not apply to variable life insurance policies and related forms issued in connection with corporate pension and profit-sharing plans and retirement income plans which are exempt pursuant to section 3(c)(11) of the investment company act of 1940, 15 U.S.C. S80a-3(c)(11), and, where applicable, other provisions of the federal securities laws because of their tax qualified status.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.849 Variable life insurance policy; benefit and design requirements {#sec-r-500.849 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.849}

Rule 9. Variable life insurance policies delivered or issued for delivery in this state shall comply with all of the following minimum requirements:

(a) The mortality and expense risk shall be borne by the insurer. The mortality and expense charges shall be subject to the maximums stated in the contract. If mortality and expense charges are lower than the guaranteed maximums, the difference shall be credited to the policy account at least annually.

(b) For scheduled premium policies, a minimum death benefit shall be provided in an amount at least equal to the initial face amount of the policy if premiums are paid when due, subject to the provisions of R 500.851(b).

(c) The policy shall reflect the investment experience of the 1 or more variable life insurance separate accounts established and maintained by the insurer. The insurer shall demonstrate that the reflection of investment experience in the variable life insurance policy is actuarially sound.

(d) Each variable life insurance policy shall be credited with the full amount of the net investment return applied to the benefit base.

(e) Changes in variable death benefits of each variable life insurance policy shall be determined at least annually.

(f) The policy value and the cash surrender value of each variable life insurance policy shall be determined at least monthly. The method of computation of cash values and other nonforfeiture benefits, as described either in the policy or in a statement filed with the commissioner, shall be in accordance with actuarial procedures that recognize the variable nature of the policy. The method of computation shall be such that, if the net investment return credited to the policy at all times from the date of issue is equal to the assumed investment rate with premiums and benefits determined accordingly under the terms of the policy, then the resulting cash values and other nonforfeiture benefits shall be at least equal to the minimum values required by section 4060 of Act No. 218 of the Public Acts of 1956, as amended, being S500.4060 of the Michigan Compiled Laws, for a general account policy with such premiums and benefits. The assumed investment rate shall not exceed the maximum interest rate permitted under the standard nonforfeiture law of this state. The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include, for example, but are not to be limited to, a guarantee that the amount payable at death or maturity shall be at least equal to the amount that otherwise would have been payable if the net investment return credited to the policy at all times from the date of issue had been equal to the assumed investment rate.

(g) The policy value, cash value, and other nonforfeiture benefits of each variable life insurance policy shall be determined in accordance with the provisions of R 500.849a.

(h) The computation of values required for each variable life insurance policy may be based upon such reasonable and necessary approximations as are approved by the commissioner.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.849a Variable life nonforfeiture values {#sec-r-500.849a omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.849a}

Rule 9a. (1) Minimum cash surrender values for variable life insurance policies shall be determined separately for the basic policy and any benefits and riders for which premiums are paid separately. The methods pertain to a basic policy and any benefits and riders for which premiums are not paid separately.

(2) The method of computation of minimum cash surrender values for variable life policies shall be determined using the retrospective method, the prospective method, or the maximum charge method.

(a) When variable life policy funds are solely in 1 or more separate accounts, the retrospective method or the maximum charge method may be used to compute minimum cash surrender values.

(b) In case of a combination general account and separate account product providing for 1 basic amount of insurance but with the policy value allocated among the general account and 1 or more separate accounts and with mortality charges applicable to the difference between the death benefit and the policy value, the applicable cash surrender value procedures used may be either the maximum charge method or the retrospective method. The method used shall be applicable to both the general account and the separate account portions and all of the following provisions shall apply:

(i) The policy shall specify a guaranteed rate of interest for the portion of the fund accumulated in the general account.

(ii) Additions or amounts derived from more favorable interest, mortality, and expense than those guaranteed in the policy on the general account fund and credited within 12 months before surrender may be subject to forfeiture upon surrender.

(iii) At least once each year the insured has the option to transfer all separate account funds to the general account and apply his or her cash surrender value to purchase a guaranteed fixed paid-up benefit.

(iv) Any amount of paid-up whole life insurance provided under paragraph (iii) of this subdivision shall be at least as great as that computed using the mortality table on which the maximum mortality charges have been calculated and the interest rate guaranteed in the policy. Any period of extended term insurance provided under paragraph (iii) of this subdivision shall be at least as long as that using an extended term insurance mortality table appropriate to the mortality table for the maximum mortality charges and the interest rate guaranteed in the policy.

(v) The annual report shall note the availability of the option under paragraph (iii) of this subdivision.

(3) As used in this rule:

(a) "Accumulation rate" means the net investment return or any interest credits applied towards the policy value.

(b) "Cash surrender value" means the net cash surrender value plus any amounts outstanding as policy loans.

(d) "Policy value" means the amount to which separately identified interest credits or investment return and mortality, expense, or other charges are made under a variable life insurance policy.

(e) "Valuation rate" means the higher of the assumed investment rate (AIR) or guaranteed interest included in the policy, if any, otherwise the highest valuation interest rate allowed under the standard nonforfeiture law.

(4) All of the following provisions apply to use of the retrospective method:

(a) The minimum cash surrender value before adjustment for indebtedness and dividend credits, available on a valuation date shall be equal to the value using the accumulation rate through that date of the premiums paid minus the accumulation through that date of all of the following:

(i) The benefit charges.

(ii) The averaged administrative expense charges for the first policy year and any insurance increase years.

(iii) Actual administrative expense charges for other years.

(iv) Initial and additional acquisition expense charges not exceeding the initial or additional expense allowances respectively.

(v) Any service charges actually made, excluding charges for cash surrender or election of a paid-up nonforfeiture benefit.

(vi) Any deductions made for partial withdrawals.

(vii) All accumulations being at the accumulation rate at which changes in policy values have been made unconditionally to the policy or have been made conditionally, but for which the conditions have since been met, and minus any unamortized, unused initial and additional expense allowance.

(b) Accumulation for the premiums and for all charges referred to in subdivision (a)(i) to (vi) of this subrule shall be based on the accumulation rate for the applicable account or accounts from and to such dates as are consistent with the manner in which such accumulation rate is credited in determining the policy value.

(c) The benefit charges shall include the charges made for mortality and any charges made for riders or supplementary benefits for which premiums are not paid separately. If benefit charges are substantially level by duration and develop low or no cash values, then the commissioner shall have the right to require higher cash values unless the insurer provides adequate justification that the cash values are appropriate in relation to the policy's other characteristics.

(d) The administrative expense charges shall include all of the following:

(i) Charges per premium payment.

(ii) Charges per dollar of premium paid.

(iii) Periodic charges per thousand dollars of insurance.

(iv) Periodic per policy charges.

(v) Any other charges permitted by the policy to be imposed without regard to the policyowner's request for services.

(e) The averaged administrative expense charges for any year shall be those which would have been imposed in the year if the charge rate or rates for each transaction or period within the year had been equal to the arithmetic average of the corresponding charge rates which the policy states will be imposed in policy years 2 through 20 in determining the policy value.

(f) The initial acquisition expense charges shall be the excess of the expense charges, other than service charges, actually made in the first policy year over the averaged administrative expense charges for that year. Additional acquisition expense charges shall be the excess of the expense charges, other than service charges, actually made in an insurance increase year over the averaged administrative expense charges for that year. An insurance increase year shall be the year beginning on the date of increase in the amount of insurance by policyowner request or by the terms of the policy.

(g) Service charges shall include charges permitted by the policy to be imposed as a result of a policyowner's request for a service by the insurer, such as the furnishing of future benefit illustrations or of special transactions.

(h) The initial expense allowance shall be the allowance provided by items (ii), (iii), and (iv) of paragraph 1 of subsection (5), or by items (ii) and (iii) of paragraph 9 of subsection (5), as applicable, of section 4060 of Act No. 218 of the Public Acts of 1956, as amended, being S500.4060(5)(1)(ii),(iii), and (iv) or (5)(9)(ii) and (iii) of the Michigan Compiled Laws, for a fixed premium, fixed benefit endowment policy with a face amount equal to the initial face amount of the variable life insurance policy, with level premiums paid annually until the highest attained age at which a premium may be paid under the variable life insurance policy and maturing on the latest maturity date permitted under the policy, if any, otherwise at the highest age in the valuation mortality table. The unused initial expense allowance shall be the excess, if any, of the initial allowance over the initial acquisition expense charge as defined in this subrule.

(i) If the amount of insurance is subsequently increased upon request of the policyowner or by the terms of the policy, an additional expense allowance and an unused additional expense allowance shall be determined on a basis consistent with subdivision (h) of this subrule and with paragraph 13 of subsection (5) of section 4060 of Act No. 218 of the Public Acts of 1956, as amended, being S500.4060(5)(13) of the Michigan Compiled Laws, using the face amount and the latest maturity date permitted at that time under the policy.

(j) The unamortized, unused initial expense allowance during the policy year beginning on the policy anniversary at age x+t, where "x" is the issue age, shall be the unused initial expense allowance multiplied by x+t/ x where " x+t" and " x " are present value of an annuity of 1 per year payable on policy anniversaries beginning at ages x+t and x, respectively, and continuing until the highest attained age at which a premium may be paid under the policy, both on the mortality guaranteed in the policy and the valuation rate for the policy. An unamortized, unused additional expense allowance shall be the unused additional expense allowance multiplied by a similar ratio of annuities, with x replaced by an annuity beginning on the date as of which the additional expense allowance was determined.

(5) All of the following provisions apply to the use of the prospective method:

(a) The minimum cash surrender value before adjustment for indebtedness and dividend credits which is available on a date as of which interest is credited to the policy shall be equal to (A)-(B)-(C)-(D). "A" means the present value of all future benefits. "B" means the present value of future adjusted premiums. The adjusted premiums are calculated as described in paragraphs 1 to 6 and 9 of subsection (5), as applicable, of section 4060 of Act No. 218 of the Public Acts of 1956, as amended, being S500.4060(5)(1) to (6) and (9) of the Michigan Compiled Laws. If paragraph 9 of subsection (5) is applicable, the nonforfeiture net level premium is equal to the quantity PVFB/ x , where "PVFB" is the present value of all benefits at issue assuming future premiums are paid by the policy owner, assuming all guarantees contained in the policy or declared by the insurer, and using the valuation rate. x is the present value of an annuity of 1 per year payable on policy anniversaries beginning at age x and continuing until the highest attained age at which a premium may be paid under the policy. "C" means the present value of any quantities analogous to the nonforfeiture net level premium which arise because of guarantees declared by the insurer after the issue date of the policy. x shall be replaced by an annuity beginning on the date the declaration became effective and payable until the end of the period covered by the declaration. The types of quantities included are increased current interest rate credits guaranteed for a future period, decreased current mortality rate charges guaranteed for a future period, or decreased current expense charges guaranteed for a future period. "D" means the sum of any quantities analogous to "B" which arise because of structural changes in the policy. Structural changes are those changes which are separate from the automatic workings of the policy. Such structural changes usually would be initiated by the policy owner and include changes in the guaranteed benefits, changes in latest maturity date, or changes in allowable premium payment period.

(b) Future benefits are determined by both of the following:

(i) Projecting the policy value, taking into account future premiums, if any, and using the guaranteed interest rate, if any; otherwise, the lesser of the air, if any, or the highest stateapproved nonforfeiture interest rate, and using the mortality, expense deductions, and other provisions contained in the policy or declared by the insurer.

(ii) Taking into account any benefits guaranteed in the policy or by declaration which do not depend on the policy value.

(c) All present values shall be determined using an interest rate or rates specified by section 4060 of Act No. 218 of the Public Acts of 1956, as amended, being S500.4060 of the Michigan Compiled Laws, for policies issued in the same year, and the mortality rates specified by section 4060 of Act No. 218 of the Public Acts of 1956, as amended, for policies issued in the same year or contained in such other table as may be approved by the commissioner for this purpose.

(6) All of the following provisions apply to the maximum charge method:

(a) As used in this subrule:

(i) "Acquisition and other charges" means charges deducted from gross premiums before they are credited to policy value or made to the policy value. They may be expressed as a percentage of premium or a dollar amount per $1,000.00 of insurance or a dollar amount per premium payment or a per policy charge other than the administrative charge. They do not include charges made as a reduction in investment return. These charges may vary by premium size, policy size, and policy year.

(ii) "Administrative charge" means a per policy charge made regularly to the policy value or deducted from premiums on scheduled premium policies for the cost of administration.

This charge shall not be more than $5.00 per month in 1986. In subsequent years, the limit for any new or in-force policy shall be the product of $5.00 and the ratio, not to be more than 2.00 of the consumer price index for all urban households for the September preceding the year for which the determination is being made to the consumer price index for September, 1985. The commissioner may allow a higher charge upon an insurer demonstrating justification.

(iii) "Benefit charges made to the policy value" means the mortality charges made for life insurance on the insured person or persons and any charge made for riders and supplementary benefits.

(iv) "Cash surrender value" means the policy value, less any surrender charge, before reduction for outstanding loans or other amounts due under the policy.

(v) "Deferred acquisition and other charges" means acquisition and other charges deducted from the policy value after the first policy year.

(vi) "Excess acquisition and other charges for a face amount increase" means the maximum excess of "A" over "B" based on the assumption that the net level whole life annual premium for the increase as defined in paragraph (x) of this subdivision applies throughout the remaining premium paying period. "A" is the acquisition and other charge for the increase and "B" is the arithmetic average of the corresponding charges which the policy states would be made in the 19 policy years following the increase.

(vii) "Excess first-year acquisition and other charges" means the maximum excess of "A" over "B" based on the assumption that any premium, other than a single premium, payable in the first policy year is also payable during the entire premium paying period. "A" is the acquisition and other charge made in the first policy year and "B" is the arithmetic average of the corresponding charges which the policy states would be made in policy years 2 through 20.

(viii) "Net investment return" means the actual amount credited to policy value net of investment expenses or other charges made as a reduction in investment return.

(ix) "Net level whole life annual premium at issue" is based on the assumption of level insurance and level annual premium for life, the mortality table rate used to calculate the maximum mortality charges, and an interest rate based on the higher of 4% or that specified in the policy.

(x) "Net level whole life annual premium for an increase in the face amount of insurance" shall be determined as of the date of the increase as though such increase were a separate policy under paragraph (ix) of this subdivision. Only increases in the face amount requested by the policy owner and increases in the face amount pursuant to the terms of the policy, such as an option to purchase or a cost-of-living increase, shall give rise to such a premium and the associated excess acquisition and other charges for a face amount increase.

Increases for this purpose shall not include increases in face amount resulting from a change in the death benefit option or changes in the death benefit pursuant to policy terms that do not affect the face amount. Increases for this purpose shall be reduced by the amounts of any earlier decreases that have not been offset against an earlier increase. Such decreases shall include a decrease by reason of a partial withdrawal, but not a decrease resulting from a change in the death benefit option.

(xi) "Policy value" means gross premiums paid, excluding separate identified premiums for riders or supplementary benefits which are not credited to policy value, plus net investment income, which may be positive or negative and may vary based on policy loans, less the following as specified in the policy:

(A) Administrative charges, which may be taken in part from premiums and in part from policy value.

(B) Acquisition and other charges.

(D) Benefit charges.

(E) Service charges.

(F) Partial withdrawals.

(G) Partial surrender charges.

(xii) "Service charges made to the policy value" are charges for transactional costs, such as partial withdrawals, reallocations of policy values, and benefit illustrations.

Transactional charges shall not be assessed unless specifically permitted by law or regulation for transactions made under mandatory policy provisions.

(xiii) "Surrender charge" is a deferred charge made to the policy value in the event of a full or partial surrender of the policy, reduction in the face amount of insurance or premium, or a lapse.

(b) If cash surrender values are determined in accordance with this subrule, then such cash surrender values shall be considered to have satisfied the requirements for minimum cash surrender values as provided in section 4060 of Act No. 218 of the Public Acts of 1956, as amended, being S500.4060 of the Michigan Compiled Laws.

(i) Acquisition and other charges shall not exceed the sum of all of the following:

(A) 90% of premiums received up to the net level whole life annual premium at issue, regardless of when received.

(B) 10% of all other premiums received.

(C) 90% of the net level whole life annual premium for increases in the face amount of insurance as defined in subdivision (a)(x).

(D) $10.00 per $1,000.00 of initial face amount in the first policy year.

(E) $1.00 per $1,000.00 of face amount in subsequent policy years.

(F) $10.00 per $1,000.00 of any increase in the face amount of insurance other than an increase resulting from a change in the death benefit option. Increases up to the amount of earlier decreases are included here but not in subparagraph (c) of this paragraph.

(G) $200.00 per policy in the first year.

(ii) A surrender charge may be established if the initial surrender charge and the actual acquisition and other charges made in the first policy year, and the actual acquisition and other charges on premiums up to the net level whole life annual premium if received after the first year, do not exceed the sum of subparagraph (A), subparagraph (B) in the first year, subparagraph (D), and subparagraph (G) of paragraph (i) of this subdivision. Additional surrender charges may be established after issue in connection with an increase in the face amount if any such additional surrender charge and any acquisition and other charges made in connection with such increase do not exceed the sum of subparagraphs (C) and (F) of paragraph (i) of this subdivision.

(iii) A deferred acquisition and other charge may be charged against the policy value in any policy after the first such that the total of all such charges imposed to date plus the surrender charge for that year does not exceed the maximum initial surrender charge. The deferred acquisition and other charge in any 1 year shall not exceed the maximum allowable surrender charge for that year. Similar deferred acquisition and other charges may be imposed with respect to an increase in the face amount.

(iv) The maximum allowable surrender charge for any year shall be the maximum initial surrender charge multiplied by x+t/ x, where "x" is the issue age and "t" is the number of years since issue. Similar maximums shall be determined with respect to any additional surrender charges, with x and t based on the date of increase.

(7) All of the following provisions apply to minimum paid-up nonforfeiture benefits:

(a) If a variable life insurance policy provides for the optional election of a paid-up nonforfeiture benefit, it shall be such that its present value shall be at least equal to the cash surrender value provided by the policy on the effective date of the election. The present value shall be based on mortality and interest standards at least as favorable to the policy owner as the mortality and interest basis, if any, specified in the policy for determining the policy value or the mortality and interest standards permitted for paid-up nonforfeiture benefits by section 4060 of Act No. 218 of the Public Acts of 1956, as amended, being S500.4060 of the Michigan Compiled Laws. In place of the paid-up nonforfeiture benefit, the insurer may substitute, upon a proper request made not later than 60 days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or longer period of death benefits or, if applicable, a greater amount or earlier payment of endowment benefits.

(b) Any secondary guarantees in a policy shall be taken into consideration when computing minimum paid-up nonforfeiture benefits.

(c) A charge may be made at the surrender of the policy if the result after the deduction of the charge is not less than the minimum cash surrender value required by this subrule.

(8) An insurer may use different methods to compute minimum cash surrender values for different variable life policies, but for any 1 policy form, an insurer shall use the same method for all issue ages. An insurer may revise its method for new issues.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.850 Variable life insurance policy; mandatory provisions {#sec-r-500.850 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.850}

Rule 10. Every variable life insurance policy delivered or issued for delivery in this state shall contain, at a minimum, all of the following:

(a) A cover page or pages corresponding to the cover page of each policy which shall contain all of the following items:

(i) A prominent statement, either in contrasting color or in boldface type, that the amount or duration of death benefit may be variable or fixed under specified conditions and that cash values may increase or decrease in accordance with the experience of the separate account, subject to any specified minimum guarantees.

(ii) A statement describing the minimum death benefit required pursuant to R 500.849(b).

(iii) The method, or a reference to the policy provision which describes the method, for determining the amount of insurance payable at death.

(iv) A captioned provision which provides that the policyholder may return the variable life insurance policy to the insurer or agent within 45 days of the date of the execution of the application or within 10 days of receipt of the policy by the policyholder, whichever is later, and receive a refund of all premium payments for such policy.

(v) Such other items as are currently required for fixed benefit life insurance policies and which are not inconsistent with this rule.

(b) For scheduled premium policies, a provision for a grace period of not less than 31 days from the premium due date, which shall provide that when the premium is paid within the grace period, policy values shall be the same, except for the deduction of any overdue premium, as if the premium were paid on or before the due date.

(c) For scheduled premium policies, a provision that the policy shall be reinstated at any time within 2 years from the date of default, unless the cash surrender value has been paid or the period of extended insurance has expired. Reinstatement shall be upon the written application of the insured with evidence of insurability, including good health, which satisfies the insurer, the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement, and payment of an amount not exceeding the greater of either of the following:

(i) All overdue premiums and any other indebtedness in effect at the end of the grace period following the date of default, with interest at a rate not exceeding the rate charged on comparable fixed benefit policies.

(ii) 110% of the increase in cash surrender value resulting from reinstatement.

(d) A full description of the benefit base and of the method of calculation and application of any factors used to adjust variable benefits under the policy.

(e) A provision designating the separate account to be used and stating all of the following:

(i) Such separate account shall be used to fund only variable life insurance benefits, except to the extent permitted by R 500.852(c)(vi).

(ii) The assets of such separate account shall be available to cover the liabilities of the general account of the insurer only to the extent that the assets of the separate account exceed the liabilities of the separate account arising under the variable life insurance policies supported by the separate account.

(iii) The assets of such separate account shall be valued as often as any policy benefits vary, but at least monthly.

(f) For scheduled premium policies, a provision that at any time during the first 18 months of the variable life insurance policy, so long as premiums are duly paid, the owner may exchange the policy for a policy of permanent fixed benefit life insurance on the life of the insured for the same initial amount of insurance as the variable life insurance policy.The insurer shall not require evidence of insurability for this exchange and the new policy shall satisfy all of the following requirements:

(i) Bear the same date of issue and age as the original variable life insurance policy.

(ii) Be issued on a substantially comparable plan of permanent insurance offered in the state by the insurer or an affiliate on the date of issue and at the premium rates in effect on that date for the same class of insureds.

(iii) Include such riders and incidental insurance benefits as were included in the original policy if such riders and incidental insurance benefits are issued with the fixed benefit policy.

(iv) Be issued subject to an equitable premium or cash value adjustment that takes appropriate account of the premiums and cash values under the original and new policies. A detailed statement of the method of computing such adjustment shall be filed with, and subject to the approval of, the commissioner.

(g) A provision that the policy and any papers attached thereto by the insurer, including the application, if attached, constitute the entire insurance contract.

(h) A designation of the officers of the insurer who are empowered to make an agreement or representation on behalf of the insurer and an indication that statements by the insured, or on his or her behalf, shall be considered as representations and not as warranties.

(i) An identification of the owner of the insurance contract.

(j) A provision setting forth conditions or requirements as to the designation, or change of designation, of a beneficiary and a provision for disbursement of benefits in the absence of a beneficiary designation.

(k) A statement of any conditions or requirements concerning the assignment of the policy.

(l) A description of any adjustments in policy values to be made in the event of misstatement of the age or sex of the insured.

(m) A provision that the policy shall be incontestable by the insurer after it has been in force for 2 years during the lifetime of the insured.However, any increase in the amount of the policy's death benefits subsequent to the policy issue date, which increase occurred upon a new application or request of the owner and was subject to satisfactory proof of the insured's insurability, shall be incontestable after any such increase has been in force, during the lifetime of the insured, for 2 years from the date of issue of such increase.

(n) A provision stating that in the event of a material change of investment policy of the separate account, any policyholder who objects to such change shall have the option to convert, without providing evidence of insurability, to a fixed benefit life insurance policy and that the insurer shall give proper notification of the options available to such objecting policyholder. The conversion options shall be equivalent to those provided by R 500.859(5)(b).

(o) A provision that payment of variable death benefits in excess of the minimum death benefits, cash values, policy loans, or partial withdrawals, except when used to pay premiums or partial surrenders, may be deferred as follows:

(i) For up to 6 months from the date of request if such payments are based on policy values which do not depend on the performance of the separate account.

(ii) For any period during which the New York stock exchange is closed for trading, except for normal holiday closings, or when the securities and exchange commission has determined that a state of emergency exists which may make such payment impractical.

(p) A description of the basis for computing the cash value and the surrender value under the policy. In scheduled premium policies, such surrender value may be expressed as either of the following:

(i) A schedule of cash value amounts per $1,000.00 of variable face amount at each attained age or policy year for not less than 20 years from issue or for the premium paying period if less than 20 years.

(ii) One cash value schedule, as described in paragraph (i) of this subdivision, for the death benefit, or for each $1,000.00 of death benefit, which would be in effect if the net investment return is always equal to the assumed investment rate, and a second schedule applicable to any adjustments to the death benefit, disregarding the minimum death benefit guarantee and term insurance amounts, if the net investment return does not equal the assumed investment rate at each age for not less than 20 years from issue or for the premium paying period if it is less than 20 years.

(q) Premiums or charges for incidental insurance benefits shall be stated separately.

(r) For flexible premium policies, a provision for a grace period beginning on the policy processing day when the total charges authorized by the policy that are necessary to keep the policy in force until the next policy processing day exceed the amounts available under the policy to pay such charges in accordance with the terms of the policy. Such grace period shall end on a date not less than 61 days after the mailing date of the report to policyholders required by R 500.865(d). The death benefit payable during the grace period will equal the death benefit in effect immediately before such period, less any overdue charges. If the policy processing days occur monthly, the insurer may require the payment of not more than 3 times the charges which were due on the policy processing day on which the amounts available under the policy were insufficient to pay all charges authorized by the policy that are necessary to keep such policy in force until the next policy processing day.

(s) If settlement options are provided, at least 1 such option shall be provided on a fixed benefit basis only.

(t) For scheduled premium policies which permit the insurer to adjust premiums, a provision stating the frequency with which premium will be reviewed to determine whether an adjustment should be made. Such frequency shall be at least once every 3 policy years.

(u) The policy shall describe how loans are charged against separate accounts and the effect on such accounts when a loan is made or repaid.

(v) Any other required provisions, including other items currently required for fixed benefit life insurance policies which are not inconsistent with this rule.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.851 Variable life insurance policy; nonforfeiture, partial withdrawal, policy loan, and partial surrender provisions {#sec-r-500.851 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.851}

Rule 11. Every variable life insurance policy delivered or issued for delivery in this state shall contain all of the following provisions:

(a) A provision for nonforfeiture insurance benefits, so that at least 1 such benefit is offered on a fixed basis from the due date of the premium in default. Variable extended term insurance shall not be offered. A given nonforfeiture option need not be offered on both a fixed and a variable basis. The insurer may establish a reasonable minimum cash surrender value below which any nonforfeiture insurance options will not be available.

(b) A provision for policy loans after the policy has been in force for 3 full years. Such provision shall be not less favorable to the policyholder than any of the following provisions:

(i) The policyholder may borrow at least 75% of the cash surrender value.

(ii) The amount borrowed shall bear interest at a rate not to exceed the rate charged on comparable fixed benefit policies.

(iii) Any indebtedness shall be deducted from the proceeds payable on death.

(iv) Any indebtedness shall be deducted from the cash surrender value upon surrender or in determining any nonforfeiture benefit.

(v) For scheduled premium policies, when the indebtedness exceeds the cash surrender value, the insurer shall give notice of intent to cancel the policy if the excess indebtedness is not repaid within 31 days after the date of mailing of such notice, by registered mail, return receipt requested, to the last known address of the policyholder.

(vi) For flexible premium policies, when the total charges authorized by the policy that are necessary to keep the policy in force until the next following policy processing day exceed the amounts available under the policy to pay such charges, a report shall be sent to the policyholder containing the information specified by R 500.865(d).

(vii) The policy may provide that if, at any time, so long as premiums are duly paid, the variable death benefit is less than it would have been if no loan or withdrawal had ever been made, the policyholder may increase such variable death benefit up to what it would have been if there had been no loan or withdrawal by paying an amount not exceeding 110% of the corresponding increase in cash value and by furnishing such evidence of insurability as the insurer may request.

(viii) The policy may specify a reasonable minimum amount which may be borrowed at any time, but such minimum shall not apply to any automatic premium loan provision.

(ix) A policy loan provision is not required if the policy is under the extended insurance nonforfeiture option.

(c) In addition to the provisions specified in subdivisions (a) and (b) of this rule, the policy may contain a partial surrender provision; however, any such provision shall provide that the policyholder may request part of the cash value and both the variable and minimum death benefits shall be reduced in proportion to the percentage of the cash value received by the policyholder and the premium for the remaining amount of insurance shall also be reduced to the appropriate rates for the reduced amount of insurance. The policy may provide that a partial surrender provision shall not require the insurer to reduce the amount of the minimum death benefit to less than the lowest amount of minimum death benefit which would have been issued to the insured under the insurance plans of the insurer at the time the policy was issued. The policy shall clearly provide that the policyholder has the option of electing to exercise the cash value privileges of the policy loan provision rather than the partial surrender or partial withdrawal provision.

(d) All policy loan, partial withdrawal, or partial surrender provisions shall be constructed so that variable life insurance policyholders who have not exercised such provision are not disadvantaged by the exercise thereof.

(e) Monies paid to the policyholders upon the exercise of any policy loan, partial withdrawal, or partial surrender provision shall be withdrawn from the separate account and shall be returned to the separate account upon repayment, except that a stock insurer may provide the monies for policy loans from the general account.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.852 Variable life insurance policy; suicide exclusion; incidental insurance benefits on fixed basis; dividends; election of automatic premium loan {#sec-r-500.852 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.852}

Rule 12. Any of the following provisions may in substance be included in a variable life insurance policy or related form delivered or issued for delivery in this state:

(a) An exclusion for suicide committed within 2 years of the policy issue date.

However, to the extent of the increased death benefits only, the policy may provide an exclusion for suicide within 2 years of any increase in death benefits which result from an application of the owner subsequent to the policy issue date.

(b) Incidental insurance benefits may be offered on a fixed basis or variable basis.

(c) Policies issued on a participating basis shall offer to pay dividend amounts in cash. In addition, such policies may offer the following dividend options:

(i) The amount of the dividend may be credited against premium payments.

(ii) The amount of the dividend may be applied to provide amounts of additional fixed benefit life insurance.

(iii) The amount of the dividend may be applied to provide amounts of additional variable life insurance.

(iv) The amount of the dividend may be deposited in the general account at a specified minimum rate of interest.

(v) The amount of the dividend may be applied to provide paid-up amounts of fixed-benefit, 1-year term insurance.

(vi) The amount of the dividend may be deposited as a variable deposit in a separate account.

(d) A provision allowing the policyholder to elect, in writing, in the application for the policy or thereafter, an automatic premium loan on a basis not less favorable than that required of policy loans under R 500.851, except that a restriction that not more than 2 consecutive premiums shall be paid under this provision may be imposed.

(e) A provision allowing the policyholder to make partial withdrawals.

(f) Any other policy provision approved in writing by the commissioner.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.853 Reserve liabilities {#sec-r-500.853 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.853}

Rule 13. All of the following provisions are applicable to reserve liabilities for variable life insurance:

(a) Reserve liabilities for variable life insurance policies shall be established pursuant to section 834 of Act No. 218 of the Public Acts of 1956, as amended, being S500.834 of the Michigan Compiled Laws, in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

(b) For scheduled premium policies, reserve liabilities for the guaranteed minimum death benefit shall be the reserve needed to provide for the contingency of death occurring when the guaranteed minimum death benefit exceeds the death benefit that would be paid in the absence of the guarantee, shall be maintained in the general account of the insurer, and shall be not less than the greater of either of the following minimum reserves:

(i) The aggregate total of the term costs, if any, covering a period of 1 full year from the valuation date, of the guarantee on each variable life insurance contract, assuming an immediate 1/3 depreciation in the current value of the assets of the separate account followed by a net investment return equal to the assumed investment rate.

(ii) The aggregate total of the attained age level reserves on each variable life insurance contract. The attained age level reserve on each variable life insurance contract shall not be less than zero and shall equal the residue, as described in subparagraph (A) of this paragraph, of the prior year's attained age level reserve on the contract, with any such residue increased or decreased by a payment computed on an attained age basis as described in subparagraph (B) of this paragraph. Subparagraphs (A) and (B) read as follows:

(A) The residue of the prior year's attained age level reserve on each variable life insurance contract shall not be less than zero and shall be determined by adding interest at the valuation interest rate to such prior year's reserve, deducting the tabular claims based on the excess, if any, of the guaranteed minimum death benefit over the death benefit that would be payable in the absence of such guarantee, and dividing the net result by the tabular probability of survival. The excess referred to in the preceding sentence shall be based on the actual level of death benefits that would have been in effect during the preceding year in the absence of the guarantee, taking appropriate account of the reserve assumptions regarding the distributions of death claim payments over the year.

(B) The payment referred to in paragraph (ii) of this subdivision shall be computed so that the present value of a level payment of that amount each year over the future premium paying period of the contract is equal to A minus B minus C, where "A" is the present value of the future guaranteed minimum death benefits, "B" is the present value of the future death benefits that would be payable in the absence of such guarantee, and "C" is any residue, as described in subparagraph (A) of this paragraph, of the prior year's attained age level reserve on such variable life insurance contract. The amounts of future death benefits referred to in B shall be computed assuming a net investment return of the separate account, which may differ from the assumed investment rate or the valuation interest rate, or both, but shall not exceed the maximum interest rate permitted for the valuation of life insurance contracts; however, if the contract is paid up, the payment shall equal A minus B minus C.

(c) The valuation interest rate and mortality table used in computing the 2 minimum reserves described in subdivision (b)(i) and (ii) shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ approximations and estimates acceptable to the commissioner, including, but not limited to, groupings and averages.

(d) For flexible premium policies, reserve liabilities for any guaranteed minimum death benefit shall be maintained in the general account of the insurer and shall not be less than the aggregate total of the term costs, if any, covering the period in the guarantee not otherwise provided for by the reserves held in the separate account assuming an immediate 1/3 depreciation in the current value of the assets of the separate account followed by a net investment return equal to the valuation interest rate. The valuation interest rate and mortality table used in computing this additional reserve, if any, shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserve, the company may employ suitable approximations and estimates, including, but not limited to, groupings and averages.

(e) Reserve liabilities for all fixed incidental insurance benefits and any guarantees associated with variable incidental insurance benefits shall be maintained in the general account and reserve liabilities for all variable aspects of the variable incidental insurance benefits shall be maintained in a separate account in amounts determined in accordance with the actuarial procedures appropriate to such benefit.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.854 Separate accounts generally {#sec-r-500.854 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.854}

Rule 14. The following apply to separate accounts for variable life insurance:

(a) An insurer issuing variable life insurance in this state shall establish 1 or more separate accounts pursuant to section 925 of the insurance code of 1956, as amended, being S500.925 of the Michigan Compiled Laws.

(b) An insurer shall not, without the prior written approval of the commissioner, employ, in any material connection with the handling of separate account assets, any person, who:

(i) Within the last 10 years, has been convicted of any felony or a misdemeanor arising out of such person's conduct involving embezzlement, fraudulent conversion, or misappropriation of funds or securities or involving violation of 18 U.S.C. SS1341, 1342, or 1343; or (ii) Within the last 10 years, has been found by any state regulatory authority to have violated, or has acknowledged violation of, any provision of any state insurance law involving fraud, deceit, or knowing misrepresentation; or (iii) Within the last 10 years, has been found by federal or state regulatory authorities to have violated, or has acknowledged violation of, any provision of federal or state securities laws involving fraud, deceit, or knowing misrepresentation.

(c) If the commissioner determines not to grant prior written approval to any person described in subdivisions (b)(i), (ii), and (iii), that decision may be considered a decision not to license an individual, and a person so affected may exercise his right for an appropriate hearing pursuant to Act No. 306 of the Public Acts of 1969, as amended, being S24.201 et seq. of the Michigan Compiled Laws.

(d) All persons with access to the cash, securities, or other assets of the separate account shall be under bond in an amount of not less than $250,000.00 or 1/2 of 1% of assets, whichever is greater, but in any event not more than 100% of assets.

(e) If an insurer establishes more than 1 separate account for variable life insurance, justification for the establishment of each additional separate account shall also be filed with the commissioner and shall be subject to his approval. The creation of additional separate accounts to avoid lower maximum charges against the separate account is prohibited.

(f) The assets of separate accounts established for variable life insurance policies shall be valued as often as variable benefits are determined, but in any event at least monthly.

(g) A separate account exempt pursuant to section 3(c)(11) of the investment company act of 1940 because of the tax qualified status of the policies funded thereby shall not be used to fund other variable life insurance policies.

(h) Except for separate accounts exempt pursuant to section 3(c)(11) of the investment company act of 1940, variable life insurance separate accounts shall not be used for variable annuities or for the investment of funds corresponding to dividend accumulations or other policyholder liabilities not involving life contingencies.

History

History: 1979 AC.

Mich. Admin. Code R 500.855 Separate accounts; assets {#sec-r-500.855 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.855}

Rule 15. The insurer shall maintain, in each variable life insurance separate account, assets with a fair market value at least equal to the greater of the valuation reserves for the variable portion of the variable life insurance policies or the benefit base for such policies.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.856 Separate accounts; investments {#sec-r-500.856 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.856}

Rule 16. All of the following provisions apply to investments of separate accounts of variable life insurance:

(a) A sale, exchange, or other transfer of assets shall not be made by an insurer or any of its affiliates between any of its separate accounts or between any other investment account and 1 or more of its separate accounts unless both of the following requirements are satisfied:

(i) In case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the policies with respect to the separate account to which the transfer is made.

(ii) Such transfer, whether into or from a separate account, is made by a transfer of cash; but other assets may be transferred if approved by the commissioner in advance.

(b) Assets allocated to a variable life insurance separate account shall be held in cash or investments having a reasonably ascertainable market price. For purposes of this subdivision, only the following shall be considered investments having a reasonably ascertainable market price:

(i) Liens in favor of the insurer against separate account policy reserves resulting from use by policyholders of cash values.

(ii) Securities listed and traded on the New York stock exchange, the American stock exchange, or regional stock exchanges or successors to such exchanges having the same or similar qualifications.

(iii) Securities listed on the national association of securities dealers automated quotations system.

(iv) Shares of an investment company registered pursuant to the provisions of 15 U.S.C. S80a-1 et seq. Where such an investment company issues book shares instead of share certificates, such book shares shall be deemed to be adequate evidence of ownership.

(v) Obligations of, or guaranteed by, the United States government, the Canadian government, any state, or any municipality or governmental subdivision of a state.

(vi) Commercial paper issued by business corporations when the total of such paper issued by the corporation does not exceed in value a guaranteed short line of credit by a bank.

(vii) Certificates of deposit issued by financial institutions, the deposits of which are insured by the federal deposit insurance corporation or the federal savings and loan insurance corporation.

(viii) New bond or debt issues which may reasonably be expected to be listed on an exchange regulated by the securities exchange act of 1934, 15 U.S.C. S78a et seq.

(ix) Financial futures contracts issued under terms and conditions regulated by a federal regulatory agency and in compliance with the requirements of section 943 of Act No. 218 of the Public Acts of 1956, as amended, being S500.943 of the Michigan Compiled Laws.

(i) Letter or restricted stock, except through shares of an investment company registered under the provisions of 15 U.S.C. S80a-1 et seq.

(ii) Units or other evidences of ownership or a separate account of another insurer, except those registered under the provisions of 15 U.S.C.S80a-1 et seq.

(iii) Real estate other than shares of a real estate investment trust listed as described in subdivision (b)(ii) of this rule.

(d) The separate account shall have sufficient net investment income and readily marketable assets to meet anticipated withdrawals under policies funded by the account.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.857 Separate accounts; limitations on ownership of securities {#sec-r-500.857 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.857}

Rule 17. The following apply to limitations on ownership by a separate account for variable life insurance:

(a) A variable life insurance separate account shall not purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal and interest by the United States, if immediately after such purchase or acquisition the value of such investment, together with prior investments of such separate account in such security valued as required by these rules, would exceed 10% of the value of the assets of the separate account. The commissioner may waive this limitation in writing if he believes such waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state.

(b) No separate account shall purchase or otherwise acquire the voting securities of any issuer if as a result of such acquisition the insurer and its separate accounts, in the aggregate, will own more than 10% of the total issued and outstanding voting securities of such issuer. The commissioner may waive this limitation in writing if he believes such waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state or jeopardize the independent operation of the issuer of such securities.

(c) The percentage limitation specified in subdivision (a) of this rule shall not be construed to preclude the investment of the assets of separate accounts in shares of investment companies registered pursuant to the investment company act of 1940 if the investments and investment policies of such investment companies comply substantially with the provisions of R 500.856 and other applicable rules.

History

History: 1979 AC.

Mich. Admin. Code R 500.858 Separate accounts; valuation of assets {#sec-r-500.858 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.858}

Rule 18. The following apply to valuation of assets of a separate account for variable life insurance:

(a) Investments of the separate account shall be valued at their market value on the date of valuation. Market value for investments traded on the recognized exchanges means the last reported sale price on the date of valuation. If there has been no sale on that date, the market value means the last reported bid quotation on the date of valuation. Market value for investments listed on the NASDAQ system means the last representative bid quotation on the valuation date. If an investment ceases to be listed but continues to be traded over the counter, it shall be valued at the lowest bid quotation as it appears on the national quotation bureau sheets.

(b) If the valuation date referred to in subdivision (a) above is a day when the exchange or the NASDAQ system is not open for business, the valuation date shall be the last date when the exchange or the NASDAQ system was open for business.

(c) If an investment ceases to be traded, it shall be valued at fair value as determined in good faith by, or at the direction of, the committee of the separate account, or if there is no such committee, the board of directors of the insurer, but not in excess of the last reported bid quotation. Within 30 days notification of cessation of trading of any investment shall be reported by the insurer to the commissioner of the state of domicile of the insurer, who shall within a reasonable period of time determine the method of valuation or disposition of such investment.

History

History: 1979 AC.

Mich. Admin. Code R 500.859 Separate accounts; material change in investment policy {#sec-r-500.859 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.859}

Rule 19. (1) The investment policies of a separate account for variable life insurance operated by insurers authorized under R 500.843 shall not be changed without first filing such change with the insurance commissioner.

(2) A material change in the investment policy of a separate account operated by a domestic insurer or an alien insurer entering the United States through this state and filed under R 500.843(c)(iii) shall not be made without first filing such change with the commissioner not less than 60 days before the effective date of the change.

(3) A material change in the investment policy of a separate account operated by a foreign insurer or an alien insurer not entering the United States through this state, pursuant to the section of the insurance law of the insurer's state of domicile which corresponds to R 500.843(c)(iii), shall not be made without first filing such change with the commissioner not less than 60 days before the effective date of the change.

(4) Any change filed pursuant to this rule shall be effective 60 days after the date it was filed with the commissioner, unless the commissioner notifies the insurer before the end of such 60-day period of his or her disapproval of the proposed change. At any time the commissioner may, after notice and public hearing, disapprove any change that has become effective pursuant to this rule if he or she determines that the change would be detrimental to the interests of the policyholders participating in such separate accounts.

(5) If any policyholder objects to a proposed material change in the investment policy of a separate account and the change becomes effective, the objecting policyholder shall be given the option of converting, within 60 days after the effective date of the change or the receipt of a notice of the options available, whichever is later, without evidence of insurability, under 1 of the following options, to a fixed benefit life insurance policy issued by the insurer or an affiliate:

(a) If the policy is a scheduled premium policy, as defined by R 500.841 and is in force on a premium paying basis, an insurer shall offer either or both of the following options:

(i) A conversion as of the original issue age to a substantially comparable form of general account life insurance, based on the insurer's premium rates for a general account life insurance policy at the original issue age, for an amount of insurance not exceeding the death benefit of the variable life insurance policy on the date of conversion. If the cash value of the variable life insurance policy exceeds the cash value of the general account life insurance policy, the difference shall be paid to the policyholder. If the cash value of the general account life insurance policy exceeds the cash value of the variable life insurance policy, the difference shall be paid by the policyholder.

(ii) Conversion as of the attained age to a substantially comparable form of general account life insurance for an amount of insurance not exceeding the excess of the death benefit of the variable life insurance policy on the date of conversion over either of the following:

(A) Its net cash surrender value on the date of conversion if the withdrawing policyholder elects to surrender the variable life policy for its net cash surrender value.

(B) The death benefit payable under any paid-up insurance option if the withdrawing policyholder elects such nonforfeiture option under the variable life policy.

(b) If the policy is in force as paid-up variable life insurance, then conversion shall be to a substantially comparable paid-up general account life insurance policy for an amount of insurance not exceeding the death benefit of the variable life insurance policy on the date of conversion.

(c) If the policy is a flexible premium policy, as defined by R 500.841 and is in force, an insurer shall offer a conversion to a substantially comparable flexible premium general account life insurance policy for an amount of insurance not exceeding the death benefit of the variable life insurance policy on the date of conversion. If the cash value of the variable life insurance policy exceeds the cash value of the general account life insurance policy, the difference shall be paid to the policyholder. If the cash value of the general account life insurance policy exceeds the cash value of the variable life insurance policy, the difference shall be paid by the policyholder.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.860 Separate accounts; allowable charges {#sec-r-500.860 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.860}

Rule 20. The insurer shall disclose, in writing, before or at the time of delivery of the policy, all charges that may be made against the variable life insurance separate account, including, but not limited to, all of the following:

(a) Taxes or reserves for taxes attributable to investment gains and income of the separate account.

(b) Actual cost of reasonable brokerage fees and similar direct acquisition and sales costs incurred in the purchase or sale of separate account assets.

(c) Actuarially determined costs of insurance (tabular costs) and the release of reserves and benefit base consistent with the release of separate account liabilities.

(d) Charges for administrative expenses and investment management expenses, including internal costs attributable to the investment management of assets of the separate account.

(e) A charge for mortality and expense guarantees at a rate specified in the policy.

(f) Any amount in excess of those required to be held in the separate account.

(g) Any charges for incidental insurance benefits.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.861 Standards of conduct and conflicts of interest {#sec-r-500.861 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.861}

Rule 21. The following apply to standards of conduct and conflict of interest:

(a) Every insurer seeking approval to enter into the variable life insurance business in this state, shall adopt by formal action of its board of directors, and file with the commissioner, a written statement specifying the standards of conduct of the insurer, its officers, directors, employees, and affiliates with respect to investments of variable life insurance separate accounts and variable life insurance operations. Such standards of conduct shall be binding on the insurer and those to whom it refers and shall contain at a minimum the items contained in subdivision (c) of this rule.

(b) Rules under any provisions of the insurance laws of this state or any regulation applicable to the officers and directors of insurance companies with respect to conflicts of interest shall also apply to members of any separate account's committee or other similar body. No officer or director of such company nor any member of any managing committee or body of separate account shall receive, directly or indirectly, any commission or any other compensation with respect to the purchase or sale of assets of such separate account. The board of directors of the insurer is responsible for all acts concerning the separate account, except to the extent that authority must be exercised by a separate account committee established pursuant to section 925(3) of the insurance code of 1956, as amended, being S500.925(3) of the Michigan Compiled Laws.

(c) Unless otherwise approved in writing by the commissioner in advance of the transaction, with respect to variable life insurance separate accounts, an insurer or affiliate thereof shall not:

(i) Sell to, or purchase from, any such separate account established by the insurer any securities or other property, other than variable life insurance policies.

(ii) Purchase, or allow to be purchased, for any such separate account, any securities of which the insurer or an affiliate is the issuer.

(iii) Accept any compensation, other than a regular salary or wages from such insurer or affiliate, for the sale or purchase of securities to or from any such separate account other than as provided in subdivision (d)(iii) of R 500.861.

(iv) Engage in any joint transaction, participation, or common undertaking whereby such insurer or an affiliate participates with such a separate account in any transaction in which an insurer or any of its affiliates obtains an advantage in the price or quality of the item purchased, in the service received, or in the cost of such service and the insurer or any of its other affiliates is disadvantaged in any of these respects by the same transaction.

(v) Borrow money or securities from any such separate account other than under a policy loan provision.

(d) No provision of this rule shall be construed to prohibit any of the following:

(i) The investment of separate account assets in securities issued by 1 or more investment companies registered pursuant to the investment company act of 1940 which is sponsored or managed by the insurer or an affiliate, and the payment of investment management or advisory fees on such assets.

(ii) The combination of orders for the purchase or sale of securities for the insurer, an affiliate thereof, any separate accounts, or any 1 or more of them, which is for their mutual benefit or convenience so long as any securities so purchased or the proceeds of any sale thereof are allocated among the participants on some predetermined basis expressed in writing which is designed to assure the equitable treatment of all participants.

(iii) An insurer or an affiliate to act as a broker or dealer in connection with the sale of securities to or by such separate account; however, any commission fee or remuneration charged therefor shall not exceed minimum broker's commission established for any such transaction by any national securities exchange through which such transaction could be effected or such charges prevailing for arm's length transactions in the ordinary course of business in the community where such transaction is effected.

(iv) The rendering of investment management or investment advisory services by an insurer or affiliate, for a fee, subject to the provisions of this rule and R 500.862.

(e) The commissioner may, upon the written request of an insurer or an affiliate, approve a particular transaction or series of proposed transactions which would otherwise be prohibited under subdivision (c) if he determines such transaction is not unfair or inequitable to persons affected under the circumstances of such transactions.

History

History: 1979 AC.

Mich. Admin. Code R 500.862 Investment advisory contracts {#sec-r-500.862 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.862}

Rule 22. (1) An insurer shall not enter into a contract under which any person undertakes, for a fee, to regularly furnish investment advice to such insurer with respect to its separate accounts maintained for variable life insurance policies unless:

(a) The person providing such advice is registered as an investment adviser under the investment advisors act of 1940;

(b) The person providing such advice is an investment manager under the employee retirement income security act of 1974, 88 Stat. 829, with respect to the assets of each employee benefit plan allocated to the separate account; or (c) The insurer has filed with the commissioner and continues to file annually the following information and statements concerning the proposed adviser:

(i) The name and form of organization, state of organization, and its principal place of business.

(ii) The names and addresses of its partners, officers, directors, and persons performing similar functions or, if such an investment adviser be an individual, or such individual.

(iii) A written standard of conduct complying in substance with the requirements of subdivision (a) of R 500.861 which has been adopted by the investment adviser and is applicable to the investment adviser, its officers, directors, and affiliates; and any other persons or entities performing similar functions.

(iv) A statement provided by the proposed adviser as to whether the adviser or any person associated therewith:

(A) Has been convicted within 10 years of any felony or misdemeanor arising out of such person's conduct as an employee, salesman, officer or director of an insurance company, a bank, an insurance agent, a securities broker, or an investment adviser; involving embezzlement, fraudulent conversion, or misappropriation of funds or securities, or involving the violation of 18 U.S.C. SS1341, 1342, and 1343.

(B) Has been permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction from acting as an investment adviser, underwriter, broker, or dealer, or as an affiliated person or as an employee of any investment company, bank, or insurance company, or from engaging in, or continuing any conduct or practice in connection with, any such activity.

(C) Has been found by federal or state regulatory authorities to have willfully violated, or has acknowledged willful violation of, any provision of federal or state securities laws or state insurance laws or of any rule or regulation under any such laws.

(D) Has been censured, denied an investment adviser registration, had a registration as an investment adviser revoked or suspended from being associated with an investment adviser by order of federal or state regulatory authorities.

(2) Such investment advisory contract shall be in writing and provide that it may be terminated by the insurer without penalty to the insurer or the separate account upon not more than 60 days' written notice to the investment adviser.

(3) The commissioner, after notice and opportunity for hearing, may by order prohibit execution of such contract, or require such investment advisory contract to be terminated, if he deems continued operation thereunder to be hazardous to the public or the insurer's policyholders.

(4) If the commissioner finds that the public safety or welfare requires emergency action, and incorporates the finding in his orders, he may summarily suspend an investment advisory contract.

History

History: 1979 AC.

Mich. Admin. Code R 500.863 Information required to be delivered to policy applicant {#sec-r-500.863 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.863}

Rule 23. The requirements of this rule shall be deemed to have been satisfied by the delivery to the applicant of a prospectus included in a registration statement which satisfies the requirements of the securities act of 1933, 15 U.S.C. S77A et seq., and which was declared effective by the securities and exchange commission to the extent that the prospectus contains the information required by this rule. An insurer delivering or issuing for delivery in this state any variable life insurance policies shall deliver to the applicant for the policy, and obtain a written acknowledgment of receipt from such applicant coincident with, or before, the execution of the application, the following information:

(a) A summary explanation, in nontechnical terms, of the principal features of the policy, including a description of the manner in which the variable benefits will reflect the investment experience of the separate account and the factors which affect such variation.

Such explanation shall include notices of the provisions required by R 500.850(a)(iv) and (f). (b) A statement of the investment policy of the separate account, including both of the following:

(i) A description of the investment objective and orientation intended for the separate account and the principal types of investments intended to be made as required by R 500.843(c)(iii).

(ii) Any restriction or limitations on the manner in which the operations of the separate account are intended to be conducted.

(c) A statement of the net investment return of the separate account for each of the last 10 years for which the separate account was in existence.

(d) A statement of the annual taxes, brokerage fees, and all other costs, including all allowable charges whether expressed as an annual percentage or otherwise, levied against the separate account during the previous year.

(e) A summary of the method to be used in valuing assets held by the separate account.

(f) A summary of the federal income tax liabilities of the policy applicable to the insured, the policy owner, and the beneficiary.

(g) Illustrations of benefits payable under any variable life insurance contract shall be prepared by the insurer and shall not include projections of past investment experience into the future or attempted predictions of future investment experience; however, nothing contained in this subdivision shall be construed to prohibit the use of hypothetical assumed rates of return to illustrate possible levels of benefits if it is made clear that such assumed rates are hypothetical only.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.864 Policy application {#sec-r-500.864 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.864}

Rule 24. The application for a variable life insurance policy shall contain all of the following statements and questions:

(a) A prominent statement that the death benefit may be variable or fixed under specified conditions.

(b) A prominent statement that cash values may increase or decrease in accordance with the experience of the separate account, subject to any specified minimum guarantees.

(c) Questions designed to elicit information which enables the insurer to determine the suitability of variable life insurance for the applicant.

(d) A prominent statement that, in the case of a variable endowment policy, the amount of the endowment payable at maturity is not guaranteed, but is dependent upon the then cash surrender value, subject to any specified minimum guarantees.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.865 Reports to policyholders {#sec-r-500.865 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.865}

Rule 25. Any insurer delivering or issuing for delivery in this state any variable life insurance policies shall mail to each variable life insurance policyholder, at his or her last known address, all of the following statements, notice, report, and information:

(a) Within 30 days after each anniversary of the policy, a statement or statements of all of the following:

(i) The cash surrender value.

(ii) Death benefit.

(iii) Any partial withdrawal.

(iv) Any policy loan.

(v) Any interest charge.

(vi) Any optional payments allowed under the policy pursuant to R 500.851 computed as of the policy anniversary date. Such statement may be furnished within 30 days after a specified date in each policy year if the information contained therein is computed as of a date not more than 65 days before the mailing of such notice. This statement shall state that, in accordance with the investment experience of the separate account, the cash values and the variable death benefit may increase or decrease and the statement shall prominently identify any value described therein which may be recomputed before the next statement required by this rule. If the policy guarantees that the variable death benefit on the next policy anniversary date will not be less than the variable death benefit specified in such statement, the statement shall be modified to so indicate. For flexible premium policies, the statement shall contain a reconciliation of the change since the previous statement in cash value and cash surrender value, if different, because of payments made, less deductions for expense charges; withdrawals; investment experience; insurance charges; and any other charges made against the cash value. In addition, the statement shall show the projected cash value and cash surrender value, if different, as of 1 year from the end of the period covered by the statement assuming that planned periodic premiums, if any, are paid as scheduled, guaranteed costs of insurance are deducted, and the net return is equal to the guaranteed rate or, in the absence of a guaranteed rate, is not more than zero. If the projected value is less than zero, a warning message shall be included that states that the policy may be in danger of terminating without value in the next 12 months unless additional premium is paid.

(b) Annually, a statement or statements including all of the following information:

(i) A summary of the financial statement of the separate account, including a calculation of the net investment return, based on the annual statement last filed with the commissioner.

(ii) The net investment return of the separate account for the most recent year and, for each year after the first, a comparison of the investment rate of the separate account during the most recent year with the investment rate during prior years, up to a total of 5 years, when available.

(iii) A list of investments held by the separate account as of a date not earlier than the end of the last year for which an annual statement was filed with the commissioner.

(iv) Any charges, taxes, and brokerage fees determined on an accrual basis payable by the separate account during the previous year, each expressed as a dollar amount and a percentage and the total expressed as a dollar amount and as a percentage of the assets of the separate account.

(v) A statement of any change in any of the following since the last statement:

(A) The investment objective and orientation of the separate account.

(B) Any investment restriction or material quantitative or qualitative investment requirement applicable to the separate account.

(vi) The name of each broker or dealer handling portfolio transactions on behalf of the separate account in which the insurer or an affiliate has any material interest, directly or indirectly, and the nature of such transactions and the amount of compensation received by each such broker or dealer from business originating with the separate account during the preceding fiscal year.

(vii) The names and principal occupations of each principal executive officer and each director of the insurer.

(viii) The names of all parents of the insurer and the basis of control of the insurer, and the name of any person who is known to own, of record or beneficially, 10% or more of the outstanding voting securities of the company.

(c) Notwithstanding the requirements in subdivision (b) of this rule, a notice of any change in investment policy of the separate account, pursuant to R 500.859, shall be provided not later than 6 months from the effective date of that change. This requirement shall be considered satisfied if an annual report containing such notice is provided not later than 6 months from the effective date of the change or if a substantially similar notice is made pursuant to any federal securities laws not later than 6 months from the effective date.

(d) For flexible premium policies, a statement shall be sent to the policyholder if the amounts available under the policy, on any policy processing day, to pay the charges authorized by the policy are less than the amount necessary to keep the policy in force until the next following policy processing day. The statement shall indicate the minimum payment required under the terms of the policy to keep it in force and the length of the grace period for payment of such amount.

(e) Such additional information concerning the variable life insurance operations or the variable life insurance separate accounts as the commissioner shall deem appropriate.

History

History: 1979 AC; 1988 AACS.

Mich. Admin. Code R 500.866 Qualification of agents for the sale of variable life insurance {#sec-r-500.866 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.866}

Rule 26. The following apply to qualifications of agents for the sale of variable life insurance:

(a) No person shall sell or offer for sale in this state any variable life insurance policy unless such person is an agent and has filed with the commissioner, in a form satisfactory to the commissioner, evidence that such person holds any license or authorization which may be required for the solicitation or sale of variable life insurance by any federal or state securities law.

(b) Any examination conducted by the commissioner for the purpose of determining the eligibility of any person for licensing as an agent shall, after the effective date of these rules, include such questions concerning the history, purpose, regulation, and sale of variable life insurance as the commissioner deems appropriate.

(c) Any person qualified in this state under this rule to sell or offer to sell variable life insurance shall immediately report to the commissioner all of the following:

(i) Any suspension or revocation of his agent's license in any other state or territory of the United States.

(ii) The imposition of any disciplinary sanction, including suspension, or revocation of or denial of registration, imposed upon him by any national securities exchange, or national securities association, or any federal, state, or territorial agency with jurisdiction over securities or variable life insurance.

(iii) Any judgment or injunction entered against him on the basis of conduct deemed to have involved fraud, deceit, misrepresentation, or violation of any insurance or securities law or regulation.

(d) The commissioner may reject any application or suspend or revoke or refuse to renew any agent's qualification under this rule to sell or offer to sell variable life insurance upon any ground that would bar such applicant or such agent from being licensed to sell other life insurance contracts in this state. The rules governing any proceeding relating to the suspension or revocation of an agent's license shall also govern any proceeding for suspension or revocation of an agent's qualification to sell or offer to sell variable life insurance.

History

History: 1979 AC.

R 500.881 to R 500.997 Actuarial Opinion and Memorandum Under Standard Valuation Law

Mich. Admin. Code R 500.881 Rescinded {#sec-r-500.881 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.881}

DEPARTMENT OF LABOR AND ECONOMIC GROWTH

OFFICE OF FINANCIAL AND INSURANCE SERVICES

ACTUARIAL OPINION AND MEMORANDUM UNDER STANDARD VALUATION

LAW (By authority conferred on the commissioner of the Office of Financial and Insurance Services by sections 210 and 830a of 1956 PA 218 as amended, 1969 PA 306, as amended, and E.R.O. No. 2003-1, MCL 500.210, MCL 500.830a, MCL 24.231 to MCL 24.233; and MCL 445.2011)

History

History: 1995 AACS; 2006 AACS.

Mich. Admin. Code R 500.882 Rescinded {#sec-r-500.882 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.882}

History

History: 1995 AACS; 2006 AACS.

Mich. Admin. Code R 500.883 Rescinded {#sec-r-500.883 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.883}

History

History: 1995 AACS; 2006 AACS.

Mich. Admin. Code R 500.884 Rescinded {#sec-r-500.884 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.884}

History

History: 1995 AACS; 2006 AACS.

Mich. Admin. Code R 500.885 Rescinded {#sec-r-500.885 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.885}

History

History: 1995 AACS; 2006 AACS.

Mich. Admin. Code R 500.886 Rescinded {#sec-r-500.886 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.886}

History

History: 1995 AACS; 2006 AACS.

Mich. Admin. Code R 500.887 Rescinded {#sec-r-500.887 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.887}

History

History: 1995 AACS; 2006 AACS.

Mich. Admin. Code R 500.888 Rescinded {#sec-r-500.888 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.888}

History

History: 1995 AACS; 2006 AACS.

Mich. Admin. Code R 500.889 Rescinded {#sec-r-500.889 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.889}

History

History: 1995 AACS; 2006 AACS.

Mich. Admin. Code R 500.991 Definitions {#sec-r-500.991 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.991}

Rule 1. As used in these rules:

(a) "Actuarial opinion" means the opinion of an appointed actuary regarding the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with R 500.995 and with applicable Actuarial Standards of Practice.

(b) "Actuarial Standards Board" means the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.

(c) "Annual statement" means that statement required by section 438 of 1956 PA 218, as amended, MCL 500.438, to be filed by the company with the Office of Financial and Insurance Services annually.

(d) "Appointed actuary" means an individual who is appointed or retained under R 500.994(3) to provide the actuarial opinion and supporting memorandum as required by section 830a of 1956 PA 218, MCL 500.830a, of the Standard Valuation Law.

(e) "Asset adequacy analysis" means an analysis that meets the standards and other requirements referred to in R 500.994(4).

(f) "Commissioner" means the commissioner of the Office of Financial and Insurance Services.

(g) "Company" means a life insurance company, fraternal benefit society or reinsurer subject to the provisions of this rule.

(h) "Qualified actuary" means an individual who meets the requirements in R 500.994(2).

History

History: 2006 AACS.

Mich. Admin. Code R 500.992 Purpose {#sec-r-500.992 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.992}

Rule 2. The purpose of these rules is to prescribe the following:

(a) Requirements for statements of actuarial opinion that are to be submitted in accordance with MCL 500.830a of the Standard Valuation Law, and for memoranda in support thereof.

(b) Rules applicable to the appointment of an appointed actuary.

History

History: 2006 AACS.

Mich. Admin. Code R 500.993 Applicability {#sec-r-500.993 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.993}

Rule 3. (1) These rules shall apply to all life insurance companies and fraternal benefit societies doing business in this state and to all life insurance companies and fraternal benefit societies that are authorized to reinsure life insurance, annuities, or accident and health insurance business in this state. This rule shall be applied in a manner that allows the appointed actuary to utilize his or her professional judgment in performing the asset analysis and developing the actuarial opinion and supporting memoranda, consistent with relevant actuarial standards of practice. However, the commissioner shall have the authority to specify specific methods of actuarial analysis and actuarial assumptions when, in the commissioner's judgment, these specifications are necessary for an acceptable opinion to be rendered relative to the adequacy of reserves and related items.

(2) These rules shall be applicable to all annual statements filed with the office of the commissioner as specified in R 500.997. A statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis under R 500.995, and a memorandum in support thereof under R 500.996 shall be required each year.

(3) These rules apply to all annual statements filed with the commissioner as specified in R 500.997, except with respect to companies that are exempted by a determination made by the commissioner. A company that intends to file for an exemption from asset adequacy analysis shall submit a letter of intent to the commissioner not later than December 1 of the calendar year for which the exemption is to be claimed. The commissioner may deny the exemption before December 31 of the same year if an exemption is deemed inappropriate.

History

History: 2006 AACS.

Mich. Admin. Code R 500.994 General requirements {#sec-r-500.994 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.994}

Rule 4. (1) The following apply to the Statement of Actuarial Opinion:

(a) There is to be included on or attached to Page 1 of the annual statement for each year beginning with the year in which this rule becomes effective the statement of an appointed actuary, entitled "Statement of Actuarial Opinion," setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts under R 500.995.

(b) Upon written request by the company, the commissioner may grant an extension of the date for submission of the statement of actuarial opinion.

(2) A "qualified actuary" is an individual who meets the following:

(a) Is a member in good standing of the American Academy of Actuaries.

(b) Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements.

(d) Has not been found by the commissioner, or if found, has subsequently been reinstated as a qualified actuary, following appropriate notice and hearing, to have done the following:

(i) Violated any provision of, or any obligation imposed by, the insurance law or other law in the course of his or her dealings as a qualified actuary.

(ii) Been found guilty of fraudulent or dishonest practices.

(iii) Demonstrated his or her incompetence, lack of cooperation, or untrustworthiness to act as a qualified actuary.

(iv) Submitted to the commissioner during the past 5 years, under this rule, an actuarial opinion or memorandum that the commissioner rejected because it did not meet the provisions of this rule including standards set by the Actuarial Standards Board.

(v) Resigned or been removed as an actuary within the past five 5 years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards.

(e) Has notified the commissioner of any action taken by any commissioner of any other state similar to that described in subdivision (d) of this subrule.

(3) An "appointed actuary" is a qualified actuary who is appointed or retained to prepare the Statement of Actuarial Opinion required by this rule, either directly by or by the authority of the board of directors through an executive officer of the company other than the qualified actuary. The company shall give the commissioner timely written notice of the name, title, and, in the case of a consulting actuary, the name of the firm, and manner of appointment or retention of each person appointed or retained by the company as an appointed actuary and shall state in the notice that the person meets the requirements of R 500.994(2). Once notice is furnished, no further notice is required with respect to this person, provided that the company shall give the commissioner timely written notice in the event the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements of R 500.994(2). If any person appointed or retained as an appointed actuary replaces a previously appointed actuary, the notice shall so state and give the reasons for replacement.

(4) Standards for asset adequacy analysis include the following:

(a) Shall conform to the Standards of Practice as promulgated by the Actuarial Standards Board and on any additional standards under this rule, which standards are to form the basis of the statement of actuarial opinion in accordance with this rule.

(b) Shall be based on methods of analysis as are deemed appropriate for such purposes by the Actuarial Standards Board.

(5) The following liabilities shall be covered:

(a) Under authority of section 830a of the Standard Valuation Law, the statement of actuarial opinion shall apply to all in force business on the statement date, whether directly issued or assumed, regardless of when or where issued, such as reserves of exhibits 8, 9 and 10, and claim liabilities in exhibit 11, Part 1 and equivalent items in the separate account statement or statements.

(b) If the appointed actuary determines as the result of asset adequacy analysis that a reserve should be held in addition to the aggregate reserve held by the company and calculated in accordance with methods in the Standard Valuation Law, the company shall establish the additional reserve.

(c) Additional reserves established under subdivision (b) of this subrule and deemed not necessary in subsequent years may be released. Any amounts released shall be disclosed in the actuarial opinion for the applicable year.The release of such reserves shall not be deemed an adoption of a lower standard of valuation.

History

History: 2006 AACS.

Mich. Admin. Code R 500.995 Statement of actuarial opinion based on an asset adequacy analysis {#sec-r-500.995 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.995}

Rule 5. (1) The statement of actuarial opinion shall consist of the following:

(a) A paragraph identifying the appointed actuary and his or her qualifications under R 500.995(2)(a).

(b) A scope paragraph identifying the subjects on which an opinion is to be expressed and describing the scope of the appointed actuary's work, including a tabulation delineating the reserves and related actuarial items that have been analyzed for asset adequacy and the method of analysis of R 500.995(2)(b), and identifying the reserves and related actuarial items covered by the opinion that have not been so analyzed.

(c) A reliance paragraph describing those areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions, such as anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios of R 500.995(2)(c), supported by a statement of each such expert in the form prescribed by R 500.995(5).

(d) An opinion paragraph expressing the appointed actuary's opinion with respect to the adequacy of the supporting assets to mature the liabilities of R 500.995(2)(f).

(e) One or more additional paragraphs shall be needed in individual company cases as follows:

(i) If the appointed actuary considers it necessary to state a qualification of his or her opinion.

(ii) If the appointed actuary must disclose an inconsistency in the method of analysis or basis of asset allocation used at the prior opinion date with that used for this opinion.

(iii) If the appointed actuary must disclose whether additional reserves as of the prior opinion date are released as of this opinion date, and the extent of the release.

(iv) If the appointed actuary chooses to add a paragraph briefly describing the assumptions that form the basis for the actuarial opinion.

(2) The following paragraphs are to be included in the statement of actuarial opinion in accordance with this rule. Language is that which in typical circumstances should be included in a statement of actuarial opinion.The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary should use language that clearly expresses his or her professional judgment. The opinion shall retain all pertinent aspects of the language provided in this rule.

(a) The opening paragraph should generally indicate the appointed actuary's relationship to the company and his or her qualifications to sign the opinion. For a company actuary, the opening paragraph of the actuarial opinion should include a statement such as:

I, [name], am [title] of [insurance company name] and a member of the American Academy of Actuaries. I was appointed by, or by the "authority of, the Board of Directors of said insurer to render this opinion as stated in the letter to the commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies."

For a consulting actuary, the opening paragraph should include a statement such as:

"I, [name], a member of the American Academy of Actuaries, am associated with the firm of [name of consulting firm]. I have been appointed by, or by the authority of, the Board of Directors of [name of company] to render this opinion as stated in the letter to the commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies."

(b) The scope paragraph should include a statement such as:

"I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, shown in the annual statement of the company, as prepared for filing with state regulatory officials, as of December 31, 20[ ]. Tabulated below are those reserves and related actuarial items which have been subjected to asset adequacy analysis.

Asset Adequacy Tested Amounts-Reserves and Liabilities Statement Item Formula Reserves (1) Additional Actuarial Reserves (a)(2) Analysis Method (b) Other Amount (3)

Total Amount (1)+(2)+(3)(4) Exhibit 8A Life Insurance B Annuities C Supplementary Contracts Involving Life Contingencies D Accidental Death Benefit E Disability-Active F Disability-Disabled G Miscellaneous Total (Exhibit 8Item 1, Page 3) Exhibit 9A Active Life Reserve B Claim Reserve Total (Exhibit 9Item 2, Page 3)

Exhibit 10Premium and Other Deposit Funds(Column 5, Line 14) Guaranteed Interest Contracts(Column 2, Line 14) Other (Column 6, Line 14) Supplemental Contracts and Annuities Certain (Column 3, Line 14) Dividend Accumulations or Refunds(Column 4, Line 14) Total Exhibit 10(Column 1, Line 14) Exhibit 11 Part 11 Life (Page 3, Line 4.1) 2 Health (Page 3,Line 4.2) Total Exhibit 11,Part 1 Separate Accounts(Page 3 of the Annual Statement of the Separate Accounts, Lines 1, 2, 3.1, 3.2, 3.3) TOTAL RESERVES IMR (General Account, Page ___ Line ___) (Separate Accounts, Page ___ Line ___) AVR (Page ___ Line ___) (c) Net Deferred and Uncollected Premium Table Notes:

(a) The additional actuarial reserves are the reserves established under subparagraph (b) of R 500.994(5).

(b) The appointed actuary should indicate the method of analysis. determined in accordance with the standards of asset adequacy analysis referred to in R 500.994(4) of this regulation, by means of symbols that should be defined in footnotes to the table.

(c) If the appointed actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph should include a statement such as:

"I have relied on [name], [title] for [for example, "anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios" or "certain critical aspects of the analysis performed in conjunction with forming my opinion"], as certified in the attached statement. I have reviewed the information relied upon for reasonableness."

A statement of reliance on other experts should be accompanied by a statement by each of the experts in the form prescribed by R 500.995(5).

(d) If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph should include a statement such as:

"My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and such tests of the actuarial calculations as I considered necessary. I also reconciled the underlying basic asset and liability records to [exhibits and schedules listed as applicable] of the company's current annual statement."

(e) If the appointed actuary has not examined the underlying records, but has relied upon data, for example, listings and summaries of policies in force or asset records, prepared by the company, the reliance paragraph should include a statement such as:

"In forming my opinion on [specify types of reserves] I relied upon data prepared by [name and title of company officer certifying in force records or other data] as certified in the attached statements. I evaluated that data for reasonableness and consistency. I also reconciled that data to [exhibits and schedules to be listed as applicable] of the company's current annual statement. In other respects, my examination included review of the actuarial assumptions and actuarial methods used and tests of the calculations I considered necessary."

The section shall be accompanied by a statement by each person relied upon in the form prescribed by R 500.995(5).

(f) The opinion paragraph should include a statement such as:

"In my opinion the reserves and related actuarial values concerning the statement items identified above:

(i) Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles.

(ii) Are based on actuarial assumptions that produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions.

(iii) Meet the requirements of the insurance law and rule of the state of [state of domicile]; and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed.

(iv) Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end, with any exceptions noted below.

(v) Include provision for all actuarial reserves and related statement items which ought to be established. The reserves and related items, when considered in light of the assets held by the company with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on the assets, and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company. At the discretion of the commissioner, this language may be omitted for an opinion filed on behalf of a company doing business only in this state and in no other state.

The actuarial methods, considerations, and analyses used in forming my opinion conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis of this statement of opinion.

This opinion is updated annually as required by statute. To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion which should be considered in reviewing this opinion. or The following material changes which occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: Describe the change or changes.

Note: Choose one of the above two paragraphs, whichever is applicable.

The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of asset adequacy portion of this opinion should be viewed recognizing that the company's future experience may not follow all the assumptions used in the analysis. ________________________________________ Signature of Appointed Actuary _______________________________________ Address of Appointed Actuary _______________________________________ Telephone Number of Appointed Actuary _______________________________________ Date"

(3) Assumptions for new issues. The adoption for new issues or new claims or other new liabilities of an actuarial assumption that differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of R 500.995.

(4) Adverse opinions. If the appointed actuary is unable to form an opinion, then he or she shall refuse to issue a statement of actuarial opinion. If the appointed actuary's opinion is adverse or qualified, then he or she shall issue an adverse or qualified actuarial opinion explicitly stating the reasons for the opinion. This statement should follow the scope paragraph and precede the opinion paragraph.

(5) Reliance on information furnished by other persons. If the appointed actuary relies on the certification of others on matters concerning the accuracy or completeness of any data underlying the actuarial opinion, or the appropriateness of any other information used by the appointed actuary in forming the actuarial opinion, the actuarial opinion should so indicate the persons the actuary is relying upon and a precise identification of the items subject to reliance. In addition, the persons on whom the appointed actuary relies shall provide a certification that precisely identifies the items on which the person is providing information and a statement as to the accuracy, completeness, or reasonableness, as applicable, of the items. This certification shall include the signature, title, company, address, and telephone number of the person rendering the certification, as well as the date on which it is signed.

(6) The following shall apply to alternate options:

(a) The Standard Valuation Law gives the commissioner broad authority to accept the valuation of a foreign insurer when that valuation meets the requirements applicable to a company domiciled in this state in the aggregate. As an alternative to the requirements of R 500.995(2)(f)(iii), the commissioner may make 1 or more of the following additional approaches available to the opining actuary:

(i) A statement that the reserves "meet the requirements of the insurance laws and rules of the state of [state of domicile] and the formal written standards and conditions of this state for filing an opinion based on the law of the state of domicile." If the commissioner chooses to allow this alternative, a formal written list of standards and conditions shall be made available.

If a company chooses to use this alternative, the standards and conditions in effect on July 1 of a calendar year shall apply to statements for that calendar year, and they shall remain in effect until they are revised or revoked. If no list is available, this alternative is not available.

(ii) A statement that the reserves "meet the requirements of the insurance laws and rules of the state of [state of domicile] and I have verified that the company's request to file an opinion based on the law of the state of domicile has been approved and that any conditions required by the commissioner for approval of that request have been met." If the commissioner chooses to allow this alternative, a formal written statement of such allowance shall be issued not later than March 31 of the year it is first effective. It shall remain valid until rescinded or modified by the commissioner. The rescission or modifications shall be issued not later than March 31 of the year they are first effective. Subsequent to that statement being issued, if a company chooses to use this alternative, the company shall file a request to do so, along with justification for its use, not later than April 30 of the year of the opinion to be filed.

The request shall be deemed approved on October 1 of that year if the commissioner has not denied the request by that date.

(iii) A statement that the reserves "meet the requirements of the insurance laws and rules of the state of [state of domicile] and I have submitted the required comparison as specified by this state." The following apply:

(A) If the commissioner chooses to allow this alternative, a formal written list of products, to be added to the table in Item (ii), for which the required comparison shall be provided, will be published. If a company chooses to use this alternative, the list in effect on July 1 of a calendar year shall apply to statements for that calendar year, and it shall remain in effect until it is revised or revoked. If no list is available, this alternative is not available.

(B) If a company desires to use this alternative, the appointed actuary shall provide a comparison of the gross nationwide reserves held to the gross nationwide reserves that would be held under NAIC codification standards, as specified in the NAIC Accounting Practices & Procedures Manual, as adopted annually in the Commissioner's Order issued under MCL 500.438. Gross nationwide reserves are the total reserves calculated for the total company in force business directly sold and assumed, indifferent to the state in which the risk resides, without reduction for reinsurance ceded. The information provided shall be at least the following:

(1)Product Type (2)Death Benefit or Account Value (3)Reserves Held (4)Codification Reserves (5)Codification Standard (C) The information listed shall include all products identified by either the state of filing or any other states subscribing to this alternative.

(D) If there is no codification standard for the type of product or risk in force or if the codification standard does not directly address the type of product or risk in force, the appointed actuary shall provide detailed disclosure of the specific method and assumptions used in determining the reserves held.

(E) The comparison provided by the company is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

(b) Notwithstanding the above, the commissioner may reject an opinion based on the laws and rules of the state of domicile and require an opinion based on the laws of this state. If a company is unable to provide the opinion within 60 days of the request or such other period of time determined by the commissioner after consultation with the company, then the commissioner may contract an independent actuary at the company's expense to prepare and file the opinion.

History

History: 2006 AACS.

Mich. Admin. Code R 500.996 Description of actuarial memorandum including asset adequacy analysis and regulatory asset adequacy issues summary {#sec-r-500.996 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.996}

Rule 6. (1) All of the following apply:

(a) In accordance with Section 830a of the Standard Valuation Law, the appointed actuary shall prepare a memorandum to the company describing the analysis done in support of his or her opinion regarding the reserves. The memorandum shall be made available for examination by the commissioner upon his or her request but shall be returned to the company after examination and shall not be considered a record of the insurance department or subject to automatic filing with the commissioner.

(b) In preparing the memorandum, the appointed actuary may rely on, and include as a part of his or her own memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of R 500.994(2) with respect to the areas covered in such memoranda, and so stated in their memoranda.

(c) If the commissioner requests a memorandum and no such memorandum exists or if the commissioner finds that the analysis described in the memorandum fails to meet the standards of the Actuarial Standards Board or the standards and requirements of this rule, the commissioner may designate a qualified actuary to review the opinion and prepare such supporting memorandum as is required for review. The reasonable and necessary expense of the independent review shall be paid by the company but shall be directed and controlled by the commissioner.

(d) The reviewing actuary shall have the same status as an examiner for purposes of obtaining data from the company and the work papers and documentation of the reviewing actuary shall be retained by the commissioner; provided, however, that any information provided by the company to the reviewing actuary and included in the work papers shall be considered as material provided by the company to the commissioner and shall be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the commissioner pursuant to the statute governing this rule. The reviewing actuary shall not be an employee of a consulting firm involved with the preparation of any prior memorandum or opinion for the insurer pursuant to this rule for any 1 of the current year or the preceding 3 years.

(e) In accordance with Section 830a of the Standard Valuation Law, the appointed actuary shall prepare a regulatory asset adequacy issues summary, the contents of which are specified in R 500.996(3). The regulatory asset adequacy issues summary shall be submitted not later than March 15 of the year following the year for which a statement of actuarial opinion based on asset adequacy is required. The regulatory asset adequacy issues summary shall be confidential to the same extent and under the same conditions as the actuarial memorandum.

(2) Details of the memorandum section documenting asset adequacy analysis.When an actuarial opinion is provided, the memorandum shall demonstrate that the analysis has been done in accordance with the standards for asset adequacy referred to in R 500.994(4) and any additional standards under this rule. It shall specify the following:

(a) For reserves:

(i) Product descriptions including market description, underwriting, and other aspects of a risk profile and the specific risks the appointed actuary deems significant.

(ii) Source of liability in force.

(iii) Reserve method and basis.

(iv) Investment reserves.

(v) Reinsurance arrangements.

(vi) Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis.

(vii) Documentation of assumptions to test reserves for the following:

(A) Lapse rates, both base and excess.

(B) Interest crediting rate strategy.

(D) Policyholder dividend strategy.

(E) Competitor or market interest rate.

(F) Annuitization rates.

(G) Commissions and expenses.

(H) Morbidity. The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions.

(b) The following apply to assets:

(i) Portfolio descriptions, including a risk profile disclosing the quality, distribution, and types of assets.

(ii) Investment and disinvestment assumptions.

(iii) Source of asset data.

(iv) Asset valuation bases.

(v) Documentation of assumptions made for the following:

(A) Default costs.

(B) Bond call function.

(D) Determining market value for assets sold due to disinvestment strategy.

(E) Determining yield on assets acquired through the investment strategy.

(c) For the analysis basis, the documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions. The following apply:

(i) Methodology.

(ii) Rationale for inclusion or exclusion of different blocks of business and how pertinent risks were analyzed.

(iii) Rationale for degree of rigor in analyzing different blocks of business, include in the rationale the level of "materiality" that was used in determining how rigorously to analyze different blocks of business.

(iv) Criteria for determining asset adequacy, include in the criteria the precise basis for determining if assets are adequate to cover reserves under "moderately adverse conditions" or other conditions as specified in relevant actuarial standards of practice.

(v) Whether the impact of federal income taxes was considered and the method of treating reinsurance in the asset adequacy analysis.

(d) Summary of material changes in methods, procedures, or assumptions from prior year's asset adequacy analysis.

(e) Summary of results.

(f) Conclusions.

(3) (a) The regulatory asset adequacy issues summary shall include the following:

(i) Descriptions of the scenarios tested, including whether those scenarios are stochastic or deterministic, and the sensitivity testing done relative to those scenarios. If negative ending surplus results under certain tests in the aggregate, the actuary should describe those tests and the amount of additional reserve as of the valuation date which, if held, would eliminate the negative aggregate surplus values. Ending surplus values shall be determined by either extending the projection period until the in force and associated assets and liabilities at the end of the projection period are immaterial or by adjusting the surplus amount at the end of the projection period by an amount that appropriately estimates the value that can reasonably be expected to arise from the assets and liabilities remaining in force.

(ii) The extent to which the appointed actuary uses assumptions in the asset adequacy analysis that are materially different than the assumptions used in the previous asset adequacy analysis.

(iii) The amount of reserves and the identity of the product lines that had been subjected to asset adequacy analysis in the prior opinion but were not subject to analysis for the current opinion.

(iv) Comments on any interim results that may be of significant concern to the appointed actuary.

(v) The methods used by the actuary to recognize the impact of reinsurance on the company's cash flows, including both assets and liabilities, under each of the scenarios tested.

(vi) Whether the actuary has been satisfied that all options whether explicit or embedded, in any asset or liability, including but not limited to those affecting cash flows embedded in fixed income securities, and equity-like features in any investments have been appropriately considered in the asset adequacy analysis.

(b) The regulatory asset adequacy issues summary shall contain the name of the company for which the regulatory asset adequacy issues summary is being supplied and shall be signed and dated by the appointed actuary rendering the actuarial opinion.

(4) Conformity to Standards of Practice. The memorandum shall include a statement:

"Actuarial methods, considerations, and analyses used in the preparation of this memorandum conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis for this memorandum."

(5) Use of assets supporting the interest maintenance reserve and the asset valuation reserve.

An appropriate allocation of assets in the amount of the interest maintenance reserve (IMR), whether positive or negative, shall be used in any asset adequacy analysis. Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the asset valuation reserve (AVR); these AVR assets may not be applied for any other risks with respect to reserve adequacy. Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support. The amount of the assets used for the AVR shall be disclosed in the table of reserves and liabilities of the opinion and in the memorandum. The method used for selecting particular assets or allocated portions of assets shall be disclosed in the memorandum.

(6) The appointed actuary shall retain on file, for at least 7 years, sufficient documentation so that it will be possible to determine the procedures followed, the analyses performed, the bases for assumptions, and the results obtained.

History

History: 2006 AACS.

Mich. Admin. Code R 500.997 Effective date {#sec-r-500.997 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.997}

Rule 7. These rules shall take effect for annual statements beginning with the year 2006.

History

History: 2006 AACS.

R 500.1041 to R 500.1043 Declaratory Rulings

Mich. Admin. Code R 500.1041 Submission of request {#sec-r-500.1041 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1041}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

DECLARATORY RULINGS

(By authority conferred on the commissioner of insurance by section 210 of Act No. 218 of the Public Acts of 1956, as amended, and by section 63 of Act No. 306 of the Public Acts of 1969, as amended, being SS500.210 and 24.263 of the Michigan Compiled Laws)

Rule 1. A request for a declaratory ruling shall include both of the following:

(a) A statement of facts, which shall state all facts known to the applicant which are or may be relevant to a determination of the applicability of a rule, statute, or order and shall certify to the existence of the actual state of facts set forth and to the submission of all relevant facts.

(b) A statement of all statutes and rules known to the applicant which are relevant to a determination of the request and which the applicant seeks to have considered by. the commissioner in making the ruling. The applicant shall certify that he or she has identified all statutes and rules which the applicant seeks to have considered by the commissioner in making the ruling.

History

History: 1985 AACS.

Mich. Admin. Code R 500.1042 Notice and opportunity to comment {#sec-r-500.1042 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1042}

Rule 2. The commissioner may give interested persons notice and an opportunity to comment upon the request for a declaratory ruling.

History

History: 1985 AACS.

Mich. Admin. Code R 500.1043 Disposition {#sec-r-500.1043 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1043}

Rule 3. (1) If the commissioner grants a request for a declaratory ruling, the commissioner shall issue the declaratory ruling within 90 days after receipt of the request, unless the commissioner advises the applicant, in writing, that the complexity of the issue, the need to secure comments from interested persons, or the need to seek the advice of the attorney general requires a longer period of time.

(2) A declaratory ruling shall state that it is limited to those facts which were presented and to the statute or rule identified by the applicant or other relevant statute or rule identified by the commissioner.

History

History: 1985 AACS.

R 500.1051 to R 500.1059 Uniform Trade Practices -- Independent Hearing Officer

Mich. Admin. Code R 500.1051 Qualifications {#sec-r-500.1051 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1051}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

UNIFORM TRADE PRACTICES - INDEPENDENT HEARING OFFICER

(By authority conferred on the commissioner of insurance by sections 210 and 2030 of Act No. 218 of the Public Acts of 1956, as amended, being SS500.210 and 500.2030 of the Michigan Compiled Laws)

Rule 1. To qualify as an independent hearing officer for purposes of section 2030 of Act No. 218 of the Public Acts of 1956, as amended, being S500.2030 of the Michigan Compiled Laws, a candidate shall meet all of the following criteria:

(a) The candidate shall be an attorney who is licensed in this state to practice law.

(b) The candidate shall not be a current employee of this state.

(c) The candidate shall be able to hear and decide contested cases which involve alleged violations of Act No. 218 of the Public Acts of 1956, as amended, being S500.100 et seq. of the Michigan Compiled Laws, and known as the insurance code of 1956, with fairness and impartiality.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1053 Advertisement of position; content; review of applications; notice to candidate of qualification or disqualification {#sec-r-500.1053 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1053}

Rule 3. The commissioner shall advertise the position of independent hearing officer in the state bar journal or comparable publication. The advertisements shall indicate the qualifications for the job and that application forms shall be requested from the American arbitration association. The association shall review the applications to determine if candidates are qualified and periodically shall submit a list of all qualified candidates, together with their applications, to the commissioner. The American arbitration association is responsible for informing each candidate of whether or not he or she is qualified. If a candidate is determined to be unqualified, the candidate shall be notified of the reason for the disqualification.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1055 Independent hearing officer list; compilation; public inspection {#sec-r-500.1055 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1055}

Rule 5. The commissioner shall compile the lists of names submitted by the American arbitration association into an official, independent hearing officer list which shall be available for public inspection.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1057 Request for designation of independent hearing officer {#sec-r-500.1057 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1057}

Rule 7. A person who is the subject of proceedings brought pursuant to the Michigan uniform trade practices act, sections 2001 to 2050 of Act No. 218 of the Public Acts of 1956, as amended, being SS500.2001 to 500.2050 of the Michigan Compiled Laws, hereinafter called respondent, shall have 20 days from the date the notice of hearing in a contested case is received to request that the commissioner designate an independent hearing officer. The right to such a designation shall be exercised in writing and shall be received by the commissioner on or before the twentieth day after the date that the notice of hearing is received. Failure to request the designation of an independent hearing officer within such time shall operate as a waiver of the right to an independent hearing officer designated under these rules. The respondent shall be informed in the notice of hearing of the right to an independent hearing officer and of the time by which the request shall be made.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1059 Selection of independent hearing officer; procedure {#sec-r-500.1059 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1059}

Rule 9. Upon receiving a timely request from a respondent for the designation of a independent hearing officer, the commissioner shall select the name of a qualified candidate from the compiled list. To encourage participation by all qualified persons, the commissioner shall avoid undue reliance on any one person. The commissioner shall make an initial screening for bias and shall require the candidate to complete a current personal disclosure statement. In addition to other relevant information, the statement shall disclose any personal acquaintance with any of the parties to the contested case or their counsel and the nature of such acquaintance. If the statement reveals facts that establish or create the appearance of partiality, the commissioner shall select other names from the compiled list until a qualified, impartial candidate is found and shall designate, by order, that candidate as the hearing officer for the contested case. The order shall be promptly served upon the parties to the case and shall provide notice to the respondent of the respondent's right to a peremptory dismissal of the first hearing officer selected, if such right is exercised within 20 days after notification. If the respondent peremptorily dismisses the first designated hearing officer, the commissioner shall select another qualified, impartial candidate who shall not be subject to peremptory dismissal from the compiled list and shall designate, by order, that candidate as the hearing officer. The order shall be promptly served upon the parties to the case.

History

History: 1983 AACS.

R 500.1121 to R 500.1134 Credit for Reinsurance

Mich. Admin. Code R 500.1121 Rescinded {#sec-r-500.1121 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1121}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

CREDIT FOR REINSURANCE

(By authority conferred on the director of the department of insurance and financial services by sections 210, 1103, and 1106 of the insurance code of 1956, 1956 PA 218, MCL 500.210, 500.1103, and 500.1106, and Executive Reorganization Order No. 2013-1, MCL 550.991)

History

History: 1996 AC; 2019 AACS.

Mich. Admin. Code R 500.1122 Definitions {#sec-r-500.1122 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1122}

Rule 2. (1) As used in these rules:

(a) “Beneficiary” means the entity for whose sole benefit a trust or letter of credit has been established and any successor of the beneficiary by operation of law. If a court of law appoints a successor in interest to the named beneficiary, then the named beneficiary includes and is limited to the court appointed domiciliary receiver (including conservator, rehabilitator, or liquidator).

(b) “Code” means the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.

(d) “Director” means the director of the department.

(e) “Grantor” means the entity that has established a trust for the sole benefit of the beneficiary. When a trust is established in conjunction with a reinsurance agreement, the grantor is the unlicensed, unaccredited assuming insurer.

(f) “Liabilities” means the assuming insurer’s gross liabilities attributable to reinsurance ceded by United States domiciled insurers, excluding liabilities that are otherwise secured by acceptable means, and includes all of the following:

(i) For business ceded by domestic insurers authorized to write accident and health, and property and casualty insurance all of the following:

(A) Losses and allocated loss expenses paid by the ceding insurer, recoverable from the assuming insurer.

(B) Reserves for losses reported and outstanding.

(D) Reserves for allocated loss expenses.

(E) Unearned premiums.

(ii) For business ceded by domestic insurers authorized to write life, health, and annuity insurance all of the following:

(A) Aggregate reserves for life policies and contracts net of policy loans and net due and deferred premiums.

(B) Aggregate reserves for accident and health policies.

(D) Liabilities for policy and contract claims.

(g) “NAIC” means the National Association of Insurance Commissioners.

(h) “Obligations” means any of the following:

(i) Reinsured losses and allocated loss expenses paid by the ceding company, but not recovered from the assuming insurer.

(ii) Reserves for reinsured losses reported and outstanding.

(iii) Reserves for reinsured losses incurred but not reported.

(iv) Reserves for allocated reinsured loss expenses and unearned premiums.

(i) “Solvent scheme of arrangement” means a foreign or alien statutory or regulatory compromise procedure that is subject to requisite majority creditor approval and judicial sanction in the assuming insurer’s home jurisdiction either to finally commute liabilities of duly noticed classed members or creditors of a solvent debtor or to reorganize or restructure the debts and obligations of a solvent debtor on a final basis and that may be subject to judicial recognition and enforcement of the arrangement by a governing authority outside the ceding insurer’s home jurisdiction.

(2) A term defined in the code has the same meaning when used in these rules.

History

History: 1996 AC; 2019 AACS; 2021 MR 10, Eff. May 18, 2021.

Mich. Admin. Code R 500.1123 Conditions applicable to a reinsurance agreement in conjunction with a trust agreement under section 1105 of the code, MCL 500.1105 {#sec-r-500.1123 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1123}

Rule 3. (1) A reinsurance agreement that is entered into in conjunction with a trust agreement under section 1105 of the code, MCL 500.1105, may contain any of the following provisions:

(a) A requirement that the assuming insurer enter into a trust agreement, establish a trust account for the benefit of the ceding insurer, and specify what the agreement is to cover.

(b) A stipulation that assets deposited in the trust account must be valued according to their current fair market value and consist only of cash (United States legal tender), certificates of deposit issued by a United States bank and payable in United States legal tender, and investments of the types permitted by chapter 9 of the code, MCL 500.901 to 500.947, or any combination of cash, certificates of deposit, or investments specified in this subrule, if the investments are issued by an entity that is not the parent, subsidiary, or affiliate of either the grantor or the beneficiary.

The reinsurance agreement may further specify the types of investments to be deposited. If a trust agreement is entered into in conjunction with a reinsurance agreement covering risks other than life, annuities, and accident and health, then the trust agreement may contain the provisions required by this subdivision instead of including the provisions in the reinsurance agreement.

(c) A requirement that the assuming insurer, before depositing assets with the trustee, execute assignments or endorsements in blank or transfer legal title to the trustee of all shares, obligations, or any other assets requiring assignments, so that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, if necessary, negotiate the assets without the consent or signature from the assuming insurer or any other entity.

(d) A requirement that all settlements of account between the ceding insurer and the assuming insurer be made in cash or its equivalent.

(e) A stipulation that the assuming insurer and the ceding insurer agree that the assets in the trust account established pursuant to the provisions of the reinsurance agreement may be withdrawn by the ceding insurer at any time, notwithstanding any other provisions in the reinsurance agreement, and must be used and applied by the ceding insurer or its successors in interest by operation of law, including, without limitation, any liquidator, rehabilitator, receiver, or conservator of the company, without diminution because of insolvency on the part of the ceding insurer or the assuming insurer, only for 1 or more of the following purposes:

(i) To pay or reimburse the ceding insurer for the assuming insurer’s share under the specific reinsurance agreement of premiums returned, but not yet recovered from the assuming insurer, to the owners of policies reinsured under the reinsurance agreement because of cancellation of the policies.

(ii) To pay or reimburse the ceding insurer for the assuming insurer’s share of surrenders and benefits or losses paid by the ceding insurer pursuant to the provisions of the policies reinsured under the reinsurance agreement.

(iii) To pay or reimburse the ceding insurer for any other amounts necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer.

(iv) To make payment to the assuming insurer of amounts held in the trust account in excess of the amount necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer.

(2) The reinsurance agreement may also do any of the following:

(a) Give the assuming insurer the right to seek approval from the ceding insurer, which must not be unreasonably or arbitrarily withheld, to withdraw from the trust account all or any part of the trust assets and transfer the assets to the assuming insurer, if either of the following provisions is satisfied:

(i) The assuming insurer shall, at the time of withdrawal, replace the withdrawn assets with other qualified assets that have a current fair market value equal to the market value of the assets withdrawn so as to maintain, at all times, the deposit in the required amount.

(ii) After withdrawal and transfer, the current fair market value of the trust account is not less than 102% of the required amount.

(b) Provide for the return of any amount withdrawn in excess of the actual amounts required under subrule (1)(e) of this rule.

(c) Provide for interest payments, at a rate that is not more than the prime rate of interest, on the amounts held pursuant to subrule (1)(e) of this rule.

(d) Permit the award by any arbitration panel or court of competent jurisdiction of any of the following:

(i) Interest at a rate different from that provided in subdivision (c) of this subrule.

(ii) Court or arbitration costs.

(iii) Attorney fees.

(iv) Any other reasonable expenses.

(3) A trust agreement that complies with these rules may be used to reduce any liability for reinsurance ceded to an unauthorized assuming insurer in financial statements required to be filed with the director if established on or before the date of filing of the financial statement of the ceding insurer. Further, the amount of the reduction for the existence of an acceptable trust account may be up to the current fair market value of acceptable assets available to be withdrawn from the trust account at that time, but the reduction must not be more than the specific obligations under the reinsurance agreement that the trust account was established to secure.

(4) Notwithstanding the effective date of this rule, any trust agreement or underlying reinsurance agreement in existence before July 1, 1996, is acceptable until June 30, 1997, at which time the agreements must be in full compliance with this rule for the trust agreement to be acceptable.

(5) The failure of any trust agreement to specifically identify the beneficiary must not be construed to affect any actions or rights that the director may take or possess pursuant to the laws of this state.

History

History: 1996 AC; 2019 AACS; 2021 MR 10, Eff. May 18, 2021.

Mich. Admin. Code R 500.1124 Letters of credit under section 1105 of the code, MCL 500.1105 {#sec-r-500.1124 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1124}

Rule 4. (1) A letter of credit used to reduce any liability for reinsurance ceded to an unauthorized reinsurer under section 1105 of the code, MCL 500.1105, must be clean, irrevocable, unconditional, and issued or confirmed by a qualified United States financial institution. The letter of credit must contain an issue date and date of expiration and stipulate that the beneficiary need only draw a sight draft under the letter of credit and present it to obtain funds and that no other document needs to be presented. The letter of credit must also indicate that it is not subject to any condition or qualifications outside of the letter of credit. In addition, the letter of credit itself must not contain reference to any other agreements, documents, or entities, except as provided in R 500.1125(1).

(2) The heading of the letter of credit may include a boxed section that contains the name of the applicant and other appropriate notations to provide a reference for the letter of credit. The boxed section must be clearly marked to indicate that the information is for internal identification purposes only.

(3) The letter of credit must contain a statement to the effect that the obligation of the qualified United States financial institution under the letter of credit is not contingent upon reimbursement with respect thereto.

(4) The term of the letter of credit must be for at least 1 year and contain an “evergreen clause” that prevents the expiration of the letter of credit without due notice from the issuer. The “evergreen clause” must provide for a period of not less than 30 days’ notice before the expiration date or nonrenewal of the letter of credit.

(5) The letter of credit must state whether it is subject to and governed by the laws of this state, publication 600 of the International Chamber of Commerce entitled the Uniform Customs and Practice for Documentary Credits (UCP 600), or publication 590 of the International Chamber of Commerce entitled International Standby Practices (ISP 98), or any successor publication, and all drafts drawn thereunder must be presentable at an office in the United States of a qualified United States financial institution.

(6) If the letter of credit is made subject to publication 600 of the International Chamber of Commerce entitled the Uniform Customs and Practice for Documentary Credits (UCP 600), or publication 590 of the International Chamber of Commerce entitled International Standby Practices (ISP 98), or any successor publication, then the letter of credit must specifically address and make provision for an extension of time to draw against the letter of credit if 1 or more of the occurrences specified in article 36 of publication 600, or any successor publication, occur.

(7) If the letter of credit is issued by a financial institution authorized to issue letters of credit, other than a qualified United States financial institution as described in subrule (1) of this rule, then both of the following additional requirements must be met:

(a) The issuing financial institution shall formally designate the confirming qualified United States financial institution as its agent for the receipt and payment of the drafts.

(b) The “evergreen clause” must provide for 30 days’ notice before the expiration date or nonrenewal of the letter of credit.

History

History: 1996 AC; 2011 AACS; 2019 AACS; 2021 MR 10, Eff. May 18, 2021.

Mich. Admin. Code R 500.1125 Conditions applicable to reinsurance agreement in conjunction with letter of credit under section 1105 of the code, MCL 500.1105 {#sec-r-500.1125 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1125}

Rule 5. (1) A reinsurance agreement in conjunction with which a letter of credit is obtained under section 1105 of the code, MCL 500.1105, may contain any of the following provisions:

(a) A requirement that the assuming insurer provide letters of credit to the ceding insurer and specify what they are to cover.

(b) A stipulation that the assuming insurer and ceding insurer agree that the letter of credit provided by the assuming insurer pursuant to the provisions of the reinsurance agreement may be drawn upon at any time, notwithstanding any other provisions in the agreement, and must be utilized by the ceding insurer or its successors in interest only for 1 or more of the following reasons:

(i) To pay or reimburse the ceding insurer for the assuming insurer’s share under the specific reinsurance agreement, of premiums returned, but not yet recovered from the assuming insurers, to the owners of policies reinsured under the reinsurance agreement on account of cancellations of the policies.

(ii) To pay or reimburse the ceding insurer for the assuming insurer’s share, under the specific reinsurance agreement, of surrenders and benefits or losses paid by the ceding insurer, but not yet recovered from the assuming insurers, under the terms and provisions of the policies reinsured under the reinsurance agreement.

(iii) To pay or reimburse the ceding insurer in an amount necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer.

(iv) Where the letter of credit will expire without renewal or be reduced or replaced by a letter of credit for a reduced amount and where the assuming insurer’s entire obligations under the reinsurance agreement remain unliquidated and undischarged 10 days before the termination date, to withdraw amounts equal to the assuming insurer’s share of the liabilities, to the extent that the liabilities have not yet been funded by the assuming insurer and exceed the amount of any reduced or replacement letter of credit, and deposit those amounts in a separate account in the name of the ceding insurer in a qualified United States financial institution apart from its general assets, in trust for those uses and purposes specified in paragraphs (i) to (iii) of this subdivision as may remain after withdrawal and for any period after the termination date.

(c) A requirement that all of the provisions of this subrule must be applied without diminution because of insolvency on the part of the ceding insurer or assuming insurer.

(2) Nothing contained in subrule (1) of this rule precludes the ceding insurer and assuming insurer from providing for either or both of the following:

(a) An interest payment, at a rate not more than the prime rate of interest, on the amounts held pursuant to subrule (1)(b) of this rule.

(b) The return of any amounts drawn down on the letters of credit in excess of the actual amounts required for subrule (1)(b) of this rule, or any amounts that are subsequently determined not to be due.

History

History: 1996 AC; 2019 AACS; 2021 MR 10, Eff. May 18, 2021.

Mich. Admin. Code R 500.1126 Other security {#sec-r-500.1126 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1126}

Rule 6. A ceding insurer may take credit for unencumbered funds withheld by the ceding insurer in the United States subject to withdrawal solely by the ceding insurer and under its exclusive control.

History

History: 1996 AC; 2019 AACS.

Mich. Admin. Code R 500.1127 Reinsurance contract {#sec-r-500.1127 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1127}

Rule 7. Credit must not be granted, nor an asset or reduction from liability allowed, to a ceding insurer for reinsurance effected with assuming insurers meeting the requirements of section 1103 of the code, MCL 500.1103, not including section 1103(5), or section 1105 of the code, MCL 500.1105, and applicable rules, or otherwise in compliance with section 1103 of the code, MCL 500.1103, after the effective date of these rules, unless the reinsurance agreement includes all of the following:

(a) A proper insolvency clause, which stipulates that reinsurance is payable directly to the liquidator or successor without diminution regardless of the status of the ceding company.

(b) A provision pursuant to section 1103 of the code, MCL 500.1103, whereby the assuming insurer, if an unauthorized assuming insurer, has submitted to the jurisdiction of an alternative dispute resolution panel or court of competent jurisdiction within the United States, has agreed to comply with all requirements necessary to give the court or panel jurisdiction, has designated an agent upon whom service of process may be served, and has agreed to abide by the final decision of the court or panel.

History

History: 1996 AC; 2019 AACS; 2021 MR 10, Eff. May 18, 2021.

Mich. Admin. Code R 500.1128 Contracts affected {#sec-r-500.1128 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1128}

Rule 8. All new and renewal reinsurance transactions entered into on or after January 1, 2019 must conform to the requirements of the code and these rules if credit is to be given to the ceding insurer for the reinsurance.

History

History: 1996 AC; 2019 AACS; 2021 MR 10, Eff. May 18, 2021.

Mich. Admin. Code R 500.1129 Rescinded {#sec-r-500.1129 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1129}

History

History: 1996 AC; 2019 AACS.

Mich. Admin. Code R 500.1130 Credit for reinsurance; reinsurer licensed in this state {#sec-r-500.1130 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1130}

Rule 10. Pursuant to section 1103(1) of the code, MCL 500.1103, the director shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that was licensed in this state as of any date on which statutory financial statement credit for reinsurance is claimed.

History

History: 2019 AACS; 2021 MR 10, Eff. May 18, 2021.

Mich. Admin. Code R 500.1131 Credit for reinsurance; certified reinsurers {#sec-r-500.1131 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1131}

Rule 11. (1) Pursuant to section 1103(6) of the code, MCL 500.1103, the director shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that has been certified as a reinsurer in this state at all times for which statutory financial statement credit for reinsurance is claimed under this rule. The credit allowed must be based upon the security held by or on behalf of the ceding insurer in accordance with a rating assigned to the certified reinsurer by the director. The security must be in a form consistent with sections 1103(6) and 1105 of the code, MCL 500.1103 and MCL 500.1105, and the requirements, as applicable, under R 500.1123, R 500.1124, R 500.1125, R 500.1126, and R 500.1133. The amount of security required in order for full credit to be allowed must correspond with the following requirements:

Ratings Security Required Secure—1 0% Secure—2 10% Secure—3 20% Secure—4 50% Secure—5 75% Vulnerable—6 100% (2) Affiliated reinsurance transactions must receive the same opportunity for reduced security requirements as all other reinsurance transactions.

(3) The director shall require the certified reinsurer to post 100% security, for the benefit of the ceding insurer or its estate, upon the entry of an order of rehabilitation, liquidation, or conservation against the ceding insurer.

(4) In order to facilitate the prompt payment of claims, a certified reinsurer must not be required to post security for catastrophe recoverables for a period of one year from the date of the first instance of a liability reserve entry by the ceding company as a result of a loss from a catastrophic occurrence as recognized by the director. The one-year deferral period is contingent upon the certified reinsurer continuing to pay claims in a timely manner. Reinsurance recoverables for only the following lines of business as reported on the NAIC annual financial statement related specifically to the catastrophic occurrence will be included in the deferral:

(a) Line 1: Fire.

(b) Line 2: Allied Lines.

(d) Line 4: Homeowners multiple peril.

(e) Line 5: Commercial multiple peril.

(f) Line 9: Inland Marine.

(g) Line 12: Earthquake.

(h) Line 21: Auto physical damage.

(5) Credit for reinsurance under this rule only applies to reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer. Any reinsurance contract entered into before the effective date of the certification of the assuming insurer that is subsequently amended after the effective date of the certification of the assuming insurer, or a new reinsurance contract, covering any risk for which collateral was provided previously, is only subject to this rule with respect to the losses incurred and reserves reported from and after the effective date of the amendment or new contract.

(6) Nothing in this rule prohibits the parties to a reinsurance agreement from agreeing to provisions establishing security requirements that exceed the minimum security requirements established for certified reinsurers under this rule.

(7) The director shall post notice on the department’s website promptly upon receipt of any application for certification, including instructions on how members of the public may respond to the application. The director may not take final action on the application until at least 30 days after posting the notice required by this subrule.

(8) The director shall issue written notice to an assuming insurer that has applied and been approved as a certified reinsurer. The notice must include the rating assigned the certified reinsurer pursuant to subrules (1) to (6) of this rule. The director shall publish a list of all certified reinsurers and their ratings.

(9) In order to be eligible for certification, the assuming insurer shall meet all of the following requirements:

(a) The assuming insurer must be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the director pursuant to subrule (15) of this rule.

(b) The assuming insurer must maintain capital and surplus, or its equivalent, of no less than $250,000,000.00 calculated pursuant to subrule (10)(h) of this rule. This requirement may also be satisfied by an association including incorporated and individual unincorporated underwriters having minimum capital and surplus equivalents (net of liabilities) of at least $250,000,000.00 and a central fund containing a balance of at least $250,000,000.00.

(c) The assuming insurer must maintain financial strength ratings from 2 or more rating agencies considered acceptable by the director. These ratings must be based on interactive communication between the rating agency and the assuming insurer and must not be based solely on publicly available information. These financial strength ratings will be one factor used by the director in determining the rating that is assigned to the assuming insurer. Acceptable rating agencies include all of the following:

(i) Standard & Poor’s.

(ii) Moody’s Investors Service.

(iii) Fitch Ratings.

(iv) A.M. Best Company.

(v) Any other nationally recognized statistical rating organization.

(d) The certified reinsurer must comply with any other requirements reasonably imposed by the director.

(10) Each certified reinsurer must be rated on a legal entity basis, with due consideration being given to the group rating where appropriate, except that an association including incorporated and individual unincorporated underwriters that has been approved to do business as a single certified reinsurer may be evaluated on the basis of its group rating. Factors that may be considered as part of the evaluation process include, but are not limited to, all of the following:

(a) The certified reinsurer’s financial strength rating from an acceptable rating agency. The maximum rating that a certified reinsurer may be assigned will correspond to its financial strength rating as outlined in the table below. The director shall use the lowest financial strength rating received from an approved rating agency in establishing the maximum rating of a certified reinsurer. A failure to obtain or maintain at least 2 financial strength ratings from acceptable rating agencies will result in loss of eligibility for certification.

Ratings Best S&P Moody’s Fitch Secure—1 A++ AAA Aaa AAA Secure—2 A+ AA+,AA, AA- Aa1, Aa2, Aa3 AA+,AA, AA- Secure—3 A A+, A A1, A2 A+, A Secure—4 A- A- A3 A- Secure—5 B++, B+ BBB+,BBB, BBB- Baa1,Baa2, Baa3 BBB+,BBB, BBB- Vulnerable—6 B, B-C++, C+, C, C-, D, E, F BB+, BB, BB-, B+, B, B-, CCC, CC, C, D, R Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, C BB+, BB, BB-, B+, B, B-, CCC+, CC, CCC-, DD (b) The business practices of the certified reinsurer in dealing with its ceding insurers, including its record of compliance with reinsurance contractual terms and obligations.

(c) For certified reinsurers domiciled in the United States, a review of the most recent applicable NAIC Annual Statement Blank, either Schedule F (for property/casualty reinsurers) or Schedule S (for life and health reinsurers).

(d) For certified reinsurers not domiciled in the United States, a review annually of a form approved by the director.

(e) The reputation of the certified reinsurer for prompt payment of claims under reinsurance agreements, based on an analysis of ceding insurers’ Schedule F reporting of overdue reinsurance recoverables, including the proportion of obligations that are more than 90 days past due or are in dispute, with specific attention given to obligations payable to companies that are in administrative supervision or receivership.

(f) Regulatory actions against the certified reinsurer.

(g) The report of the independent auditor on the financial statements of the insurance enterprise, on the basis described in subdivision (h) of this subrule.

(h) For certified reinsurers not domiciled in the United States, audited financial statements, regulatory filings, and actuarial opinion (as filed with the non-United States jurisdiction supervisor, with a translation into English). Upon the initial application for certification, the director will consider audited financial statements for the last 2 years filed with its non-United States jurisdiction supervisor.

(i) The liquidation priority of obligations to a ceding insurer in the certified reinsurer’s domiciliary jurisdiction in the context of an insolvency proceeding.

(j) A certified reinsurer’s participation in any solvent scheme of arrangement, or similar procedure, that involves United States ceding insurers. The director shall receive prior notice from a certified reinsurer that proposes participation by the certified reinsurer in a solvent scheme of arrangement.

(k) Any other information considered relevant by the director.

(11) Based on the analysis conducted under subrule (10)(e) of this rule of a certified reinsurer’s reputation for prompt payment of claims, the director may make appropriate adjustments in the security the certified reinsurer is required to post to protect its liabilities to United States ceding insurers as long as the director, at a minimum, increases the security the certified reinsurer is required to post by 1 rating level under subrule (10)(a) of this rule if the director finds either of the following:

(a) More than 15% of the certified reinsurer’s ceding insurance clients have overdue reinsurance recoverables on paid losses of 90 days or more that are not in dispute and exceed $100,000.00 for each cedent.

(b) The aggregate amount of reinsurance recoverables on paid losses that are not in dispute that are overdue by 90 days or more exceeds $50,000,000.00.

(12) The assuming insurer must submit a properly executed form approved by the director as evidence of its submission to the jurisdiction of this state, appointment of the director as an agent for service of process in this state, and agreement to provide security for 100% of the assuming insurer’s liabilities attributable to reinsurance ceded by United States ceding insurers if it resists enforcement of a final United States judgment. The director shall not certify any assuming insurer that is domiciled in a jurisdiction that the director has determined does not adequately and promptly enforce final United States judgments or arbitration awards.

(13) The certified reinsurer must agree to meet applicable information filing requirements as determined by the director, both with respect to an initial application for certification and on an ongoing basis. All information submitted by certified reinsurers that are not otherwise public information subject to disclosure are exempted from disclosure under the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, and must be withheld from public disclosure. The applicable information filing requirements include all of the following:

(a) Notification within 10 days of any regulatory actions taken against the certified reinsurer, any change in the provisions of its domiciliary license or any change in rating by an approved rating agency, including a statement describing the changes and the reasons for the changes.

(b) Annually, the filing of a form approved by the director.

(c) Annually, the report of the independent auditor on the financial statements of the insurance enterprise, on the basis described in subdivision (d) of this subrule.

(d) Annually, the most recent audited financial statements, regulatory filings, and actuarial opinion (as filed with the certified reinsurer’s supervisor, with a translation into English). Upon the initial certification, audited financial statements for the last 2 years filed with the certified reinsurer’s supervisor.

(e) At least annually, an updated list of all disputed and overdue reinsurance claims regarding reinsurance assumed from United States domestic ceding insurers.

(f) A certification from the certified reinsurer’s domestic regulator that the certified reinsurer is in good standing and maintains capital in excess of the jurisdiction’s highest regulatory action level.

(g) Any other information that the director may reasonably require.

(14) All of the following apply to a change in rating or revocation of certification, as applicable:

(a) In the case of a downgrade by a rating agency or other disqualifying circumstance, the director shall upon written notice assign a new rating to the certified reinsurer pursuant to the requirements of subrule (10)(a) of this rule.

(b) The director has the authority to suspend, revoke, or otherwise modify a certified reinsurer’s certification at any time if the certified reinsurer fails to meet its obligations or security requirements under this rule, or if other financial or operating results of the certified reinsurer, or documented significant delays in payment by the certified reinsurer, lead the director to reconsider the certified reinsurer’s ability or willingness to meet its contractual obligations.

(c) If the rating of a certified reinsurer is upgraded by the director, the certified reinsurer may meet the security requirements applicable to its new rating on a prospective basis, but the director shall require the certified reinsurer to post security under the previously applicable security requirements as to all contracts in force on or before the effective date of the upgraded rating. If the rating of a certified reinsurer is downgraded by the director, the director shall require the certified reinsurer to meet the security requirements applicable to its new rating for all business it has assumed as a certified reinsurer.

(d) Upon revocation of the certification of a certified reinsurer by the director, the assuming insurer shall post security pursuant to section 1105 of the code, MCL 500.1105, in order for the ceding insurer to continue to take credit for reinsurance ceded to the assuming insurer. If funds continue to be held in trust pursuant to section 1103(4) of the code, MCL 500.1103, and R 500.1132, the director may allow additional credit equal to the ceding insurer’s pro rata share of such funds, discounted to reflect the risk of uncollectibility and anticipated expenses of trust administration. Notwithstanding the change of a certified reinsurer’s rating or revocation of its certification, a domestic insurer that has ceded reinsurance to that certified reinsurer may not be denied credit for reinsurance for a period of 3 months for all reinsurance ceded to that certified reinsurer, unless the reinsurance is found by the director to be at high risk of uncollectibility.

(15) All of the following apply to the recognition of a jurisdiction as a qualified jurisdiction:

(a) If, upon conducting an evaluation under this rule with respect to the reinsurance supervisory system of any non-United States assuming insurer, the director determines that the jurisdiction qualifies to be recognized as a qualified jurisdiction, the director shall publish notice and evidence of such recognition in an appropriate manner. The director may establish a procedure to withdraw recognition of those jurisdictions that are no longer qualified.

(b) In order to determine whether the domiciliary jurisdiction of a non-United States assuming insurer is eligible to be recognized as a qualified jurisdiction, the director shall evaluate the reinsurance supervisory system of the non-United States jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits and the extent of reciprocal recognition afforded by the non-United States jurisdiction to reinsurers licensed and domiciled in the United States. The director shall determine the appropriate approach for evaluating the qualifications of those jurisdictions and create and publish a list of jurisdictions for which reinsurers may be approved by the director as eligible for certification. A qualified jurisdiction must agree to share information and cooperate with the director with respect to all certified reinsurers domiciled within that jurisdiction. Additional factors to be considered in determining whether to recognize a qualified jurisdiction, in the discretion of the director, include, but are not limited to, all of the following:

(i) The framework under which the assuming insurer is regulated.

(ii) The structure and authority of the domiciliary regulator with regard to solvency regulation requirements and financial surveillance.

(iii) The substance of financial and operating standards for assuming insurers in the domiciliary jurisdiction.

(iv) The form and substance of financial reports required to be filed or made publicly available by reinsurers in the domiciliary jurisdiction and the accounting principles used.

(v) The domiciliary regulator’s willingness to cooperate with United States regulators in general and the director in particular.

(vi) The history of performance by assuming insurers in the domiciliary jurisdiction.

(vii) Any documented evidence of substantial problems with the enforcement of final United States judgments in the domiciliary jurisdiction. A jurisdiction is not considered to be a qualified jurisdiction if the director has determined that it does not adequately and promptly enforce final United States judgments or arbitration awards.

(viii) Any relevant international standards or guidance with respect to mutual recognition of reinsurance supervision adopted by the International Association of Insurance Supervisors or successor organization.

(ix) Any other matters considered relevant by the director.

(c) A list of qualified jurisdictions is published through the NAIC committee process. The director shall consider this list in determining qualified jurisdictions. If the director approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the director shall provide thoroughly documented justification with respect to the criteria provided under subdivision (b)(i) to (ix) of this subrule.

(d) United States jurisdictions that meet the requirements for accreditation under the NAIC financial standards and accreditation program must be recognized as qualified jurisdictions.

(16) All of the following apply to the recognition of certification issued by an NAIC accredited jurisdiction:

(a) If an applicant for certification has been certified as a reinsurer in an NAIC accredited jurisdiction, the director has the discretion to defer to that jurisdiction’s certification, and to defer to the rating assigned by that jurisdiction, if the assuming insurer submits a properly executed form approved by the director and additional information as the director requires. The assuming insurer must be considered to be a certified reinsurer in this state.

(b) Any change in the certified reinsurer’s status or rating in the other jurisdiction applies automatically in this state as of the date it takes effect in the other jurisdiction. The certified reinsurer shall notify the director of any change in its status or rating within 10 days after receiving notice of the change.

(c) The director may withdraw recognition of the other jurisdiction’s rating at any time and assign a new rating pursuant to subrule (14)(a) of this rule.

(d) The director may withdraw recognition of the other jurisdiction’s certification at any time, with written notice to the certified reinsurer. Unless the director suspends or revokes the certified reinsurer’s certification under subrule (14)(a) of this rule, the certified reinsurer’s certification remains in good standing in this state for a period of 3 months, which must be extended if additional time is necessary to consider the assuming insurer’s application for certification in this state.

(17) In addition to the clauses required under R 500.1127, reinsurance contracts entered into or renewed under this rule must include a proper funding clause requiring the certified reinsurer to provide and maintain security in an amount sufficient to avoid the imposition of any financial statement penalty on the ceding insurer under this rule for reinsurance ceded to the certified reinsurer.

(18) The director shall comply with all reporting and notification requirements that may be established by the NAIC with respect to certified reinsurers and qualified jurisdictions.

History

History: 2019 AACS; 2021 MR 10, Eff. May 18, 2021.

Mich. Admin. Code R 500.1132 Requirements for assets deposited in trusts established under section 1103 of the code, MCL 500.1103; specific security provided under section 1105 of the code, MCL 500.1105 {#sec-r-500.1132 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1132}

Rule 12. (1) Assets deposited in trusts established pursuant to section 1103 of the code, MCL 500.1103, and this rule must be valued according to their current fair market value and consist only of 1 or more of the following:

(a) Cash in United States dollars.

(b) Certificates of deposit issued by a qualified United States financial institution.

(c) Clean, irrevocable, unconditional, and “evergreen” letters of credit issued or confirmed by a qualified United States financial institution.

(d) Investments of the type specified in this rule if the investments meet all of the following criteria:

(i) Investments in or issued by an entity controlling, controlled by or under common control with either the grantor or beneficiary of the trust does not exceed 5% of total investments.

(ii) No more than 20% of the total of the investments in the trust are foreign investments authorized under subrule (2)(a)(v), (c), (d)(ii), or (e) of this rule, and no more than 10% of the total of the investments in the trust are securities denominated in foreign currencies. For purposes of applying the preceding sentence, a depository receipt denominated in United States dollars and representing rights conferred by a foreign security must be classified as a foreign investment denominated in a foreign currency.

(2) The assets of a trust established to satisfy the requirements of section 1103 of the code, MCL 500.1103, must be invested only in 1 or more of the following investments:

(a) Government obligations that are not in default as to principal or interest, that are valid and legally authorized, and that are issued, assumed, or guaranteed by any of the following:

(i) The United States or any agency or instrumentality of the United States.

(ii) A state of the United States.

(iii) A territory, possession, or other governmental unit of the United States.

(iv) An agency or instrumentality of a governmental unit referred to in paragraphs (ii) and (iii) of this subdivision if the obligations are by law (statutory or otherwise) payable, as to both principal and interest, from taxes levied, or by law required to be levied, or from adequate special revenues pledged or otherwise appropriated or by law required to be provided for making these payments, but must not be obligations eligible for investment under this paragraph if payable solely out of special assessments on properties benefited by local improvements.

(v) The government of any other country that is a member of the Organization for Economic Cooperation and Development and whose government obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC.

(b) Obligations that are issued in the United States, or that are dollar denominated and issued in a non-United States market by a solvent United States institution (other than an insurance company) or that are assumed or guaranteed by a solvent United States institution (other than an insurance company) and that are not in default as to principal or interest if the obligations meet 1 of the following requirements:

(i) Are rated A or higher (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the NAIC, or if not so rated., are similar in structure and other material respects to other obligations of the same institution that are so rated.

(ii) Are insured by at least one authorized insurer (other than the investing insurer or a parent. subsidiary or affiliate of the investing insurer) licensed to insure obligations in this state and, after considering the insurance., are rated AAA (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the NAIC.

(iii) Have been designated as Class One or Class Two by the Securities Valuation Office of the NAIC.

(c) Obligations issued, assumed, or guaranteed by a solvent non-United States institution chartered in a country that is a member of the Organization for Economic Cooperation and Development or obligations of United States corporations issued in a non-United States currency if in either case the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC.

(d) Equity interests to which the following apply, as applicable:

(i) Investments in common shares or partnership interests of a solvent United States institution are permissible if both of the following requirements are met:

(A) Its obligations and preferred shares, if any, are eligible as investments under this rule.

(B) The equity interests of the institution (except an insurance company) are registered on a national securities exchange as provided in the securities exchange act of 1934, 15 USC 78a to 78qq, or otherwise registered pursuant to that act, and if otherwise registered, price quotations for them are furnished through a nationwide automated quotations system approved by the Financial Industry Regulatory Authority, or successor organization. A trust must not invest in equity interests under this subparagraph in an amount exceeding 1% of the assets of the trust even though the equity interests are not so registered and are not issued by an insurance company.

(ii) Investments in common shares of a solvent institution organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development are permissible if both of the following requirements are met:

(A) All its obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC.

(B) The equity interests of the institution are registered on a securities exchange regulated by the government of a country that is a member of the Organization for Economic Cooperation and Development.

(iii) An investment in or loan upon any one institution’s outstanding equity interests must not exceed 1% of the assets of the trust. The cost of an investment in equity interests made pursuant to this paragraph, when added to the aggregate cost of other investments in equity interests then held pursuant to this paragraph, must not exceed 10% of the assets in the trust.

(e) Obligations issued, assumed, or guaranteed by a multinational development bank, if the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC.

(f) Investment companies to which the following apply, as applicable:

(i) Securities of an investment company registered pursuant to the investment company act of 1940, 15 USC 80a-1 to 80a-64, are permissible investments if the investment company meets either of the following:

(A) Invests at least 90% of its assets in the types of securities that qualify as an investment under subdivision (a), (b), or (c) of this subrule or invests in securities that are determined by the director to be substantively similar to the types of securities set forth in subdivision (a), (b), or (c) of this subrule.

(B) Invests at least 90% of its assets in the types of equity interests that qualify as an investment under subdivision (d)(i) of this subrule.

(ii) Investments made by a trust in investment companies under this subdivision must not exceed either of the following limitations:

(A) An investment in an investment company qualifying under paragraph (i)(A) of this subdivision must not exceed 10% of the assets in the trust, and the aggregate amount of investment in qualifying investment companies must not exceed 25% of the assets in the trust.

(B) Investments in an investment company qualifying under paragraph (i)(B) of this subdivision must not exceed 5% of the assets in the trust, and the aggregate amount of investment in qualifying investment companies must be included when calculating the permissible aggregate value of equity interests pursuant to subdivision (d)(i) of this subrule.

(g) Letters of credit to which all of the following apply:

(i) In order for a letter of credit to qualify as an asset of the trust, the trustee shall have the right and the obligation pursuant to the deed of trust or some other binding agreement (as duly approved by the director) to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiaries of the trust if the letter of credit will otherwise expire without being renewed or replaced.

(ii) The trust agreement must provide that the trustee is liable for its negligence, willful misconduct, or lack of good faith. The failure of the trustee to draw against the letter of credit in circumstances where the draw would be required must be considered to be negligence, willful misconduct, or both.

(3) A specific security provided to a ceding insurer by an assuming insurer pursuant to section 1105 of the code, MCL 500.1105, must be applied, until exhausted, to the payment of liabilities of the assuming insurer to the ceding insurer holding the specific security before, and as a condition precedent for, presentation of a claim by the ceding insurer for payment by a trustee of a trust established by the assuming insurer pursuant to this rule.

(4) An investment made pursuant to the provisions of subrule (2)(a), (b), or (c) of this rule is subject to all of the following additional limitations:

(a) An investment in or loan upon the obligations of an institution other than an institution that issues mortgage-related securities must not exceed 5% of the assets of the trust.

(b) An investment in any one mortgage-related security must not exceed 5% of the assets of the trust.

(d) Preferred or guaranteed shares issued or guaranteed by a solvent United States institution are permissible investments if all of the institution’s obligations are eligible as investments under subrule (2)(b)(i) and (iii) of this rule, but must not exceed 2% of the assets of the trust.

(5) As used in this rule:

(a) “Mortgage-related security” means an obligation that is rated AA or higher (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the NAIC and that meets either of the following provisions:

(i) Represents ownership of 1 or more promissory notes or certificates of interest or participation in the notes (including any rights designed to assure servicing of, or the receipt or timeliness of receipt by the holders of the notes, certificates, or participation of amounts payable under the notes, certificates, or participation), that meet both of the following requirements:

(A) Are directly secured by a first lien on a single parcel of real estate, including stock allocated to a dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling or mixed residential and commercial structure, or on a residential manufactured home as defined in 42 USC 5402(6), whether the manufactured home is considered real or personal property under the laws of the state in which it is located.

(B) Were originated by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution that is supervised and examined by a federal or state housing authority, or by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to 12 USC 1709 and 1715b, or, where the notes involve a lien on the manufactured home by an institution or by a financial institution approved for insurance by the Secretary of Housing and Urban Development pursuant to 12 USC 1703.

(ii) Is secured by 1 or more promissory notes or certificates of deposit or participations in the notes (with or without recourse to the insurer of the notes) and, by its terms, provides for payments of principal in relation to payments, or reasonable projections of payments, or notes meeting the requirements of paragraph (i)(A) and (B) of this subdivision.

(b) “Promissory note” when used in connection with a manufactured home, also includes a loan, advance, or credit sale as evidenced by a retail installment sales contract or other instrument.

History

History: 2019 AACS; 2021 MR 10, Eff. May 18, 2021.

Mich. Admin. Code R 500.1133 Trust agreements under section 1105 of the code, MCL 500.1105 {#sec-r-500.1133 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1133}

Rule 13. (1) Reinsurance trusts established under section 1105 of the code, MCL 500.1105, must comply with the requirements of R 500.1123 and this rule.

(2) The trust agreement must be entered into between the beneficiary, the grantor, and a trustee. The trustee must be a qualified United States financial institution.

(3) The trust agreement must create a trust account into which assets must be deposited.

(4) All assets in the trust account must be held by the trustee at the trustee’s office in the United States.

(5) The trust agreement must provide for all of the following:

(a) The beneficiary has the right to withdraw assets from the trust account at any time, without notice to the grantor, subject only to written notice from the beneficiary to the trustee.

(b) No other statement or document is required to be presented to withdraw assets, except that the beneficiary may be required to acknowledge receipt of withdrawn assets.

(d) The trust agreement must not contain references to any other agreements or documents, except as provided for under subrules (12) and (13) of this rule.

(6) The trust agreement must be established for the sole benefit of the beneficiary.

(7) The trust agreement must require the trustee to do all of the following:

(a) Receive assets and hold all assets in a safe place.

(b) Determine that all assets are in a form that the beneficiary, or the trustee upon the direction of the beneficiary, may, when necessary, negotiate the assets without the consent of, or a signature from, the grantor or any other person or entity.

(c) Furnish to the grantor and the beneficiary a statement of all assets in the trust account upon its inception and at intervals not less frequent than the end of each calendar quarter.

(d) Notify the grantor and the beneficiary within 10 days of any deposits to, or withdrawals from, the trust account.

(e) Upon written demand of the beneficiary, immediately take any and all steps necessary to transfer absolutely and unequivocally all right, title, and interest in the assets held in the trust account to the beneficiary and deliver physical custody of the assets to the beneficiary.

(f) Allow no substitutions or withdrawals of assets from the trust account, except on written instructions from the beneficiary. However, the trustee may, without the consent of, but with notice to, the beneficiary, upon call or maturity of any trust asset, withdraw the asset upon the condition that the proceeds are paid into the trust account.

(8) The trust agreement must provide that written notice of termination must be delivered by the trustee to the beneficiary not less than 30 days, but not more than 45 days, before termination of the trust account.

(9) The trust agreement must be made subject to and governed by the laws of the state in which the trust is domiciled.

(10) The trust agreement must prohibit invasion of the trust corpus for the purpose of paying compensation to, or reimbursing the expenses of, the trustee. For a letter of credit to qualify as an asset of the trust, the trustee shall have the right and the obligation pursuant to the deed of trust or some other binding agreement, as duly approved by the director, to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiaries of the trust if the letter of credit will otherwise expire without being renewed or replaced.

(11) The trust agreement must provide that the trustee is liable for its negligence, willful misconduct, or lack of good faith. The failure of the trustee to draw against the letter of credit in circumstances where the draw would be required is considered to be negligence, willful misconduct, or both.

(12) Notwithstanding other provisions of these rules, when a trust agreement is established in conjunction with a reinsurance agreement covering risks other than life, annuities, and accident and health, where it is customary practice to provide a trust agreement for a specific purpose, the trust agreement may provide that the ceding insurer shall undertake to use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, for any of the following purposes:

(a) To pay or reimburse the ceding insurer for the assuming insurer’s share under the specific reinsurance agreement regarding any losses and allocated loss expenses paid by the ceding insurer, but not recovered from the assuming insurer, or for unearned premiums due to the ceding insurer if not otherwise paid by the assuming insurer.

(b) To make payment to the assuming insurer of any amounts held in the trust account that are more than 102% of the actual amount required to fund the assuming insurer’s obligations under the specific reinsurance agreement.

(c) Where the ceding insurer has received notification of termination of the trust account and the assuming insurer’s entire obligations under the specific reinsurance agreement remain unliquidated and undischarged 10 days before the termination date, to withdraw amounts equal to the obligations and deposit the amounts in a separate account apart from its general assets in the name of the ceding insurer in any qualified United States financial institution in trust for the uses and purposes specified in subdivisions (a) and (b) of this subrule as may remain executory after the withdrawal and for any period after the termination date.

(13) Notwithstanding other provisions of these rules, when a trust agreement is established in conjunction with a reinsurance agreement covering life, annuities, or accident and health risks, where it is customary to provide a trust agreement for a specific purpose, the trust agreement may provide that the ceding insurer shall undertake to use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, only for 1 or more of the following purposes:

(a) To pay or reimburse the ceding insurer for either or both of the following:

(i) The assuming insurer’s share under the specific reinsurance agreement of premiums returned, but not yet recovered from the assuming insurer, to the owners of policies reinsured under the reinsurance agreement on account of cancellations of the policies.

(ii) The assuming insurer’s share under the specific reinsurance agreement of surrenders and benefits or losses paid by the ceding insurer, but not yet recovered from the assuming insurer, under the terms and provisions of the policies reinsured under the reinsurance agreement.

(b) To pay the assuming insurer amounts held in the trust account in excess of the amount necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer.

(c) Where the ceding insurer has received notification of termination of the trust and the assuming insurer’s entire obligations under the specific reinsurance agreement remain unliquidated and undischarged 10 days before the termination date, to withdraw amounts equal to the assuming insurer’s share of liabilities, to the extent that the liabilities have not yet been funded by the assuming insurer, and deposit those amounts in a separate account, in the name of the ceding insurer in any qualified United States financial institution apart from its general assets, in trust for the uses and purposes specified in subdivisions (a) and (b) of this subrule as may remain executory after withdrawal and for any period after the termination date.

(14) Either the reinsurance agreement or the trust agreement must stipulate that assets deposited in the trust account must be valued according to their current fair market value and consist only of cash (United States legal tender), certificates of deposit issued by a United States bank and payable in United States legal tender, and investments permitted by chapter 9 of the code, MCL 500.901 to 500.947, or any combination of cash, certificates of deposit, or investments, as long as investments in or issued by an entity controlling, controlled by or under common control with either the grantor or the beneficiary of the trust must not exceed 5% of total investments. The agreement may further specify the types of investments to be deposited.

If the reinsurance agreement covers life, annuities, or accident and health risks, then the provisions required by this subrule must be included in the reinsurance agreement.

(15) The trust agreement may provide that the trustee may resign upon the delivery of a written notice of resignation that is effective not less than 90 days after receipt by the beneficiary and grantor of the notice and that the trustee may be removed by the grantor by the delivery, to the trustee and the beneficiary, of a written notice of removal that is effective not less than 90 days after receipt by the trustee and the beneficiary of the notice. However, a resignation or removal is not effective until a successor trustee has been duly appointed and approved by the beneficiary and the grantor and all assets in the trust have been duly transferred to the new trustee.

(16) The grantor may have the full and unqualified right to vote any shares of stock in the trust account and to receive payments of any dividends or interest upon any shares of stock or obligations included in the trust account. The interest or dividends must be either forwarded promptly upon receipt to the grantor or deposited in a separate account established in the grantor’s name.

(17) The trustee may be given authority to invest and accept substitutions of any funds in the account only if the investment or substitution is made with the prior approval of the beneficiary, unless the trust agreement specifies categories of investments acceptable to the beneficiary and authorizes the trustee to invest funds and to accept substitutions that the trustee determines are at least equal in current fair market value to the assets withdrawn and are consistent with the restrictions in R 500.1123(1)(c).

(18) The trust agreement may provide that the beneficiary may at any time designate a party to which all or part of the trust assets are to be transferred. The transfer may be conditioned upon the trustee’s receipt, either before the transfer or simultaneous with the transfer, of other specified assets.

(19) The trust agreement may provide that, upon termination of the trust account, all assets not previously withdrawn by the beneficiary must, with the written approval by the beneficiary, be delivered over to the grantor.

History

History: 2019 AACS; 2021 MR 10, Eff. May 18, 2021.

Mich. Admin. Code R 500.1134 Credit for reinsurance; reciprocal jurisdictions {#sec-r-500.1134 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1134}

Rule 14. (1) Pursuant to section 1103(7) to (18) of the code, MCL 500.1103, the director shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that is licensed to write reinsurance by, and has its head office or is domiciled in, a reciprocal jurisdiction, and that meets the other applicable requirements of these rules.

(2) Credit is allowed pursuant to this rule if the reinsurance is ceded from an insurer domiciled in this state to an assuming insurer meeting all of the following conditions:

(a) The assuming insurer is licensed to transact reinsurance by, and has its head office or is domiciled in, a reciprocal jurisdiction.

(b) The assuming insurer has and maintains on an ongoing basis minimum capital and surplus, or its equivalent, calculated on at least an annual basis as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, and confirmed as set forth in subdivision (g) of this subrule according to the methodology of its domiciliary jurisdiction, in the following amounts, as applicable:

(i) No less than $250,000,000.

(ii) For an assuming insurer that is an association, including incorporated and individual unincorporated underwriters, both of the following amounts:

(A) Minimum capital and surplus equivalents (net of liabilities) or own funds of the equivalent of at least $250,000,000.

(B) A central fund containing a balance of the equivalent of at least $250,000,000.

(c) The assuming insurer has and maintains on an ongoing basis a minimum solvency or capital ratio, as applicable, as follows:

(i) For an assuming insurer that has its head office or is domiciled in a reciprocal jurisdiction described in subrule (9)(b)(i) of this rule, the ratio specified in the applicable covered agreement.

(ii) For an assuming insurer that is domiciled in a reciprocal jurisdiction described in subrule (9)(b)(ii) of this rule, a risk-based capital (RBC) ratio of 300% of the authorized control level, calculated pursuant to the formula developed by the NAIC.

(iii) For an assuming insurer that is domiciled in a reciprocal jurisdiction described in subrule (9)(b)(iii) of this rule, after consultation with the reciprocal jurisdiction and considering any recommendations published through the NAIC committee process, including, but not limited to, solvency or capital ratio as the director determines to be an effective measure of solvency.

(d) The assuming insurer agrees to and provides adequate assurance of its agreement to all the following by submitting a properly executed form approved by the director:

(i) The assuming insurer must agree to provide prompt written notice and explanation to the director if it falls below the minimum requirements set forth in subdivisions (b) or (c) of this subrule, or if any regulatory action is taken against it for serious noncompliance with applicable law.

(ii) The assuming insurer must consent in writing to the jurisdiction of the courts of this state and to the appointment of the director as agent for service of process. The director may also require that the consent be provided and included in each reinsurance agreement under the director’s jurisdiction. This paragraph does not limit or in any way alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent the reinsurance agreement is unenforceable under applicable insolvency or delinquency laws.

(iii) The assuming insurer must consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer, that have been declared enforceable in the territory where the judgment was obtained.

(iv) Each reinsurance agreement must include a provision requiring the assuming insurer to provide security in an amount equal to 100% of the assuming insurer’s liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its estate, if applicable.

(v) The assuming insurer must confirm that it is not presently participating in any solvent scheme of arrangement that involves this state’s ceding insurers and agree to notify the ceding insurer and the director and to provide 100% security to the ceding insurer consistent with the terms of the scheme if the assuming insurer enters into a solvent scheme of arrangement. That security must be in a form consistent with the provisions of sections 1103(6) and 1105 of the code, MCL 500.1103 and 500.1105, and the requirements, as applicable, under R 500.1123, R 500.1124, R 500.1125, R 500.1126, and R 500.1133.

(vi) The assuming insurer must agree in writing to meet the applicable information filing requirements as set forth in subdivision (e) of this subrule.

(e) The assuming insurer or its legal successor must provide, if requested by the director, on behalf of itself and any legal predecessors, the following documentation to the director:

(i) For the 2 years preceding entry into the reinsurance agreement and on an annual basis after those years, the assuming insurer’s annual audited financial statements, in accordance with the applicable law of the jurisdiction of its head office or domiciliary jurisdiction, as applicable, including the external audit report.

(ii) For the 2 years preceding entry into the reinsurance agreement, the solvency and financial condition report or actuarial opinion if filed with the assuming insurer’s supervisor.

(iii) Before entry into the reinsurance agreement and not more than semi-annually afterward, an updated list of all disputed and overdue reinsurance claims outstanding for 90 days or more, regarding reinsurance assumed from ceding insurers domiciled in the United States.

(iv) Before entry into the reinsurance agreement and not more than semi-annually afterward, information regarding the assuming insurer’s assumed reinsurance by ceding insurer, ceded reinsurance by the assuming insurer, and reinsurance recoverable on paid and unpaid losses by the assuming insurer to allow for the evaluation of the criteria set forth in subdivision (f) of this subrule.

(f) The assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreements. There is evidence of a lack of prompt payment if any of the following criteria is met:

(i) More than 15% of the reinsurance recoverables from the assuming insurer are overdue and in dispute as reported to the director.

(ii) More than 15% of the assuming insurer’s ceding insurers or reinsurers have overdue reinsurance recoverables on paid losses of 90 days or more that are not in dispute and that exceed for each ceding insurer $100,000, or as otherwise specified in a covered agreement.

(iii) The aggregate amount of reinsurance recoverables on paid losses that are not in dispute, but are overdue by 90 days or more, exceeds $50,000,000, or as otherwise specified in a covered agreement.

(g) The assuming insurer’s supervisory authority must confirm to the director on an annual basis that the assuming insurer complies with the requirements set forth in subdivisions (b) and (c) of this subrule.

(3) Subrule (2) of this rule does not preclude an assuming insurer from providing the director with information on a voluntary basis.

(4) The director shall timely create and publish a list of reciprocal jurisdictions. The list must include any reciprocal jurisdiction described in subrule (9)(b)(i) and (ii) of this rule and consider any other reciprocal jurisdiction included on the list published through the NAIC committee process. The director may approve a jurisdiction that does not appear the NAIC list, as provided by applicable law or regulation or pursuant to criteria published through the NAIC committee process. The director may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets 1 or more of the requirements of a reciprocal jurisdiction, as provided by applicable law or regulation or pursuant to a process published through the NAIC committee process, except that the director shall not remove from the list a reciprocal jurisdiction as described under subrule (9)(b)(i) or (ii). Upon removal of a reciprocal jurisdiction from the list, credit for reinsurance ceded to an assuming insurer domiciled in that jurisdiction must be allowed if otherwise allowed pursuant to sections 1103, 1105, and 1106 of the code, MCL 500.1103, 500.1105, and 500.1106, and these rules.

(5) The director shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this rule and to which cessions must be granted credit under this rule.

Both of the following apply to the list of assuming insurers:

(a) If an NAIC accredited jurisdiction has determined that the conditions set forth in subrule (2) of this rule have been met, the director has the discretion to defer to that jurisdiction’s determination and add that assuming insurer to the list of assuming insurers to which cessions must granted credit under this subrule. The director may accept financial documentation filed with another NAIC accredited jurisdiction or with the NAIC in satisfaction of the requirements of subrule (2) of this rule.

(b) When requesting that the director defer to another NAIC accredited jurisdiction’s determination, an assuming insurer must submit a properly executed form approved by the director and additional information as the director may require. If the director receives a request under this subdivision, the director shall notify other states through the NAIC committee process and provide relevant information with respect to the determination of eligibility.

(6) If the director determines that an assuming insurer no longer meets 1 or more of the requirements under this rule, the director may revoke or suspend the eligibility of the assuming insurer for recognition under this rule. While an assuming insurer’s eligibility is suspended, no reinsurance agreement issued, amended, or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer’s obligations under the contract are secured pursuant to section 1105 of the code, MCL 500.1105. If an assuming insurer’s eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into before the date of revocation, except to the extent that the assuming insurer’s obligations under the contract are secured in a form acceptable to the director and are consistent with the provisions of section 1105 of the code, MCL 500.1105.

(7) Before denying statement credit or imposing a requirement to post security under subrule (6) of this rule or adopting any similar requirement that has substantially the same regulatory impact as security, the director shall do all of the following:

(a) Communicate with the ceding insurer, the assuming insurer, and the assuming insurer’s supervisory authority that the assuming insurer no longer satisfies 1 of the conditions listed in subrule (2) of this rule.

(b) Provide the assuming insurer with 30 days from the initial communication to submit a plan to remedy the defect and 90 days from the initial communication to remedy the defect, except in exceptional circumstances in which a shorter period is necessary for policyholder and other consumer protection. After the expiration of 90 days or less, as set out in this subdivision, if the director determines that no or insufficient action was taken by the assuming insurer, the director may impose any of the requirements as set out in this subrule.

(8) If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding liabilities.

(9) As used in this rule:

(a) “Covered agreement” means that term as defined in section 1103(27)(b)(i) of the code, MCL 500.1103.

(b) “Reciprocal jurisdiction” means a jurisdiction, as designated by the director pursuant to subrule (4) of this rule, that meets 1 of the following:

(i) A jurisdiction that meets the conditions under section 1103(27)(b)(i) of the code, MCL 500.1103.

(ii) A jurisdiction that meets the conditions under section 1103(27)(b)(ii) of the code, MCL 500.1103.

(iii) A qualified jurisdiction, as determined by the director pursuant to section 1103(6)(c) of the code, MCL 500.1103, and R 500.1131(15), that is not otherwise described in paragraphs (i) or (ii) of this subdivision, and that the director determines meets all of the following additional requirements:

(A) Provides that an insurer that has its head office or is domiciled in the qualified jurisdiction shall receive credit for reinsurance ceded to a United States-domiciled assuming insurer in the same manner as credit for reinsurance is received for reinsurance assumed by insurers domiciled in the qualified jurisdiction.

(B) Does not require a United States-domiciled assuming insurer to establish or maintain a local presence as a condition for entering into a reinsurance agreement with any ceding insurer subject to regulation by the non-United States jurisdiction or as a condition to allow the ceding insurer to recognize credit for such reinsurance.

(C) Recognizes the United States state regulatory approach to group supervision and group capital, by providing written confirmation by a competent regulatory authority, in the qualified jurisdiction, that insurers and insurance groups that are domiciled or maintain their headquarters in this state or another jurisdiction accredited by the NAIC shall be subject only to worldwide prudential insurance group supervision including worldwide group governance, solvency and capital, and reporting, as applicable, by the director or the commissioner of the domiciliary state and will not be subject to group supervision at the level of the worldwide parent undertaking of the insurance or reinsurance group by the qualified jurisdiction.

(D) Provides written confirmation by a competent regulatory authority in the qualified jurisdiction that information regarding insurers and their parent, subsidiary, or affiliated entities, if applicable, must be provided to the director pursuant to a memorandum of understanding or similar document between the director and the qualified jurisdiction, including, but not limited to, the International Association of Insurance Supervisors Multilateral Memorandum of Understanding or other multilateral memoranda of understanding coordinated by the NAIC.

History

History: 2021 MR 10, Eff. May 18, 2021.

R 500.1201 to R 500.1210 Casualty Insurance Rates

Mich. Admin. Code R 500.1201 Definitions {#sec-r-500.1201 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1201}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

CASUALTY INSURANCE RATES

(By authority conferred on the commissioner of insurance by sections 210 and 2484 of Act No. 218 of the Public Acts of 1956, as amended, being SS500.210 and 500.2484 of the Michigan Compiled Laws)

Rule 1. As used in these rules:

(a) "Classification" means a grouping of individuals or risk on the basis of 1 or more characteristics for purposes of measuring and rating differences in anticipated losses or expenses, or both. For purposes of these rules, a classification shall not include a grouping of individuals or risks solely for statistical data gathering purposes.

(b) "Code" means Act No. 2l8 of the Public Acts of 1956, as amended, being S500.100 et seq. of the Michigan Compiled Laws, and known as the insurance code of 1956.

(d) "Loss portion" means that portion of a rate which is attributable to provisions for incurred losses and allocated loss adjustment expenses.

(e) "Loss ratio" means, for purposes of R 500.1207(4)(e), any of the following ratios for a specified time period, as appropriate for the context of evaluation:

(i) The ratio of actual incurred losses and allocated loss adjustment expenses to total earned premiums at collected rate levels.

(ii) The ratio of actual incurred losses and allocated loss adjustment expenses to total earned premiums at current rate levels.

(iii) The ratio of reasonably anticipated incurred losses and allocated loss adjustment expenses to total estimated earned premiums at proposed rate levels.

(f) "Private passenger automobile insurance" means insurance for private passenger automobiles which provides any of the following:

(i) Security required pursuant to section 3101 of the code.

(ii) Personal protection insurance, property protection insurance, or residual liability insurance for amounts in excess of the amounts required under chapter 31 of the code.

(iii) Insurance customarily known as collision, comprehensive, and uninsured motorist insurance.

(g) "Private residential property insurance" means insurance for an individual's residence, including insurance for an owner-occupied condominium unit, insurance for owner-occupied residential dwellings containing 4 or fewer apartments or condominium units, and insurance for a tenant of a room, an apartment, or a house, provided by a Michigan standard policy as set forth in section 2832 of the code and, when contained in or indorsed to a Michigan standard policy providing insurance for an individual's residence, other insurance intended primarily to insure residential property, obligations, and liabilities.

Private residential property insurance shall not include insurance intended to insure commercial, industrial, professional, or business property, obligations, or liabilities.

(h) "Rate differential" means either the ratio of rates for any 2 rating cells or the absolute difference in rates for any 2 rating cells, whichever is applicable for a particular rating system.

(i) "Rating cell" means a group of individuals or risks for which a single rate is determined when 2 or more rating classifications are combined to define a population of individuals or risks for rating purposes.

(j) "Relativity" means either the ratio of rates for any 2 rating classifications or the absolute difference in rates for any 2 rating classifications, whichever is applicable for a particular rating system.

(k) "Uncertainty of loss" means a measure of the nature and the extent of the variability of actual losses for a group of individuals or risks from the mean anticipated loss for the group and includes other similar measures of risk.

(l) "Underwriting" means the offer or refusal to insure, the offer or refusal to continue to insure, or the limitation of the amount of coverage available to an individual, risk, or class of individuals or risks.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1202 Applicability {#sec-r-500.1202 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1202}

Rule 2. These rules apply to a person who is, or may hereafter be, subject to the jurisdiction of the commissioner of insurance.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1203 Construction of rules {#sec-r-500.1203 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1203}

Rule 3. These rules shall be construed to prohibit insurers from establishing and using casualty insurance rates that are excessive, inadequate, or unfairly discriminatory and shall be construed to protect insurance consumers from the adverse consequences of such rates.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1204 Reporting guidelines {#sec-r-500.1204 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1204}

Rule 4. Subject to section 2472 of the code, the commissioner may issue reasonable guidelines and procedures relating to the collection and reporting of data for purposes of evaluating rates and classifications or the extent and nature of competition. The guidelines and procedures shall provide for the option of using reasonable sampling techniques, when practicable, provided that any data thereby obtained are reportable in a uniform and consistent manner as may be required.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1205 Excessive rates {#sec-r-500.1205 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1205}

Rule 5. (1) For the purposes of section 2403(1)(d) of the code, a rate is unreasonably high for the insurance coverage provided if it is unreasonably high in relation to anticipated losses or expenses, or both, or to the uncertainty of loss for the insurance coverage provided.

(2) A determination regarding the existence of a reasonable degree of competition, with respect to the classification, kind, or type of risks to which a rate is applicable, shall give due consideration to all of the following:

(a) The relevant market for the coverage or the type of insurance to which the rate applies.

(b) The number of insurers and the number of self-insurers actively engaged in writing or providing the coverage or type of insurance in the relevant market.

Market shares may be measured either by premiums or exposures.

(d) Past and prospective trends in the availability of coverage and coverage options for insurance of that type in the relevant market.

(e) Profits attributable to insurance of that type in relation to the profitability of other types of insurance, to the uncertainty of loss for that and other types of insurance, and to the amount of capital and surplus funds available to support premium writings for that and other types of insurance.

(f) The ability and potential for firms to enter and exit the relevant market and for financial capital and surplus funds to be allocated to and to be removed from the relevant market.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1206 Inadequate rates {#sec-r-500.1206 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1206}

Rule 6. For purposes of section 2403(1)(d) of the code, both of the following provisions shall apply:

(a) A rate is unreasonably low for the insurance coverage provided if it is unreasonably low in relation to anticipated losses or expenses, or both, or to the uncertainty of loss for the insurance coverage provided.

(b) An applicant who is in good faith entitled to procure insurance through ordinary methods is an individual or risk in the population, defined by the classification to which the rate applies, that exhibits a willingness and a financial ability to purchase such insurance at the rate in question.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1207 Unfairly discriminatory rates {#sec-r-500.1207 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1207}

Rule 7. (1) For purposes of section 2403(1)(d) of the code, a rate for a coverage is unfairly discriminatory in relation to another rate for the same coverage if the differential between the rates is not reasonably justified by differences in mean anticipated losses or expenses, or both, or by differences in the uncertainty of loss for the individuals or risks to which the rates apply. A reasonable justification shall be supported by a reasonable classification system, by sound actuarial principles, and by actual and credible loss and expense statistics or, in the case of new coverages and classifications, by reasonably anticipated loss and expense experience.

(2) A rate is not unfairly discriminatory because it reflects differences in anticipated expenses for classifications of risks with similar anticipated losses or because it reflects differences in anticipated losses for classifications of risks with similar anticipated expenses.

(3) A reasonable classification system is a system designed to group individuals or risks with similar characteristics into rating classifications which are likely to identify significant differences in mean anticipated losses or expenses, or both, between the groups, as determined by sound actuarial principles and by actual and credible loss and expense statistics or, in the case of new coverages or classifications, by reasonably anticipated loss and expense experience.

(4) Sound actuarial principles shall include, but not be limited to, all of the following principles:

(a) That data used in developing classifications and rates are derived from the experience of a population or sample of risks that is sufficiently similar to the anticipated insured population so that the statistics thereby obtained can reasonably be expected to produce representative and reliable estimates of the anticipated loss and expense experience for the insured population and so that such statistics are calculated in a manner that is suitable to their intended use.

(b) That a reasonable predictive relationship can be demonstrated to exist between a characteristic used in defining a rating classification and anticipated losses, anticipated expenses, or the uncertainty of loss for the risks to which the classification applies.

(c) That if rates for individual rating cells are calculated by means of arithmetic combinations of relativities for the classifications defining those cells, the relativities are combined in a manner that equitably reflects the anticipated loss and expense experience for those rating cells.

(d) That sampling techniques used in developing classifications and in estimating loss and expense experience are suitable to their intended application.

Evaluation of loss ratios shall make appropriate adjustments for differences in deductibles and limits of liability among insureds, for expense provisions which are not allocated to premiums on a percentage-of-premium basis, and for differences in contingency factors among classifications and shall give due consideration to the credibility of experience for groupings of individuals or risks, to trends in past and prospective loss experience, and to historical patterns between projected and realized loss ratios. For purposes of this subrule, "substantially uniform" means the absence of significant variations among loss ratios.This subrule shall not be construed to prohibit the use of appropriate pure premium relativities to estimate or evaluate rate relativities.

(5) Data of an insurer or rating organization used in calculating actual and credible loss statistics shall be of sufficient volume, or shall be combined in an appropriate manner with suitable data of sufficient volume, so that the statistics thereby calculated are reasonably credible and can reasonably be anticipated to produce reliable estimates of anticipated loss and expense experience.

(6) Data for reasonably anticipated experience used in calculating rates for new coverages and in establishing new classifications shall, to the extent possible, be based on actual experience for similar coverages and for groups of risks similar to the proposed classification and shall be of sufficient volume so that statistics thereby produced can reasonably be anticipated to produce reliable estimates of loss and expense experience.

(7) Relevant external information, including general economic data and other indicators, may be given due consideration in evaluating or projecting loss and expense experience.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1208 Expense provisions {#sec-r-500.1208 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1208}

Rule 8. (1) The expense portion of a rate shall, with regard to each category of expense, be examined and evaluated independently of the loss portion of the rate. Expenses shall not be presumed to change by the same percentage as losses are anticipated to change.

(2) Predictions of future expense costs shall give due consideration to trends and changes in historical expense levels, in actual or reasonably allocated expenses incurred, and in external expense indices and indicators.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1209 Expense allocation {#sec-r-500.1209 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1209}

Rule 9. (1) Expense provisions for each category of expenses shall be reasonably allocated among classifications in a manner that equitably reflects variations, if any, in the manner in which such expenses are anticipated to be incurred with respect to the groups of individuals or risks defined by those classifications. Expenses, other than allocated loss adjustment expenses, shall not be presumed to be incurred proportionally to classification relativities based on anticipated losses.

(2) Expense provisions for premium taxes, if any, shall reflect the applicable premium tax rate.

(3) Expense provisions for each other category of expenses shall be reasonably allocated among classifications based on losses, coverages, exposures, or other basis that equitably measures the variations, if any, in the manner in which such expenses are anticipated to be incurred with respect to the classifications. Expense allocation methods may include percentage-of-premium, uniform-per-coverage, uniform-per-exposure, or other basis, as appropriate and justified.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1210 Exemptions from rules {#sec-r-500.1210 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1210}

Rule 10. (1) The commissioner may, by order, exempt a coverage or type of insurance from the application of 1 or more individual rules if he or she determines that application of the rule or rules will be inappropriate based on the unique characteristics of the coverage or type of insurance.

(2) An insurer or group of insurers may, in writing, request that the commissioner by order exempt a particular coverage or type of insurance from the application of 1 or more of these rules pursuant to subrule (1) of this rule. An insurer or group of insurers filing a request under this rule may, within 30 days after receiving written notice by the commissioner of a denial of the request, appeal to the commissioner. After an evidentiary hearing upon not less than 10 days' written notice to the appellant or appellants, the commissioner shall affirm or reverse the decision.

History

History: 1980 AACS.

R 500.1221 to R 500.1225 1980 CSO And 1980 Cet Unisex Mortality Tables

Mich. Admin. Code R 500.1221 Definitions {#sec-r-500.1221 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1221}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

1980 CSO AND 1980 CET UNISEX MORTALITY TABLES

(By authority conferred on the commissioner of insurance by sections 210 and 4060 of Act No. 218 of the Public Acts of 1956, as amended, being SS500.210 and 500.4060 of the Michigan Compiled Laws)

Rule 1. (1) As used in these rules:

(a) "1980 CET table" means that mortality table which consists of separate rates of mortality for male and female lives, which is developed by the society of actuaries committee to recommend new mortality tables for valuation of standard individual ordinary life insurance, which is incorporated in the 1980 NAIC amendments to the model standard valuation law and standard nonforfeiture law for life insurance, and which is referred to in those models as the commissioners 1980 extended term insurance table.

(b) "1980 CET table (F)" means that mortality table consisting of the rates of mortality for female lives from the 1980 CET table.

(c) "1980 CET table (M)" means that mortality table consisting of the rates of mortality for male lives from the 1980 CET table.

(d) "1980 CSO table, with or without 10-year select mortality factors" means that mortality table which consists of separate rates of mortality for male and female lives, which is developed by the society of actuaries committee to recommend new mortality tables for valuation of standard individual ordinary life insurance, which is incorporated in the 1980 NAIC amendments to the model standard valuation law and standard nonforfeiture law for life insurance, and which is referred to in those models as the commissioners 1980 standard ordinary mortality table, with or without 10-year select mortality factors.

(e) "1980 CSO table (F), with or without 10-year select mortality factors" means that mortality table consisting of the rates of mortality for female lives from the 1980 CSO table, with or without 10-year select mortality factors.

(f) "1980 CSO table (M), with or without 10-year select mortality factors" means that mortality table consisting of the rates of mortality for male lives from the 1980 CSO table, with or without 10-year select mortality factors.

(g) "NAIC" means national association of insurance commissioners.

(2) As used in R 500.1224(1)(a) and (b), "acceptable blend" means any of the following:

(a) One hundred percent male 0% female for tables to be designated as the 1980 CSO-A and 1980 CET-A tables for policies delivered or issued for delivery before January 1, 1985.

(b) Eighty percent male 20% female for tables to be designated as the 1980 CSO-B and 1980 CET-B tables.

(d) Fifty percent male 50% female for tables to be designated as the 1980 CSO-D and 1980 CET-D tables.

(e) Forty percent male 60% female for tables to be designated as the 1980 CSO-E and 1980 CET-E tables.

(f) Twenty percent male 80% female for tables to be designated as the 1980 CSO-F and 1980 CET-F tables.

(g) Zero percent male 100% female for tables to be designated as the 1980 CSO-G and 1980 CET-G tables for policies delivered or issued for delivery before January 1, 1985.

History

History: 1984 AACS.

Mich. Admin. Code R 500.1222 Select factors for use with blended tables {#sec-r-500.1222 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1222}

Rule 2. Gender-blended tables with 10-year select mortality factors, as defined in R 500.1221(2), may be derived by applying select factors to gender-blended tables without select factors where the select factors are derived by using the following formula: zFT/t = (Z)Fm/t + .6(1-Z)Ff/t Z + .6(1-Z) where zFT/t is the gender-blended select factor for year t Fm/t is the male select factor for year t Ff/t is the female select factor for year t Z is the ratio of mail lives to the total lives at the pivotal age

History

History: 1984 AACS.

Mich. Admin. Code R 500.1223 Adoption by reference {#sec-r-500.1223 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1223}

Rule 3. The 1980 CSO table, with or without 10-year select mortality factors, and the 1980 CET table are adopted by reference and incorporated in these rules. A copy of the tables may be obtained free of charge from the Michigan Insurance Bureau, P.O. Box 30220, Lansing, Michigan 48909, or at a cost of 20 cents per page from the National Association of Insurance Commissioners, 1125 Grand Avenue, Kansas City, Missouri 64106.

History

History: 1984 AACS.

Mich. Admin. Code R 500.1224 Substitutions for the 1980 CSO table, with or without 10-year select mortality factors, and the 1980 CET table {#sec-r-500.1224 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1224}

Rule 4. (1) For any policy of life insurance delivered or issued for delivery after August 1, 1983, both of the following provisions apply:

(a) A mortality table which is an acceptable blend of the 1980 CSO table (M) and the 1980 CSO table (F), with or without 10-year select mortality factors, may be substituted for the 1980 CSO table, with or without 10-year select mortality factors for use in determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

(b) A mortality table which is of the same blend as used in subdivision (a) of this subrule, but which is applied to form a blend of the 1980 CET table (M) and the 1980 CET table (F), shall be substituted for the 1980 CET table for use in determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits for those policies of insurance in which the substitution in subdivision (a) of this subrule is made.

(2) If a company wishes to make a substitution as provided in subrule (1)(a) and (b), of this rule, it shall file a written notice of its election to use 1 of the acceptable tables.

(3) The 1980 CSO-A, 1980 CET-A, 1980 CSO-G and 1980 CET-G tables may be used with respect to policies issued on or after January 1, 1985 where the proportion of persons insured is anticipated to be 90% or more of one sex or for certain policies converted from group insurance. Such group conversions issued on or after January 1, 1986 shall use mortality tables based on the blend of lives by sex expected for such policies if such group conversions are considered as extensions of employer-employee benefits plans.

History

History: 1984 AACS.

Mich. Admin. Code R 500.1225 Unfair trade practices act; applicability {#sec-r-500.1225 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1225}

Rule 5. For the purposes of sections 2001 to 2093 of Act No. 218 of the Public Acts of 1956, as amended, being SS500.2001 to 500.2093 of the Michigan Compiled Laws, policies of insurance delivered or issued for delivery for which a substitution has been made pursuant to R 500.1223 shall constitute a separate class of business from those policies of insurance delivered or issued for delivery for which a substitution pursuant to R 500.1223 has not been made.

History

History: 1984 AACS.

R 500.1231 to R 500.1234 Property And Casualty Insurance Company Reserves

Mich. Admin. Code R 500.1231 Property and casualty insurers; case basis and bulk loss reserves {#sec-r-500.1231 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1231}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

PROPERTY AND CASUALTY INSURANCE COMPANY RESERVES

(By authority conferred on the commissioner of insurance by sections 810, 815, and 815a of Act No. 218 of the Public Acts of 1956, as amended, being SS500.810, 500.815, and 500.815a of the Michigan Compiled Laws)

Rule 1. All property and casualty insurers, including mortgage and land contract guaranty insurers, shall compute and maintain adequate case basis and bulk loss reserves. The method used to determine the loss reserve shall accurately reflect loss frequency and loss severity and shall include components for claims reported and unpaid and for claims incurred but not reported.

History

History: 1982 AACS.

Mich. Admin. Code R 500.1232 Mortgage and land contract quaranty insurers; unearned premium reserves {#sec-r-500.1232 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1232}

Rule 2. (1) The unearned premium reserve for premiums paid in advance on mortgage and land contract quaranty insurance policies covering a risk period of more than 1 year shall be calculated based upon the annual unearned premium factor specified in table 1.

(2) On premiums paid in advance for coverage period in excess of 15 years, the unearned portion of the premium during the first 15 years of coverage shall be the premium collected minus an amount equal to the premium that would have been earned had the applicable premiums for 15 years' coverage been received. The premium remaining after 15 years shall be released from the unearned premium reserve pro rata over the remaining term of coverage.

History

History: 1982 AACS.

Mich. Admin. Code R 500.1233 Mortgage and land contract guaranty insurers; contingency loss reserves {#sec-r-500.1233 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1233}

Rule 3. (1) Mortgage and land contract guaranty insurers shall establish and maintain a contingency loss reserve for the purpose of protecting insureds against the effect of adverse economic cycles and to permit mortgage guaranty insurers to comply with section 832(e) of the internal revenue code of 1954, as amended.

(2) The annual contribution to the contingency reserve shall be 50% of the earned premium reported in the fire and casualty annual statement.

(3) The contingency reserve shall be maintained for 120 months. That portion of the contingency reserve established and maintained for more than 120 months shall be released and shall no longer constitute part of the contingency reserve.

(4) The total contingency reserve shall be reported as a liability in the financial statement. The change in contingency reserve for the year shall be reported in the financial statement as a deduction from underwriting income. Appropriate entries shall be made in the underwriting and investment exhibit--statement of income of the financial statement of the insurer.

History

History: 1982 AACS.

Mich. Admin. Code R 500.1234 Table 1 {#sec-r-500.1234 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1234}

Rule 4. Table 1 reads as follows:

Figure for 500.1234

History

History: 1982 AACS.

R 500.1251 to R 500.1251 Surplus Lines Insurance Fees

Mich. Admin. Code R 500.1251 Surplus lines insurance fee {#sec-r-500.1251 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1251}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE

SURPLUS LINES INSURANCE FEES

(By authority conferred on the director of the department of insurance and financial services by sections 210 and 1955 of the insurance code of 1956, 1956 PA 218, MCL 500.210, and 500.1955, and Executive Reorganization Order No. 2013-1, MCL 550.991)

Rule 1. (1) Subject to the limitations set forth in section 1915 of the insurance code of 1956, 1956 PA 218, MCL 500.1915, a surplus lines licensee issuing a personal or commercial surplus lines insurance policy may charge a reasonable fee to cover underwriting and other expenses that are unique to surplus lines. Expenses unique to surplus lines may include, but are not limited to, issuing, processing, or auditing the surplus lines policy, but only to the extent the service is provided by the licensee, or the expense is incurred by the licensee, and it is documented and verifiable. Expenses unique to surplus lines do not include costs incurred in maintaining offices and compensating the licensee’s employees.

(2) The licensee’s fee disclosure to the insured under section 1915(2)(b) of the insurance code of 1956, 1956 PA 218, MCL 500.1915, must include whether the fee was charged in addition to a commission.

(3) The licensee shall provide proof of the itemized fees charged and evidence of the requisite disclosure of the fees to the director on request.

History

History: 1981 AACS; 2015 AACS; 2024 MR 11, Eff. June 17, 2024.

R 500.1281 to R 500.1285 Smoker and Nonsmoker Mortality Tables

Mich. Admin. Code R 500.1281 Definitions {#sec-r-500.1281 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1281}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

SMOKER AND NONSMOKER MORTALITY TABLES

(By authority conferred on the commissioner of insurance by sections 210, 834, and 4060 of Act No. 218 of the Public Acts of 1956, as amended, being SS500.210, 500.834, and 500.4060 of the Michigan Compiled Laws)

Rule 1. As used in these rules:

(a) "1958 CET table" means that mortality table developed by the society of actuaries special committee on new mortality tables which is incorporated in the NAIC model standard nonforfeiture law for life insurance and which is referred to in that model as the commissioners 1958 extended term insurance table.

(b) "1980 CET table" means that mortality table consisting of separate rates of mortality for male and female lives which is developed by the society of actuaries committee to recommend new mortality tables for valuation of standard individual ordinary life insurance, which is incorporated in the 1980 NAIC amendments to the model standard nonforfeiture law for life insurance, and which is referred to in those models as the commissioners 1980 extended term insurance table.

(c) "Composite mortality tables" means the mortality tables defined in subdivisions (a), (b), (d), and (e) of this rule as they were originally published with rates of mortality that do not distinguish between smokers and nonsmokers.

(d) "1958 CSO table" means that mortality table developed by the society of actuaries special committee on new mortality tables which is incorporated in the NAIC model standard nonforfeiture law for life insurance and which is referred to in that model as the commissioners 1958 standard ordinary mortality table.

(e) "1980 CSO table, with or without 10-year select mortality factors" means that mortality table which consists of separate rates of mortality for male and female lives, which is developed by the society of actuaries committee to recommend new mortality tables for valuation of standard individual ordinary life insurance, which is incorporated in the 1980 NAIC amendments to the model standard valuation law, and standard nonforfeiture law for life insurance, and which is referred to in those models as the commissioners 1980 standard ordinary mortality table, with or without 10-year select mortality factors. The same select factors shall be used for both smokers and nonsmokers tables.

(f) "NAIC" means national association of insurance commissioners.

(g) "Smoker and nonsmoker mortality tables" means the mortality tables with separate rates of mortality for smokers and nonsmokers derived from the tables defined in subdivisions (a), (b), (d), and (e) of this rule which were developed by the society of actuaries task force on smoker and nonsmoker mortality and the California insurance department staff, recommended by the NAIC technical staff actuarial group, and adopted by the national association of insurance commissioners on December 8, 1983.

History

History: 1986 AACS.

Mich. Admin. Code R 500.1282 Adoption by reference {#sec-r-500.1282 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1282}

Rule 2. The 1980 CSO table, with or without 10-year select mortality factors, the 1958 CSO table, the 1980 CET table, the 1958 CET table, and the corresponding smoker and nonsmoker mortality tables are adopted by reference and incorporated in these rules. A copy of the tables may be obtained free of charge from the Michigan Insurance Bureau, P.O.

Box 30220, Lansing, Michigan 48909, or at a cost of 20 cents per page from the National Association of Insurance Commissioners, 1125 Grand Avenue, Kansas City, Missouri 64106.

History

History: 1986 AACS.

Mich. Admin. Code R 500.1283 Utilization of the 1958 CSO and CET smoker and nonsmoker mortality tables {#sec-r-500.1283 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1283}

Rule 3. (1) In determining minimum cash surrender values, minimum amounts and minimum periods of paid-up nonforfeiture benefits and minimum reserve liabilities, the 1958 CSO and CET smoker and nonsmoker mortality tables may only be used as set forth in this rule. The requirements of this rule shall apply to any policy of insurance delivered or issued for delivery in this state after the operative date of paragraphs 9 to 19 of section 4060(5) of Act No. 218 of the Public Acts of 1956, as amended, being S500.4060(5), paragraphs 9 to 19, of the Michigan Compiled Laws, for that policy form, and before January 1, 1989. The 1958 CSO smoker and nonsmoker mortality tables may be substituted for the 1980 CSO table, with or without 10-year select mortality factors, and the 1958 CET smoker and nonsmoker mortality tables may be substituted for the 1980 CET table.

(2) For any category of insurance issued on female lives with minimum reserve liabilities and minimum cash surrender values and amounts of paid-up nonforfeiture benefits determined using the 1958 CSO or 1958 CET smoker and nonsmoker mortality tables, such minimum values may be calculated according to an age not more than 6 years younger than the actual age of the insured.

(3) The 1958 CSO and CET smoker and nonsmoker mortality tables shall be utilized only if they are applicable to every insurance policy corresponding to the policy form for which the insurer has elected to use these tables.

History

History: 1986 AACS.

Mich. Admin. Code R 500.1284 Utilization of the 1980 CSO and CET smoker and nonsmoker mortality tables {#sec-r-500.1284 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1284}

Rule 4. (1) In determining minimum cash surrender values, minimum amounts and minimum periods of paid-up nonforfeiture benefits and minimum reserve liabilities, the 1980 CSO and CET smoker and nonsmoker mortality tables may only be used as set forth in this rule. The requirements of this rule shall apply to any policy of insurance delivered or issued for delivery in this state after the operative date of paragraphs 9 to 19 of section 4060(5) of Act No. 218 of the Public Acts of 1956, as amended, being S500.4060(5), paragraphs 9 to 19, of the Michigan Compiled Laws, for that policy form, at the option of the company. The 1980 CSO smoker and nonsmoker mortality tables, with or without 10-year select mortality factors, may be substituted for the 1980 CSO table, with or without 10-year select mortality tables, and the 1980 CET smoker and nonsmoker mortality tables may be substituted for the 1980 CET table.

(2) The 1980 CSO and CET smoker and nonsmoker mortality tables are sex-distinct tables. They may be gender blended in accordance with the provisions of R 500.1221 to R 500.1224.

(3) The 1980 CSO and CET smoker and nonsmoker mortality tables shall be utilized only if they are applicable to every insurance corresponding to the policy form for which the insurer has elected to use these tables.

History

History: 1986 AACS.

Mich. Admin. Code R 500.1285 Insurance plan with separate rates for smokers and nonsmokers; selection of method to determine issues of plan {#sec-r-500.1285 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1285}

Rule 5. (1) For each plan of insurance with separate rates for smokers and nonsmokers an insurer may select 1 of the following methods to apply to such plan:

(a) Use composite mortality tables to determine minimum reserve liabilities, minimum cash surrender values, and amounts of paid-up nonforfeiture benefits.

(b) Use smoker and nonsmoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by section 834(6) of Act No. 218 of the Public Acts of 1956, as amended, being S500.834(6) of the Michigan Compiled Laws, and use composite mortality tables to determine the basic minimum reserves, minimum cash surrender values, and amounts of paid-up nonforfeiture benefits.

(c) Use smoker and nonsmoker mortality tables to determine minimum reserve liabilities, minimum cash surrender values, and amounts of paid-up nonforfeiture benefits.

(2) Once an insurer has selected 1 of the methods specified in subrule (1) of this rule to apply with respect to a particular plan of insurance, such method shall not be changed without the prior approval of the commissioner.

History

History: 1986 AACS.

R 500.1301 to R 500.1310 Fire And Inland Marine Insurance Rates

Mich. Admin. Code R 500.1301 Definitions {#sec-r-500.1301 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1301}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

FIRE AND INLAND MARINE INSURANCE RATES

(By authority conferred on the commissioner of insurance by sections 210 and 2674 of Act No. 218 of the Public Acts of 1956, as amended, being SS500.210 and 500.2674 of the Michigan Compiled Laws)

Rule 1. As used in these rules:

(a) "Classification" means a grouping of individuals or risks on the basis of 1 or more characteristics for purposes of measuring and rating differences in anticipated losses or expenses, or both. For purposes of these rules, a classification shall not include a grouping of individuals or risks solely for statistical data gathering purposes.

(b) "Code" means Act No. 218 of the Public Acts of 1956, as amended, being S500.100 et seq. of the Michigan Compiled Laws, and known as the insurance code of 1956.

(d) "Loss portion" means that portion of a rate which is attributable to provisions for incurred losses and allocated loss adjustment expenses.

(e) "Loss ratio" means, for purposes of R 500.1307(4)(e), any of the following ratios for a specified time period, as appropriate for the context of evaluation:

(i) The ratio of actual incurred losses and allocated loss adjustment expenses to total earned premiums at collected rate levels.

(ii) The ratio of actual incurred losses and allocated loss adjustment expenses to total earned premiums at current rate levels.

(iii) The ratio of reasonably anticipated incurred losses and allocated loss adjustment expenses to total estimated earned premiums at proposed rate levels.

(f) "Private residential property insurance" means insurance for an individual's residence, including insurance for an owner-occupied condominium unit, insurance for owner-occupied residential dwellings containing 4 or fewer apartments or condominium units, and insurance for a tenant of a room, an apartment, or a house, provided by a Michigan standard policy as set forth in section 2832 of the code and, when contained in or indorsed to a Michigan standard policy providing insurance for an individual's residence, other insurance intended primarily to insure residential property, obligations, and liabilities.

Private residential property insurance shall not include insurance intended to insure commercial, industrial, professional, or business property, obligations, or liabilities.

(g) "Rate differential" means either the ratio of rates for any 2 rating cells or the absolute difference in rates for any 2 rating cells, whichever is applicable for a particular rating system.

(h) "Rating cell" means a group of individuals or risks for which a single rate is determined when 2 or more rating classifications are combined to define a population of individuals or risks for rating purposes.

(i) "Relativity" means either the ratio of rates for any 2 rating classifications or the absolute difference in rates for any 2 rating classifications, whichever is applicable for a particular rating system.

(j) "Uncertainty of loss" means a measure of the nature and the extent of the variability of actual losses for a group of individuals or risks from the mean anticipated loss for the group and includes other similar measures of risk.

(k) "Underwriting" means the offer or refusal to insure, the offer or refusal to continue to insure, or the limitation of the amount of coverage available to an individual, risk, or class of individuals or risks.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1302 Applicability {#sec-r-500.1302 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1302}

Rule 2. These rules apply to a person who is, or may hereafter be, subject to the jurisdiction of the commissioner of insurance.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1303 Construction of rules {#sec-r-500.1303 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1303}

History

History: 1980 AACS.

Mich. Admin. Code R 500.1304 Reporting guidelines {#sec-r-500.1304 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1304}

Rule 4. Subject to section 2664 of the code, the commissioner may issue reasonable guidelines and procedures relating to the collection and reporting of data for purposes of evaluating rates and classifications or the extent and nature of competition. The guidelines and procedures shall provide for the option of using reasonable sampling techniques, when practicable, provided that any data thereby obtained are reportable in a uniform and consistent manner as may be required.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1305 Excessive rates {#sec-r-500.1305 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1305}

Rule 5. (1) For the purposes of section 2603(1)(d) of the code, a rate is unreasonably high for the insurance coverage provided if it is unreasonably high in relation to anticipated losses or expenses, or both, or to the uncertainty of loss for the insurance coverage provided.

(a) The relevant market for the coverage or the type of insurance to which the rate applies.

(b) The number of insurers and the number of self-insurers actively engaged in writing or providing the coverage or type of insurance in the relevant market.

Market shares may be measured either by premiums or exposures.

(d) Past and prospective trends in the availability of coverage and coverage options for insurance of that type in the relevant market.

(f) The ability and potential for firms to enter and exit the relevant market and for financial capital and surplus funds to be allocated to, and to be removed from, the relevant market.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1306 Inadequate rates {#sec-r-500.1306 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1306}

Rule 6. For purposes of section 2603(1)(d) of the code, both of the following provisions apply:

History

History: 1980 AACS.

Mich. Admin. Code R 500.1307 Unfairly discriminatory rates {#sec-r-500.1307 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1307}

Rule 7. (1) For purposes of section 2603(1)(d) of the code, a rate for a coverage is unfairly discriminatory in relation to another rate for the same coverage if the differential between the rates is not reasonably justified by differences in mean anticipated losses or expenses, or both, or by differences in the uncertainty of loss for the individuals or risks to which the rates apply. A reasonable justification shall be supported by a reasonable classification system, by sound actuarial principles, and by actual and credible loss and expense statistics or, in the case of new coverages and classifications, by reasonably anticipated loss and expense experience.

(4) Sound actuarial principles shall include, but not be limited to, all of the following principles:

(d) That sampling techniques used in developing classifications and in estimating loss and expense experience are suitable to their intended application.

(e) That with regard to private residential property insurance, rates for an insurance coverage provided are established in a manner that can reasonably be anticipated to produce loss ratios which are substantially uniform among the classifications, kinds, or types of individuals or risks to which the rates apply. Evaluation of loss ratios shall make appropriate adjustments for differences in deductibles and limits of liability among insureds, for expense provisions which are not allocated to premiums on a percentage-of-premium basis, and for differences in contingency factors among classifications and shall give due consideration to the credibility of experience for groupings of individuals or risks, to trends in past and prospective loss experience, and to historical patterns between projected and realized loss ratios. For purposes of this subrule, "substantially uniform" means the absence of significant variations among loss ratios.This subrule shall not be construed to prohibit the use of appropriate pure premium relativities to estimate or evaluate rate relativities.

(7) Relevant external information, including general economic data and other indicators, may be given due consideration in evaluating or projecting loss and expense experience.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1308 Expense provisions {#sec-r-500.1308 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1308}

History

History: 1980 AACS.

Mich. Admin. Code R 500.1309 Expense allocation {#sec-r-500.1309 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1309}

(2) Expense provisions for premium taxes, if any, shall reflect the applicable premium tax rate.

History

History: 1980 AACS.

Mich. Admin. Code R 500.1310 Exemptions from rules {#sec-r-500.1310 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1310}

History

History: 1980 AACS.

R 500.1351 to R 500.1359 Workers' Compensation Insurance

Mich. Admin. Code R 500.1351 Premium dispute; insurer's responsibility to provide information upon conclusion of the personal meeting {#sec-r-500.1351 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1351}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

WORKERS' COMPENSATION INSURANCE

(By authority conferred on the commissioner of insurance by sections 210, 2407, and 2419 of Act No. 218 of the Public Acts of 1956, as amended, being SS500.210, 500.2407, and 500.2419 of the Michigan Compiled Laws)

Rule 1. (1) An insured who has reason to believe that the insured's premium charges for workers' compensation insurance are excessive as a result of unreasonable reserves or the unreasonable redemption of a claim or claims is entitled to a personal meeting with a management representative of the insurer. Upon conclusion of the personal meeting, the insurer shall provide the following information to the insured:

(a) The action taken by the insurer.

(b) The facts, with supporting documentation, upon which the action is based.

(c) A statement explaining the insured's right to appeal the matter to the commissioner within 30 days after receipt of the information provided pursuant to this rule.

(2) The insurer shall offer to provide the information in writing. If the insured accepts the offer, the insurer shall mail the written statement, with supporting documentation if any, by first-class mail, within 3 business days after acceptance.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1352 Premium dispute; appeal to commissioner {#sec-r-500.1352 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1352}

Rule 2. (1) If the personal meeting involving the insured and the insurer fails to resolve the dispute, the insured is entitled to bring the matter before the commissioner for resolution. The commissioner shall rule on the reasonableness of reserves or redemptions only with respect to their application in an insurer's rating system. In making a ruling on the reasonableness of a reserve calculation used in applying an insurer's rating system, the commissioner shall take into account the following factors:

(a) Whether or not the initial reserve amount is consistent with the information about the claim available to the insurer at the time the initial case reserve was created.

(b) The presence or absence of reasonable adjustments to the reserve as additional information becomes available.

(2) The insured shall appeal the matter to the commissioner within 30 days of the date the insured receives the information provided pursuant to R 500.1351.

(3) The insured is entitled to a review of the matter by the commissioner either by a review of written materials or through a meeting with the parties involved in the dispute.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1353 Review of premium dispute; notice; responsibilities of commissioner {#sec-r-500.1353 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1353}

Rule 3. (1) When conducting a review of a premium dispute through written materials, the commissioner shall, by first-class mail, notify the insurer of the matter under consideration and inform the insurer of the time period within which any reply shall be made.

Such notification shall be given within 10 working days after the commissioner receives the appeal.

(2) When conducting a review of a dispute through a meeting with the parties involved, the commissioner shall do the following within 10 working days after receiving the complaint:

(a) Set a time for the meeting and notify the parties, by first-class mail, of the time and place of the meeting.

(b) Inform the insurer of the time period within which any reply shall be made.

(c) The commissioner shall conduct meetings in a manner which allows the disputing parties to present relevant facts, records, dates, times, and names to substantiate their positions.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1354 Basis for premium dispute decisions by the commissioner {#sec-r-500.1354 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1354}

Rule 4. The commissioner shall base each decision upon written materials submitted by the parties and the statements of the parties at the meeting, if any. Failure of either party to supply any information in a timely manner shall result in a decision based upon information available to the commissioner at the time of the decision.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1355 Premium dispute decisions by the commissioner {#sec-r-500.1355 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1355}

Rule 5. (1) When reviewing a premium dispute through written materials, the commissioner shall prepare a written decision within 10 working days after the insurer submits a reply to the notice issued pursuant to R 500.1353(1) or, if a reply is not submitted, within 10 working days after the time for submitting a reply has expired.

(2) If a meeting is held, the commissioner shall prepare a written decision within 10 working days after the meeting is concluded.

(3) The commissioner shall send copies of the written decision to the parties by firstclass mail.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1357 Data reporting; "statistical plan" defined {#sec-r-500.1357 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1357}

Rule 7. (1) Each insurer subject to section 2407 of Act No. 218 of the Public Acts of 1956, as amended, through S500.2407 of the Michigan Compiled Laws, shall file with the designated advisory organization all of the historical information relating to premiums, losses, and exposures required by the statistical plans of the designated advisory organization that have been approved by the commissioner.

(2) As used in this rule, "statistical plan" means a procedure for collecting information related to workers' compensation insurance premiums, losses, or exposures on a routine or special call basis from all insurers subject to section 2407 of Act No. 218 of the Public Acts of 1956, as amended, or from a sample of such insurers.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1358 Data reporting; timing of designated advisory organization reports to data collection agency {#sec-r-500.1358 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1358}

Rule 8. The designated advisory organization shall provide to the data collection agency annual reports of loss and exposure data by classification for the policy years and in the formats specified by the data collection agency not later than November 1 of each year.

History

History: 1983 AACS.

Mich. Admin. Code R 500.1359 Data reporting; designated advisory organization reports to commissioner {#sec-r-500.1359 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1359}

Rule 9. The designated advisory organization shall provide to the commissioner such reports of data which it collects that the commissioner needs to monitor competition in the workers' compensation insurance market and to evaluate the effect of law changes and court decisions.

History

History: 1983 AACS.

R 500.1371 to R 500.1387 Advertisement Of Life Insurance And Annuities

Mich. Admin. Code R 500.1371 Definitions {#sec-r-500.1371 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1371}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

ADVERTISEMENT OF LIFE INSURANCE AND ANNUITIES

(By authority conferred on the commissioner of insurance by section 210 of Act No. 218 of the Public Acts of 1956, as amended, being S500.210 of the Michigan Compiled Laws)

Rule 1. As used in these rules:

(a) "Advertisement" means material designed to create public interest in life insurance or annuities or in an insurer, or to induce the public to purchase, increase, modify, reinstate, or retain a policy, including all of the following:

(i) Printed and published material, audiovisual material, and descriptive literature of an insurer used in any of the following:

(A) Director mail.

(B) Newspapers.

(D) Radio and television scripts.

(E) Billboards and similar displays.

(ii) Descriptive literature and sales aids of all kinds issued by an insurer or agent, including, but not limited to, any of the following:

(A) Circulars.

(B) Leaflets.

(D) Depictions.

(E) Illustrations.

(F) Form letters.

(iii) Prepared sales talks, presentations, and material for use by sales personnel and agents.

"Advertisement" does not include communications or materials used within an insurer's own organization and not available for dissemination to the public; communications with policyholders other than material designed to persuade policyholders to purchase, increase, modify, reinstate, or retain a policy; or a general announcement from a group or blanket policyholder to eligible individuals on an employment or membership list that a policy or program has been written or arranged.

(b) "Policy" means any of the following which provides for life insurance or annuity benefits:

(i) A policy.

(ii) A plan.

(iii) A certificate.

(iv) A contract.

(v) An agreement.

(vi) A statement of coverage.

(v) A rider.

(viii) An endorsement.

History

History: 1984 AACS.

Mich. Admin. Code R 500.1375 Form and contents of advertisements {#sec-r-500.1375 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1375}

Rule 5. (1) Advertisements shall be truthful and not misleading in fact or by implication.

The form and content of an advertisement of a policy shall be sufficiently complete and clear so as to avoid deception. Whether an advertisement is misleading or deceptive shall be determined from the overall impression that the advertisement may be reasonably expected to create.

(2) An advertisement shall not use the terms "investment," "investment plan,"

"expansion plan," "profit," "profits," "profit sharing," "interest plan," "savings," "savings plan," or other similar terms in connection with a policy in a context or under circumstances or conditions which mislead a prospective insured to believe that the prospective insured or beneficiary will or may receive something other than a policy or some benefit not available to other persons of the same class and equal expectation of life.

History

History: 1984 AACS.

Mich. Admin. Code R 500.1377 Disclosure requirements {#sec-r-500.1377 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1377}

Rule 7. (1) The information required to be disclosed by these rules shall not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the advertisement so as to be confusing or misleading.

(2) An advertisement shall not omit material information or use words, phrases, statements, references, or illustrations if such omission or such use is misleading or deceptive to purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered, premium payable, or state or federal tax consequences. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale, or an offer is made to refund the premium if the purchaser is not satisfied, does not remedy misleading statements.

(3) If an advertisement uses terms or phrases such as "Non-Medical" or "No Physical Examination Required" or uses similar terms or phrases and if issue is not guaranteed, such terms or phrases shall be accompanied by a further disclosure of equal prominence and nearby to the effect that issuance of the policy will depend upon answers to health questions contained in the application, if such is the fact.

(4) An advertisement shall not use as the name or title of a life insurance policy any phrase which does not include the words "life insurance," unless accompanied by other language clearly indicating it is life insurance.

(5) An advertisement shall prominently describe the type of policy advertised.

(6) An advertisement of an insurance policy marketed by direct response technique shall not state or imply that because there is no agent or commission involved there will be cost savings to prospective purchasers, unless such is the fact.

(7) An advertisement for a policy containing graded or modified benefits shall prominently display any limitation of benefits. If the premium is level and coverage decreases or increases with age or duration, such coverage changes shall be prominently disclosed.

(8) An advertisement for a policy with non-level premiums shall prominently describe the premium changes.

(9) All of the following provisions apply with respect to dividends:

(a) An advertisement shall not utilize or describe dividends in a manner which is misleading.

(b) An advertisement shall not state or imply that the payment or amount of dividends is guaranteed. If dividends are illustrated, they shall be based on the insurer's current dividend scale, and the illustration shall contain a statement to the effect that they are not be construed as guarantees or estimates of dividends to be paid in the future.

(c) An advertisement shall not state or imply that illustrated dividends under a participating policy or pure endowments, or both, will be or can be sufficient at any future time to assure, without the further payment of premiums, the receipt of benefits, such as a paid-up policy, unless the advertisement clearly and precisely explains what benefits or coverage would be provided at such time and under what conditions this would occur.

(d) If level benefit insurance is contingent upon dividends providing term insurance or paid-up insurance, or both, any advertisement or illustration shall disclose that insufficient or not dividends will either cause a reduction or elimination of supplemental coverage or that additional premium will be required to keep the original death benefit amount in force.

(10) An advertisement shall not state or imply that a purchaser of a policy will share in or receive a stated percentage or portion of the earnings on the general account assets of the company.

(11) An advertisement shall not contain statistical information relating to any insurer or policy unless it accurately reflects recent and relevant facts and is sufficiently complete and clear so as not to be misleading.The source of any such statistics used in an advertisement shall be identified therein.

(12) All of the following provisions apply with respect to introductory, initial, or special offers and enrollment periods:

(a) An advertisement of an individual policy or combination of such policies shall not state or imply that such policy or combination of such policies is an introductory, initial, or special offer, or that applicants will receive substantial advantages not available at a later date, or that the offer is available only to a specified group of individuals, unless such is the fact.

An advertisement shall not describe an enrollment period as "special" or "limited" or use similar words or phrases in describing it when the insurer uses successive enrollment periods as its usual method of marketing its policies.

(b) An advertisement shall not state or imply that only a specific number of policies will be sold, or that a time is fixed for the discontinuance of the sale of the particular policy advertised, because of special advantages available in the policy, unless such is the fact.

(c) An enrollment period during which a particular insurance policy may be purchased on an individual basis shall not be advertised within this state unless there has been a lapse of not less than 3 months between the close of the immediately preceding enrollment period for the same policy and the opening of the new enrollment period, but not more than twice in any calendar year. The advertisement shall specify the date by which the applicant shall mail the application, which shall be not less 10 days and not more than 40 days from the date on which such enrollment period is advertised for the first time. This rule applies to all advertising by any 1 insurer, which includes all the affiliated companies of a group of insurance companies under common management or control. This rule does not apply to the use of a termination or cutoff date beyond which an individual application for a guaranteed issue policy will not be accepted by an insurer in those instances where the application has been set to the applicant in response to the applicant's request. It is also inapplicable to solicitation by the group policyholder of employees or members of a particular group or association which otherwise would be eligible under specific provisions of Act No. 218 of the Public Acts of 1956, as amended, being S500.100 et seq. of the Michigan Compiled Laws, for group insurance.In cases where an insurance product is marketed on a direct mail basis to prospective insureds by reason of some common relationship with a sponsoring organization, this rule shall be applied separately to each sponsoring organization.

(13) An advertisement of a particular policy shall not state or imply that prospective insureds shall be or become members of a special class or group and as such enjoy special rates, dividends, or underwriting privileges, unless such is the fact.

(14) An advertisement shall not make unfair or incomplete comparisons of policies, benefits, dividends, or rates of other insurers. An advertisement shall not falsely or unfairly describe other insurers or their policies, services, or methods of marketing.

(15) For individual deferred annuity products or deposit funds, excluding variable annuities and investment annuities, all of the following provisions shall apply:

(a) Any illustrations or statements containing or based upon interest rates higher than the guaranteed accumulation interest rates shall set forth with equal prominence comparable illustrations or statements containing or based upon the guaranteed accumulation interest rates. Such higher interest rates shall not be greater than those currently being credited by the company unless such higher rates have been publicly declared by the company with an effective date for new issues not more than 3 months subsequent to the date of declaration. Any illustrations shall be based on gross premiums.

(b) If an advertisement illustrates or states premiums, net interest rates, or accumulative values, the actual relationship between the net and gross premium shall be disclosed in close proximity thereto and with equal prominence, describing the first year and renewal charges, including, but not limited to, expenses and annual contract, collection, and mortality charges.

(c) If any contract does not provide a cash value or return of premium benefit due to surrender or death prior to the commencement of payment of any annuity benefit, any illustration or statements concerning such contracts shall prominently state that these benefits are not provided.Return of premium or cash value shall not be referred to as a death benefit.

History

History: 1984 AACS; 1997 AACS.

Mich. Admin. Code R 500.1379 Identification of insurer and policy {#sec-r-500.1379 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1379}

Rule 9. (1) The name of the insurer shall be clearly identified. If any specific individual policy is advertised, it shall be identified either by form number or other appropriate description. An advertisement shall not use a trade name, an insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer, service mark, slogan, symbol, or other device or reference without disclosing the name of the insurer, in equal or greater prominence and in close proximity thereto, if the advertisement would be misleading or deceptive as to the true identity of the insurer or create the impression that a company other than the insurer has any responsibility for the financial obligation under a policy.

(2) An advertisement or related material shall not use any combination of words, symbols, or physical materials which by their content, phraseology, shape, color, or other characteristics are so similar to a combination of words, symbols, or physical materials used by a governmental program or agency or otherwise appear to be of such a nature that they tend to mislead prospective insureds into believing that the solicitation is in some manner connected with such governmental program or agency.

History

History: 1984 AACS.

Mich. Admin. Code R 500.1381 Advertising beyond limits of licensing jurisdiction; recommendation, endorsement, or rating of insurer by governmental entity {#sec-r-500.1381 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1381}

Rule 11. (1) An advertisement which is intended to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed shall not imply licensing beyond such limits.

(2) An advertisement may state that an insurer is licensed in the state where the advertisement appears, if it does not exaggerate such fact or suggest or imply that competing insurers may not be so licensed.

(3) An advertisement shall not state or create the impression that the insurer, its financial condition or status, the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds of plans of insurance are recommended or endorsed by any governmental entity, unless such is the fact. The nature and extent of any recommendation, endorsement, or rating shall be fully explained.

History

History: 1984 AACS.

Mich. Admin. Code R 500.1383 False and misleading statements; recommendation or rating by commercial rating organization {#sec-r-500.1383 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1383}

Rule 13. An advertisement shall not contain statements, pictures, or illustrations which are false or misleading, in fact or by implication, with respect to the assets, liabilities, insurance in force, corporate structure, financial condition, age, or relative position of the insurer in the insurance business. An advertisement shall not contain a recommendation or rating by any commercial rating organization unless it clearly defines the scope and extent of the recommendation or rating.

History

History: 1984 AACS.

Mich. Admin. Code R 500.1385 Advertisements disseminated in state; maintenance of specimen copy; filing with the commissioner; certificate of compliance {#sec-r-500.1385 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1385}

Rule 15. (1) An insurer shall maintain at its home or principal office a complete file containing a specimen copy of printed, published, or prepared advertisements of its policies hereafter disseminated in this state, with a notation indicating the manner and extent of distribution and the form number of any policy advertised. Such file shall be subject to inspection by the commissioner. All such advertisements shall be maintained in the file for a period of either 4 years or until the filing of the next regular report on the examination of the insurer, whichever period is longer.

(2) An insurer subject to the provisions of these rules shall file with the commissioner, with its annual statement, a certificate of compliance executed by an authorized officer of the insurer wherein it is stated, if such is the fact, that to the best of the officer's knowledge, information, and belief, the advertisements which were disseminated by, or on behalf of, the insurer in this state during the preceding statement year, or during the portion of such year when these rules were in effect, compiled in all respects with the provisions of these rules and the insurance laws of this state as implemented and interpreted by these rules.

History

History: 1984 AACS; 1997 AACS.

Mich. Admin. Code R 500.1387 Conflict with other rules {#sec-r-500.1387 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1387}

Rule 17. It is not intended that these rules conflict with or supersede any rules currently in force or subsequently adopted in this state governing specific aspects of the sale or replacement of life insurance or annuities, including, but not limited to, rules dealing with life insurance cost comparison indices, deceptive practices in the sale of life insurance, and replacement of life insurance policies. Consequently, no disclosure required under any such rules shall be deemed to be an advertisement within the meaning of these rules.

History

History: 1984 AACS.

R 500.1501 to R 500.1521 Essential Insurance

Mich. Admin. Code R 500.1501 Definitions {#sec-r-500.1501 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1501}

DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES

INSURANCE BUREAU

ESSENTIAL INSURANCE

(By authority conferred on the director of the department of insurance and financial services by sections 210, 2102, 2113, 2127, and 2130 of the insurance code of 1956, 1956 PA 218, MCL 500.210, 500.2102, 500.2113, 500.2127, and 500.2130 and Executive Reorganization Order No.

2013-1, MCL 550.991)

Rule 1. (1) As used in these rules:

(a) “Classification” means a grouping of individuals or risks on the basis of 1 or more characteristics for purposes of measuring and rating differences in anticipated losses or expenses, or both. A classification does not include a grouping of individuals or risks solely for statistical data gathering purposes.

(b) “Code” means the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.

(c) “Complaint” means a written statement by a person to an insurer, a producer, or the director claiming that an insurer or producer has improperly denied him or her automobile insurance or home insurance or has charged an incorrect premium for automobile insurance or home insurance.

(d) “Denial” or “denied” means both declination and termination.

(e) “Incorrect premium” means a premium charged for automobile insurance or home insurance that is not consistent with a rate or rating plan or classification approved by the department.

(f) “Loss portion” means the portion of a rate that is attributable to provisions for incurred losses and allocated loss adjustment expenses.

(g) “Loss ratio” means any of the following ratios for a specified time period, as appropriate for the context of evaluation:

(i) The ratio of actual incurred losses to total earned premiums at collected rate levels.

(ii) The ratio of actual incurred losses to total earned premiums at current rate levels.

(iii) The ratio of reasonably anticipated incurred losses to total estimated earned premiums at proposed rate levels.

(h) “Rating cell” means a group of individuals or risks for which a single rate is determined when 2 or more rating classifications are combined to define a population of individuals or risks for rating purposes.

(i) “Relativity” means either the ratio of rates for any 2 rating classifications or the absolute difference in rates for any 2 rating classifications, whichever is applicable for a particular rating system.

(j) “Uncertainty of loss” means a measure of the nature and the extent of the variability of actual losses for a group of individuals or risks from the mean anticipated loss for the group and includes other similar measures of risk.

(k) “Underwriting” means the offer or refusal to insure, the offer or refusal to continue to insure, or the limitation of the amount of coverage available to, an individual, risk, or class of individuals or risks.

(2) A term defined in the code has the same meaning when used in these rules.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1502 Other insurance coverages to be considered to be automobile insurance {#sec-r-500.1502 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1502}

Rule 2. In addition to the insurance coverages described in section 2102(2)(a), (b), and (c) of the code, MCL 500.2102, all of the following insurance coverages are considered to be automobile insurance under section 2102(2)(d) of the code, MCL 500.2102:

(a) Insurance coverage commonly known as “uninsured motorist insurance,” for both bodily injury and property damage claims.

(b) Insurance coverage for the liability existing under section 3135(3)(e) of the code, MCL 500.3135.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1503 Excessive rates {#sec-r-500.1503 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1503}

Rule 3. For the purposes of section 2109(1)(a) of the code, MCL 500.2109, both of the following apply in determining whether a rate for automobile insurance or home insurance is excessive:

(a) A rate is unreasonably high for the insurance coverage provided if it is unreasonably high in relation to anticipated losses or expenses, or both, or to the uncertainty of loss for the insurance coverage provided.

(b) A determination regarding the existence of a reasonable degree of competition must give due consideration to, at a minimum, all of the following:

(i) The relevant market for the coverage or the type of insurance to which the rate applies.

(ii) The number of insurers and the number of self-insurers actively engaged in underwriting or providing the coverage or type of insurance in the relevant market.

(iii) The distribution of rates and market shares for those insurers in the relevant market.

Market shares may be measured either by premiums or exposures.

(iv) Past and prospective trends in the availability of coverage and coverage options for insurance of that type in the relevant market.

(v) Profits attributable to insurance of that type in relation to the profitability of other types of insurance, to the uncertainty of loss for that and other types of insurance, and to the amount of capital and surplus funds available to support premium underwritings for that and other types of insurance.

(vi) The ability and potential for insurers to enter and exit the relevant market and for financial capital and surplus funds to be allocated to, and to be removed from, the relevant market.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1504 Inadequate rates {#sec-r-500.1504 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1504}

Rule 4. For purposes of section 2109(1)(b) of the code, MCL 500.2109, all of the following apply in determining whether a rate for automobile insurance or home insurance is inadequate:

(b) Applicants who are in good faith entitled to procure the insurance through ordinary methods are the persons who are eligible persons, as defined in section 2103(1) or (2) of the code, MCL 500.2103, with respect to that insurance.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1505 Unfairly discriminatory rates {#sec-r-500.1505 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1505}

Rule 5. (1) For purposes of section 2109(1)(c) of the code, MCL 500.2109, a rate for a coverage is unfairly discriminatory in relation to another rate for the same coverage if the differential between the rates is not reasonably justified by differences in losses, expenses, or both, or by differences in the uncertainty of loss, for the individuals or risks to which the rates apply. A reasonable justification must be supported by a reasonable classification system; by sound actuarial principles when applicable; and by actual and credible loss and expense statistics or, in the case of new coverages and classifications, by reasonably anticipated loss and expense experience.

(2) A rate is not unfairly discriminatory because it reflects differences in expenses for individuals or risks with similar anticipated losses, or because it reflects differences in losses for individuals or risks with similar expenses.

(3) A reasonable classification system is a system designed to group individuals or risks with similar characteristics into rating classifications that are likely to identify significant differences in mean anticipated losses or expenses, or both, between the groups, as determined by sound actuarial principles and by actual and credible loss and expense statistics or, in the case of new coverages or classifications, by reasonably anticipated loss and expense experience.

(4) Sound actuarial principles must include, but are not limited to, all of the following principles:

(a) That data used in developing classifications and rates are derived from the experience of a population or sample of risks that is sufficiently similar to the anticipated insured population so that the statistics obtained can reasonably be expected to produce representative and reliable estimates of the anticipated loss and expense experience for the insured population and are calculated in a manner that is suitable to their intended use.

(c) That if rates for individual rating cells are calculated by means of arithmetic combinations of relativities for the classifications defining those rating cells, the relativities are combined in a manner that equitably reflects the anticipated loss and expense experience for those rating cells.

(d) That sampling techniques used in developing classifications and in estimating loss and expense experience are suitable to their intended application.

(e) That with regard to private passenger automobile insurance and private residential property insurance, rates for an insurance coverage provided are established in a manner that can reasonably be anticipated to produce loss ratios that are substantially uniform among the classifications, kinds, or types of individuals or risks to which the rates apply. Evaluation of loss ratios must make appropriate adjustments for differences in deductibles and limits of liability among insureds, for expense provisions that are not allocated to premiums on a percentage-ofpremium basis, and for differences in contingency factors among classifications and must give due consideration to the credibility of experience for groupings of individuals or risks, to trends in past and prospective loss experience, and to historical patterns between projected and realized loss ratios. For purposes of this subdivision, “substantially uniform” means the absence of significant variations among loss ratios. This subdivision does not prohibit the use of appropriate pure premium relativities to estimate or evaluate rate relativities.

(5) Data of an insurer or rating organization used in calculating actual and credible loss statistics must be of sufficient volume, or combined in an appropriate manner with suitable data of sufficient volume, so that the statistics calculated are reasonably credible and can reasonably be anticipated to produce reliable estimates of anticipated loss and expense experience.

(6) Data for reasonably anticipated experience used in calculating rates for new coverages and in establishing new classifications must, to the extent possible, be based on actual experience for similar coverages and for groups of risks similar to the proposed classification and be of sufficient volume so that statistics produced can reasonably be anticipated to produce reliable estimates of loss and expense experience.

(7) Relevant external information, including general economic data and other indicators, may be given due consideration in evaluating or projecting loss and expense experience.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1506 Expense provisions {#sec-r-500.1506 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1506}

Rule 6. (1) The expense portion of a rate must, with regard to each category of expense, be examined and evaluated independent of the loss portion of the rate. Expenses must not be presumed to change by the same percentage as losses are anticipated to change.

(2) Predictions of future expense costs must give due consideration to trends and changes in historical expense levels, in actual or reasonably allocated expenses incurred, and in external expense indices and indicators.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1507 Expense allocation {#sec-r-500.1507 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1507}

Rule 7. (1) Expense provisions for each category of expenses must be reasonably allocated among classifications in a manner that equitably reflects variations, if any, in the manner in which those expenses are anticipated to be incurred with respect to the groups of individuals or risks defined by those classifications. Expenses, other than allocated loss adjustment expenses, must not be presumed to be incurred proportionally to classification relativities based on anticipated loss.

(2) Expense provisions for premium taxes, if any, must reflect the applicable premium tax rate.

(3) Expense provisions for each other category of expenses must be reasonably allocated among classifications based on losses, coverages, exposures, or other basis that equitably measures the variations, if any, in the manner in which those expenses are anticipated to be incurred with respect to the classifications. Expense allocation methods may include percentageof-premium, uniform-per-coverage, uniform-per-exposure, or other basis, as appropriate and justified.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1508 Complaint-resolution process; notice of rights; private informal managerial-level conference {#sec-r-500.1508 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1508}

Rule 8. (1) At the time of a denial of automobile insurance or home insurance, the insurer or producer making the denial shall provide the person subject to the denial written notice of his or her right to submit a complaint and to have a private informal managerial-level conference if he or she has reason to believe that the denial is improper.

(2) If a person has reason to believe that he or she has been charged in incorrect premium and informs the insurer or producer of that belief, the insurer or producer shall promptly provide the person written notice of his or her right to submit a complaint and to have a private informal managerial-level conference.

(3) The written notices required under subrule (1) and (2) of this rule must be in language understandable to a person of ordinary intelligence and must include, but need not be limited to, an explanation of all of the following:

(a) The person’s right to submit a complaint and the procedure the person shall follow if he or she wishes to submit a complaint.

(b) The person’s right to be provided information pertinent to the denial or premium charge upon request, subject to payment of a reasonable copying charge. An insurer’s reasonable copying charge under this subdivision must not exceed the rate charged for copying by the department in accordance with the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246. The director shall inform insurers of that maximum allowable copying charge on an annual basis.

(c) The person’s right to a private informal managerial-level conference addressing the complaint with the insurer, the procedure the person shall follow if he or she wishes to request a private informal managerial-level conference, and the process applicable to a private informal managerial-level conference. All of the following apply to that process:

(i) If a private informal managerial-level conference is requested, the conference and proposed resolution must be provided by the insurer within 30 days after the date of the person’s request.

(ii) The private informal managerial-level conference may be held by telephone, video teleconference or other substantially similar electronic means, or in-person, as long as the following requirements are met:

(A) If the conference is held by telephone or video teleconference or other substantially similar electronic means, the insurer shall state at the beginning of the conference that it is a private informal managerial-level conference and identify all persons by name and title who are listening to, or otherwise participating in, the conference. In addition, the insurer shall either provide a toll-free telephone service or other service at no cost to the person making the complaint, or pay all charges associated with the conference. As applicable, the written notice must indicate the telephone number that must be called and state that the telephone number may be called collect if a toll-free number is not provided or explain in sufficient detail other instructions for participating in a conference held by video teleconference or other substantially similar electronic means.

(B) If the conference is held in-person, the conference must be held within a reasonably accessible distance from the Michigan residence of the person or persons named on the policy as insured or the location of the risk and be held at a time reasonably convenient to the person making the complaint or the person’s designated representative.

(iii) The private informal managerial-level conference must include the participation of the person making the complaint, or the person’s designated representative, and a supervisory or higher level representative of the insurer who is authorized to decide the dispute on behalf of the insurer.

(d) The person’s right to submit a complaint to the director and for a review and determination if the private informal managerial-level conference fails to resolve the dispute.

The written notice must explain this right as described in R 500.1510.

(e) The person’s right to appoint another person as his or her designee to act on his or her behalf throughout the complaint-resolution process set forth in this rule and R 500.1509 to R 500.1514.

(4) A compliant, request for information pertinent to the denial or premium charge, and request for a private informal managerial-level conference submitted pursuant to subrule (3) of this rule must be made not later than 30 days after the date of the written notice required under subrule (1) or (2) of this rule unless an exception is made by the insurer to extend that 30-day period. An exception extending the 30-day period under this subrule must be in writing and provided to the person making the complaint or request for information or private informal managerial-level conference.

(5) An insurer or producer shall send the written notices required under subrules (1) and (2) of this rule, or if applicable, a written extension of the 30-day period under subrule (4) of this rule, by mail, unless the insurer or producer and the person entitled to the notice or extension have previously agreed to another means of communication and that agreement includes within its scope the notice or extension contemplated under this rule and is consistent with applicable law.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1509 Complaint-resolution process; information provided following private informal managerial-level conference {#sec-r-500.1509 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1509}

Rule 9. (1) Upon the conclusion of a private informal managerial-level conference, the insurer shall provide the person making the complaint the following information in writing and in language understandable to a person of ordinary intelligence:

(a) The action taken by the insurer to resolve the dispute.

(b) The facts and documentation supporting the action.

(d) A statement explaining the person’s right to submit a complaint to the director and for a review and determination within 120 days after the date that the information under this rule is mailed or provided if the person disagrees with the proposed resolution included in the information. The statement must also provide instructions regarding how to submit a complaint to the director and request a review and determination, provide the department’s toll-free number and mailing address, and clearly indicate the date that the information under this rule is mailed or provided.

(e) A statement describing the status of the automobile or home insurance coverage or coverages involved.

(2) The insurer shall mail the information under subrule (1) of this rule to the person making the complaint, unless the insurer and the person have previously agreed to another means of communication and that agreement includes within its scope providing the information contemplated under this rule and is consistent with applicable law.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1510 Complaint-resolution process; right to director’s review and determination; review of written materials; meeting {#sec-r-500.1510 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1510}

Rule 10. (1) If a person has reason to believe an insurer or producer has improperly denied him or her automobile insurance or home insurance or has charged an incorrect premium for that insurance and a private informal managerial-level conference fails to resolve the dispute because the person disagrees with the insurer’s proposed resolution following the conference or the insurer did not provide a private informal managerial-level conference and proposed resolution within 30 days after the date of the person’s request, the person has a right to submit a complaint to the director and for a review and determination to resolve the dispute.

(2) The person making the complaint shall submit the complaint and request for the director’s review and determination in a form and manner approved by the director within 120 days after the date the insurer mails or provides the information required under R 500.1509 or within 120 days after the expiration of the 30-day period that the insurer has to provide a proposed resolution to the person making the complaint if no proposed resolution is provided during that 30-day period.

(3) The person making the complaint is entitled to a review of the dispute by the director either through a review of written materials or, upon the person’s written request, through a meeting, subject to subrule (4) of this rule. A request for a meeting must be made at the same time the person submits the complaint and request for the director’s review and determination.

(4) A meeting requested pursuant to subrule (3) of this rule, may, as permitted by the director, be held by telephone, video teleconference or other substantially similar electronic means, or if requested by the person making the complaint, in-person. A request for an in-person meeting must be made at the same time the person submits the complaint and request for the director’s review and determination. Any meeting under this subrule must include the director or his or her designee, the person making the complaint or his or her designated representative, and a supervisory or higher level representative of the insurer authorized to act on behalf of the insurer. If an in-person meeting is held, the insurer’s authorized representative may participate through telephone or video teleconference or other substantially similar electronic means. The director shall conduct any meeting under this subrule in a manner that allows the person making the complaint and insurer to present relevant facts, records, dates, times, and names to substantiate their respective positions regarding the dispute.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1511 Complaint-resolution process; notice of director’s review of dispute {#sec-r-500.1511 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1511}

Rule 11. The director shall do all of the following within 10 business days after the director receives a complaint and request for the director’s review and determination, as applicable:

(a) For a review and determination conducted through a meeting pursuant to R 500.1510(4), set a time for the meeting and notify the person making the complaint and the insurer of the time, manner, and place of the meeting.

(b) For all review and determinations, notify the insurer of the time period within which any reply must be submitted to the director and of the disputed issue or issues under consideration. A copy of that notification must be provided to the person making the complaint.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1512 Complaint-resolution process; basis for director’s determination; failure to supply materials or information {#sec-r-500.1512 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1512}

Rule 12. (1) If a review and determination is conducted through written materials, the director shall base his or her determination upon written materials submitted by the person making the complaint and the insurer.

(2) If a review and determination is conducted through a meeting pursuant to R 500.1510(4), the director shall base his or her determination upon written materials submitted by the person making the complaint and the insurer, any statements made at the meeting, or a combination of both.

(3) If the person making the complaint or the insurer fails to supply any materials or information in a timely manner, the director shall base his or her determination upon materials and information available to the director at the time of the determination.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1513 Complaint-resolution process; director’s decision; contested case {#sec-r-500.1513 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1513}

Rule 13. (1) If a review and determination is conducted through written materials, the director shall issue a written decision of his or her determination of the disputed issue or issues within 15 business days after the insurer submits a reply to the complaint during the time period established by the director under R 500.1511 or, if a reply is not submitted to the director during that time period, within 15 business days after that time period has expired.

(2) If a review and determination is conducted through a meeting pursuant to R 500.1510(4), the director shall issue a written decision of his or her determination of the disputed issue or issues within 15 business days after the meeting is concluded.

(3) The director shall indicate in the written decision that if either the insurer or the person making the complaint disagrees with the determination, the director, if requested to do so, shall proceed to hear the matter as a contested case under the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328.

(4) The director shall provide copies of the written decision to the insurer and the person making the complaint.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1514 Complaint-resolution process; remedies based on director’s review and determination {#sec-r-500.1514 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1514}

Rule 14. (1) Subject to subrule (2) of this rule, if the director concludes that the person making the complaint was improperly denied automobile insurance or home insurance, the director shall order an appropriate remedy.

(2) If the director concludes that the automobile insurance or home insurance of the person making the complaint was improperly terminated, the person may select any of the following remedies:

(a) The termination is deemed invalid and coverage is reinstated effective as of the date of the termination upon payment of the applicable premium.

(b) The termination is deemed invalid and coverage is reinstated effective as of the date of the director’s decision issued under R 500.1513 upon payment of the applicable premium, subject to the following conditions if the person has secured coverage from an insurer other than the insurer that improperly terminated the insurance:

(i) Upon notice from the person, the coverage must be canceled and the insurer providing the coverage shall provide the person a refund of premium pursuant to the insurer’s filed rating rules.

(ii) The insurer that improperly terminated the insurance shall pay the person any additional premium expenditures incurred by the person as a result of seeking additional coverage in excess of the pro rata premium the person would have paid for the coverage from the improperly terminating insurer for the same period of time.

(c) If the person has secured coverage from an insurer other than the insurer that improperly terminated the insurance, the person may continue that coverage, and the termination is deemed invalid but coverage is not reinstated.

(3) If the director concludes that the person making the complaint was charged an incorrect premium, the director shall order an appropriate remedy.

(4) If the director orders an appropriate remedy under this rule, the insurer shall, within 10 business days after the director’s order, comply with the director’s order, provide the required remedy to the person making the complaint, if any, and provide documentation to the director showing how the specific remedy was determined, calculated, or assessed when providing it to the person.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1515 Collection and reporting of data by insurers {#sec-r-500.1515 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1515}

Rule 15. For purposes of section 2127 of the code, MCL 500.2127, all of the following apply:

(a) Every insurer subject to chapter 21 of the code, MCL 500.2101 to 500.2131, underwriting automobile insurance or home insurance, or both, in this state shall report data concerning the insurance in accordance with statistical plans and reporting forms approved by the director. The reporting plans and forms must provide for the collection of only the information the director finds necessary to monitor and evaluate the automobile and home insurance markets in this state, as provided in section 2127 of the code, MCL 500.2127.

(b) Statistical plans approved by order of the director for licensed statistical gathering agencies are accepted to provide adequate historical premium, exposure, loss, and expense information for automobile and home insurance.

(c) Supporting data for automobile and home insurance rate filings submitted in accordance with the forms with instructions issued by the director are assumed to comply substantially with information needs for evaluating overall rate level needs, 1 of the elements in monitoring and evaluating markets per section 2127 of the code, MCL 500.2127.

(d) The director shall accept annual statement data on 1 element in the process of monitoring competition.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1516 Exchange of claim information {#sec-r-500.1516 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1516}

Rule 16. Every insurer subject to chapter 21 of the code, MCL 500.2101 to 500.2131, shall exchange claim information for automobile insurance and home insurance as provided in these rules to the extent the information is available from the responding company’s data base. The information must not be requested for selected policyholders on the basis of age, sex, or other factor that is discriminatory in nature.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1517 Exchange of automobile insurance claim information {#sec-r-500.1517 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1517}

Rule 17. (1) Every insurer subject to chapter 21 of the code, MCL 500.2101 to 500.2131, underwriting automobile insurance shall respond, on a form similar to figure 1 under R 500.1521, within 30 calendar days, to a request by another insurer for information concerning the claim history of a specified person.

(2) The reporting insurer shall report automobile insurance claim information as follows:

(a) The name and address of the insured.

(b) The policy number of such insured.

(d) The period of time insured, if available, but in all cases, the expiration date.

(e) Whether the claim is open or closed at the time of the report.

(f) Date or dates of loss.

(g) Amount of loss paid under each coverage.

(3) The requesting insurer shall specify in its request for claim information the name, address, and responding company’s policy number of the insured who is the subject of the request. The requesting insurer shall also provide with the request a stamped, addressed envelope for the return of the completed claim information form.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1518 Exchange of home insurance claim information {#sec-r-500.1518 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1518}

Rule 18. (1) Every insurer subject to chapter 21 of the code, MCL 500.2101 to 500.2131, underwriting home insurance shall respond, on a form similar to figure 1 under R 500.1521, within 30 calendar days, to a request by another insurer for information concerning the claim history of a specified person. The claim information requested or reported must be information as described in section 2111(7)(f) of the code, MCL 500.2111.

(2) The reporting insurer shall report home insurance information as follows:

(a) Name and address of the insured.

(b) Policy number of such insured.

(d) Date of loss or losses.

(e) Amount paid.

(f) Coverage involved.

(g) Whether or not a fire loss was investigated by civil authorities.

(3) The requesting insurer shall specify in its request the name, address, and responding company’s policy number of the insured who is the subject of the request. The requesting insurer shall also provide with the request a stamped, addressed envelope for the return of the completed claim information form.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1519 Exchange of claim information; reporting period {#sec-r-500.1519 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1519}

Rule 19. An insurer is responsible for reporting, upon request, automobile insurance and home insurance claim information only for current policies or those that expired 90 days immediately preceding the date of receipt of a request for claim information. The claim information reported must cover the 3 years last preceding the expiration date, including claim information originally reported by another carrier.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1520 Fee for providing claim data prohibited {#sec-r-500.1520 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1520}

Rule 20. A fee must not be charged by an insurer for providing the claim information required by these rules for the first 12 calendar months immediately following October 30, 1981.

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

Mich. Admin. Code R 500.1521 Figure 1 {#sec-r-500.1521 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.1521}

Rule 21. Figure 1 reads as follows:

Date Submitted: ______________________ Named Insured _____________________ Address ______________________________ Responding Company Policy Number ________________________ Period Insured: From ______ to ______ We recently received an application for auto property (circle one) insurance from the above individual. As provided for in Section 2130 of the Insurance Code of 1956, 1956 PA 218, MCL 500.2130, please supply the claim experience for the past 3 years as available. If additional space is needed, please complete on the back of this form.

FOR AUTOMOBILE CLAIMS

Claim Status (Check One) Amount of Loss Paid Name of Driver of Insured Open Closed Loss Date BI PIP PD Coll Vehicle if Available 1.______ _______ ________ _____ _____ _____ _____ _______________ 2.______ _______ ________ _____ _____ _____ _____ _______________ 3.______ _______ ________ _____ _____ _____ _____ _______________ FOR HOME INSURANCE CLAIMS Location of Loss Amount Coverage If Investigated Made Premises Insured Date Paid Involved by Civil Authority Please Identify 1.__________________ ________ ________ ________ ____________________ 2.__________________ ________ ________ ________ ____________________ 3.__________________ ________ ________ ________ ____________________ Enclosed is a self addressed stamped envelope. Thank you.

Form Completed by ___________________________________ Name of Company ___________________________________ Address ___________________________________ Date Completed

History

History: 1981 AACS; 2021 MR 6, Eff. Mar 24, 2021.

R 500.2031 to R 500.2032 Credit Insurance Age Underwriting

Mich. Admin. Code R 500.2031 Definitions {#sec-r-500.2031 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2031}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

CREDIT INSURANCE AGE UNDERWRITING

(By authority conferred on the commissioner of insurance by section 210 of Act No. 218 of the Public Acts of 1956, as amended, and section 22 of Act No. 173 of the Public Acts of 1958, as amended, being SS500.210 and 550.622 of the Michigan Compiled Laws)

Rule 1. (1) As used in these rules:

(a) "Act" means Act No. 173 of the Public Acts of 1958, as amended, being S550.60l et seq. of the Michigan Compiled Laws, and known as the credit insurance act.

(b) "Code" means Act No. 218 of the Public Acts of 1956, as amended, being S500.100 et seq. of the Michigan Compiled Laws, and known as the insurance code of 1956.

(2) Terms defined in the act and the code have the same meanings when used in these rules.

History

History: 1984 AACS.

Mich. Admin. Code R 500.2032 Prohibited underwriting practices {#sec-r-500.2032 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2032}

Rule 2. For purposes of section 2027(a)(ii) of the code, with respect to the underwriting of credit life insurance, a reasonable relationship does not exist between any age up to and including age 70 and the extent of the risk or the coverage issued or to be issued. In transacting credit life insurance, insurers shall not refuse to insure, refuse to continue to insure, or limit the amount of insurance available to an individual because the person is age 70 or under. This prohibition shall not apply to any disability benefit in connection with credit life insurance coverage.

History

History: 1984 AACS.

R 500.2101 to R 500.2142 Hearing Procedures

Mich. Admin. Code R 500.2101 Rescinded {#sec-r-500.2101 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2101}

DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS

MICHIGAN ADMINISTRATIVE HEARING SYSTEM

HEARING PROCEDURES

(By authority conferred on the executive director of the Michigan administrative hearing system by section 210 of 1956 PA 218, MCL 500.210, and Executive Reorganization Order Nos. 2005-1 and 2011-4, MCL 445.2021 and 445.2030)

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2102 Interpretation of rules {#sec-r-500.2102 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2102}

Rule 2. These rules shall be construed to secure a just, speedy, efficient, and fair determination of the issues presented, consistent with due process and the safeguarding of the rights of the parties.

History

History: 1983 AACS.

Mich. Admin. Code R 500.2103 Petition for a contested case; required information {#sec-r-500.2103 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2103}

Rule 3. Except as otherwise provided by the commissioner, a person who seeks to have the commissioner commence a contested case shall submit a written petition for a contested case to the commissioner. The petition shall set forth all of the following:

(a) Facts or conduct that warrant a contested case.

(b) Specific sections of applicable rules and statutes, if known.

(d) The identity of the persons involved.This rule does not affect the commissioner's authority to commence a contested case on the commissioner's own motion.

History

History: 1983 AACS.

Mich. Admin. Code R 500.2104 Petition for a contested case; determination of commissioner; notice to petitioner {#sec-r-500.2104 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2104}

Rule 4. (1) Within 30 days after receipt of a petition for a contested case, the commissioner shall, in conformity with any applicable statute or rule, determine whether to take any of the following actions:

(a) Request the petitioner to amend the petition.

(b) Demand an answer to the petition.

(d) Issue a notice of opportunity to show compliance.

(e) Issue a notice of hearing.

(f) Order a public hearing.

(g) Decline to take further action against the petition.

(h) Take over appropriate action within the commissioner's authority.

(2) The commissioner shall notify the petitioner of the decision and shall provide the petitioner with a brief written explanation of the reasons for the decision.

History

History: 1983 AACS.

Mich. Admin. Code R 500.2105 Rescinded {#sec-r-500.2105 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2105}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2106 Rescinded {#sec-r-500.2106 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2106}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2107 Rescinded {#sec-r-500.2107 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2107}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2108 Appearance by attorney {#sec-r-500.2108 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2108}

Rule 8. An attorney who represents a party in a contested case shall promptly file an appearance with the commissioner.

History

History: 1983 AACS.

Mich. Admin. Code R 500.2109 Rescinded {#sec-r-500.2109 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2109}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2110 Rescinded {#sec-r-500.2110 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2110}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2111 Rescinded {#sec-r-500.2111 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2111}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2112 Rescinded {#sec-r-500.2112 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2112}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2113 Rescinded {#sec-r-500.2113 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2113}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2114 Rescinded {#sec-r-500.2114 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2114}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2115 Rescinded {#sec-r-500.2115 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2115}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2116 Rescinded {#sec-r-500.2116 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2116}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2117 Rescinded {#sec-r-500.2117 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2117}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2118 Rescinded {#sec-r-500.2118 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2118}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2119 Rescinded {#sec-r-500.2119 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2119}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2120 Rescinded {#sec-r-500.2120 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2120}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2121 Rescinded {#sec-r-500.2121 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2121}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2122 Rescinded {#sec-r-500.2122 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2122}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2123 Rescinded {#sec-r-500.2123 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2123}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2124 Rescinded {#sec-r-500.2124 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2124}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2125 Rescinded {#sec-r-500.2125 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2125}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2126 Rescinded {#sec-r-500.2126 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2126}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2127 Rescinded {#sec-r-500.2127 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2127}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2128 Rescinded {#sec-r-500.2128 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2128}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2129 Rescinded {#sec-r-500.2129 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2129}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2130 Rescinded {#sec-r-500.2130 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2130}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2131 Rescinded {#sec-r-500.2131 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2131}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2132 Proposal for decision; motion for oral argument; opportunity for rebuttal; service of notice {#sec-r-500.2132 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2132}

Rule 32. Upon filing exceptions to a proposal for decision, a party may make a motion for oral argument before the commissioner. Oral argument shall be by leave of the commissioner and may be limited in scope and duration. When oral argument is granted, notice shall be served on the parties. All parties shall be given an opportunity for rebuttal. The commissioner may limit the scope and duration of rebuttal.

History

History: 1983 AACS.

Mich. Admin. Code R 500.2133 Final decisions and orders; date {#sec-r-500.2133 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2133}

Rule 33. Except as otherwise provided by law, the commissioner shall issue a final decision or order not later than 30 days after the date for the filing of any exceptions or, if oral argument is permitted pursuant to section 81(1) of the act, not later than 30 days after oral argument.

History

History: 1983 AACS.

Mich. Admin. Code R 500.2134 Rescinded {#sec-r-500.2134 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2134}

History

History: 1983 AACS.

Mich. Admin. Code R 500.2135 Presiding officer; designation and authorization {#sec-r-500.2135 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2135}

Rule 35. The commissioner, a person designated by statute, or 1 or more hearing officers designated and authorized by the commissioner to conduct contested cases shall preside in a contested case. Upon commencement of a contested case, the commissioner shall designate the presiding officer in conformity with applicable law.

History

History: 1983 AACS.

Mich. Admin. Code R 500.2134 Rescinded {#sec-r-500.2134 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2134}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2136 Rescinded {#sec-r-500.2136 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2136}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2137 Rescinded {#sec-r-500.2137 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2137}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2138 Rescinded {#sec-r-500.2138 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2138}

History

History: 1983 AACS; 2015 AACS.

Mich. Admin. Code R 500.2139 Public hearing {#sec-r-500.2139 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2139}

Rule 39. The commissioner may order a public hearing for the purpose of obtaining information and providing the public with an opportunity to present data, views, and arguments on issues upon which the commissioner is authorized to make a determination.

History

History: 1983 AACS.

Mich. Admin. Code R 500.2140 Public hearing; notice; advance notice request; publication {#sec-r-500.2140 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2140}

Rule 40. (1) Notice of a public hearing shall be given not less than 10 days before the public hearing and shall include all of the following:

(a) A reference to the statutory authority under which the determination is to be made.

(b) The time and place of the public hearing and a statement of the manner in which data, views, and arguments may be submitted to the commissioner at other times by any person.

(2) A person who makes a written request to the commissioner for advance notice of a proposed action that may affect that person shall receive copies of the notice.

(3) The notice shall be published as a display advertisement is not less than 3 newspapers of general circulation in different parts of the state.At least 1 of the newspapers shall be published in the Upper Peninsula.

History

History: 1983 AACS.

Mich. Admin. Code R 500.2141 Public hearing; presentation of testimony {#sec-r-500.2141 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2141}

Rule 41. The commissioner shall determine the order in which testimony is presented and may question those persons who present testimony. Subject to any limitation the commissioner may prescribe, the commissioner may permit persons to question other persons who present testimony. The commissioner may set time limits on testimony.

History

History: 1983 AACS.

Mich. Admin. Code R 500.2142 Rescission {#sec-r-500.2142 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2142}

Rule 42. R 501.301 to R 501.308 of the Michigan Administrative Code, appearing on pages 5053 to 5055 of the 1979 Michigan Administrative Code, are rescinded.

History

History: 1983 AACS.

R 500.2201 to R 500.2202 Insurance Policy Forms - Discretionary Clauses

Mich. Admin. Code R 500.2201 Definitions {#sec-r-500.2201 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2201}

DEPARTMENT OF LABOR AND ECONOMIC GROWTH

OFFICE OF FINANCIAL AND INSURANCE SERVICES

INSURANCE POLICY FORMS - DISCRETIONARY CLAUSES

(By authority conferred on the commissioner of the Office of Financial and Insurance Services by sections 210 and 2236 of the insurance code of 1956, 1956 PA 218, 1969 PA 306, E.R.O. No 2000-2 and E.R.O. No 2003-1; MCL 500.210, MCL 500.2236, MCL 24.231 to MCL 24.233, MCL 445.2003, and MCL 445.2011)

Rule 1. As used in these rules:

(a) "Appeal" means an appeal by a policyholder or other claimant of a claim denial by an insurer. It includes appeals to administrative agencies, arbitrators, courts, and mediators.

(b) "Commissioner" means the commissioner of the office of financial and insurance services.

(c) "Discretionary clause" is a provision in a form that purports to bind the claimant to or grant deference in subsequent proceedings to the insurer's decision, denial, or interpretation on terms, coverage, or eligibility for benefits including, but not limited to, a form provision that does any of the following:

(i) Provides that a policyholder or other claimant may not appeal a denial of a claim.

(ii) Provides that the insurer's decision to deny policy coverage is binding upon a policyholder or other claimant.

(iii) Provides that on appeal the insurer's decision-making power as to policy coverage is binding.

(iv) Provides that the insurer's interpretation of the terms of a form is binding upon a policyholder or other claimant.

(v) Provides that on appeal the insurer's interpretation of the terms of a form is binding.

(vi) Provides that or gives rise to a standard of review on appeal that gives deference to the original claim decision.

(vii) Provides that or gives rise to a standard of review on appeal other than a de novo review.

(d) "Form" means a form identified in MCL 500.2236(1).

(e) Terms defined in the insurance code of 1956, 1956 PA 218, MCL 500.100 to MCL 500.8302, have the same meanings when used in these rules.

History

History: 2007 AACS.

Mich. Admin. Code R 500.2202 Discretionary Clauses Prohibited {#sec-r-500.2202 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2202}

Rule 2. (a) A discretionary clause unreasonably reduces the risk purported to be assumed in the general coverage of the policy within the meaning of MCL 500.2236(5).

(b) On and after the first day of the first month following the effective date of these rules, an insurer shall not issue, advertise, or deliver to any person in this state a policy, contract, rider, indorsement, certificate, or similar contract document that contains a discretionary clause. This does not apply to a contract document in use before that date, but does apply to any such document revised in any respect on or after that date.

(c) On and after the first day of the first month following the effective date of these rules, a discretionary clause issued or delivered to any person in this state in a policy, contract, rider, indorsement, certificate, or similar contract document is void and of no effect. This does not apply to contract documents in use before that date, but does apply to any such document revised in any respect on or after that date.

(d) Nothing in this rule limits the commissioner's authority under section 2236 to disapprove or withdraw approval of any form that contains a discretionary clause.

(e) By the first day of the second month following the effective date of these rules, each insurer transacting insurance in this state shall submit to the commissioner a list of all forms in effect in Michigan that contain discretionary clauses and shall submit a certification that the list is complete and accurate. If an insurer has no such forms in effect, it shall submit a letter to the commissioner reporting and certifying that fact.

History

History: 2007 AACS.

R 500.2211 to R 500.2212 Insurance Policy Forms - Shortened Limitation of Action Clauses

Mich. Admin. Code R 500.2211 Definitions {#sec-r-500.2211 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2211}

DEPARTMENT OF LABOR AND ECONOMIC GROWTH

OFFICE OF FINANCIAL AND INSURANCE SERVICES

INSURANCE POLICY FORMS - SHORTENED LIMITATION OF ACTION

CLAUSES

(By authority conferred on the commissioner of the Office of Financial and Insurance Services by section 210 of the insurance code of 1956, 1956 PA 218, 1969 PA 306, E.R.O. No 2000-2, and E.R.O. No 2003-1; MCL 500.210, MCL 24.231 to MCL 24.233, MCL 445.2003, and MCL 445.2011)

Rule 1. As used in these rules:

(a) "Commissioner" means the commissioner of the office of financial and insurance services.

(b) "Form" means a form identified in section 2236(1) of the insurance code of 1956, 1956 PA 218, MCL 500.2236(1).

(c) "Personal insurance" means all insurance policies underwritten and sold on an individual or group basis for personal, family, or household use.

(d) "Shortened limitation of action clause" is a provision in a form that shortens the period of time otherwise provided by statute within which a claimant may bring an action in law or equity against an insurer for claims arising under a personal insurance policy. It includes any clause, condition, or provision that reduces the period of time established by the insurance code of 1956, 1956 PA 218, MCL 500.100 to MCL 500.8302, by the revised judicature act of 1961, 1961 PA 236 , MCL 600.101 to MCL 600.9947; or by any other applicable statute.

(e) Terms defined in the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302, have the same meanings when used in these rules.

History

History: 2007 MR 9, Eff. May 3, 2007.

Mich. Admin. Code R 500.2212 Shortened limitation of action clauses prohibited {#sec-r-500.2212 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2212}

Rule 2. (1) A shortened limitation of action clause unreasonably reduces the risk purported to be assumed in the general coverage of the policy within the meaning of MCL 500.2236(5).

(2) On and after the first day of the first month following the effective date of these rules, an insurer shall not issue, advertise, or deliver to any person in this state a policy, contract, rider, indorsement, certificate, or similar contract document that contains a shortened limitation of action clause. This does not apply to a contract document in use before that date, but does apply to any such document revised in any respect on or after that date.

(3) On and after the first day of the first month following the effective date of these rules, a shortened limitation of action clause issued or delivered to any person in this state in a policy, contract, rider, indorsement, certificate, or similar contract document is void and of no effect. This does not apply to contract documents in use before that date, but does apply to any such document revised in any respect on or after that date.

(4) Nothing in this rule limits the commissioner's authority under section 2236 of the act to disapprove or withdraw approval of any form that contains a shortened limitation of action clause.

(5) By the first day of the second month following the effective date of these rules, each insurer transacting insurance in this state shall submit to the commissioner a list of all forms in effect in Michigan that contain shortened limitation of action clauses and shall submit a certification that the list is complete and accurate. If an insurer has no such forms in effect, it shall submit a letter to the commissioner reporting and certifying that fact.

History

History: 2007 MR 9, Eff. May 3, 2007.

R 500.2231 to R 500.2232 Insurance Policy Forms - Nonconforming Clauses

Mich. Admin. Code R 500.2231 Definitions {#sec-r-500.2231 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2231}

DEPARTMENT OF ENERGY, LABOR, AND ECONOMIC GROWTH

OFFICE OF FINANCIAL AND INSURANCE REGULATION

INSURANCE POLICY FORMS - NONCONFORMING CLAUSES

(By authority conferred on the commissioner of the Office of Financial and Insurance Regulation by sections 210, 2236, and 3525 of the insurance code of 1956, 1956 PA 218, 1969 PA 306, E.R.O. No 2008-1 and E.R.O. No 2008-4; MCL 500.210, MCL 500.2236, MCL 500.3525, MCL 24.231 to MCL 24.233, and MCL 445.2005, and MCL 445.2025)

Rule 1. As used in these rules:

(a) "Act" means the insurance code of 1956, 1956 PA 218, MCL 500.100.

(b) "Commissioner" means the commissioner of the office of financial and insurance regulation.

(c) "Form" means a form identified in section 2236 or in any other section of the act that is subject to section 2236 procedures for approval or disapproval of forms.

(d) "Nonconforming clause" means a clause, exception, or condition identified in R 500.2232.

(e) "Personal insurance" means all certificates issued or insurance policies underwritten and sold on an individual or group basis for personal, family, or household use.

(f) Terms defined in the insurance code of 1956, 1956 PA 218, MCL 500.100, have the same meanings when used in these rules.

History

History: 2010 AACS.

Mich. Admin. Code R 500.2232 Nonconforming clauses {#sec-r-500.2232 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 500.2232}

Rule 2. (1) Within the meaning of unreasonable in section 3525 of the act or within the meaning of section 2236(5) of the act, the following clauses violate a provision of the act, or are inconsistent, ambiguous, or misleading, or are exceptions and conditions that unreasonably or deceptively affect the risk purported to be assumed in the general coverage of a policy:

(a) A definition of disability in a disability income policy that is more inclusive than the definition of disability used in social security act disability proceedings if the more inclusive definition ceases to apply when or if the policyholder is denied social security disability benefits.

(b) A blank endorsement in connection with a personal insurance policy.

(c) An arbitration provision that requires the insured to travel to a location outside the county of the insured's residence, unless the insured consents to another location after the arbitral dispute occurs.

(2) On and after the first day of the third month following the effective date of these rules, an insurer shall not issue, advertise, or deliver to any person in this state a policy, contract, rider, endorsement, certificate, or similar contract document that contains a nonconforming clause.

This prohibition does not apply to a contract document in use before that date, but does apply to any contract document revised in any respect on or after that date.

(3) On and after the first day of the third month following the effective date of these rules, a nonconforming clause issued or delivered to any person in this state in a policy, contract, rider, endorsement, certificate, or similar contract document is void and of no effect. This does not apply to contract documents in use before that date, but does apply to any such document revised in any respect on or after that date.

(4) Nothing in this rule limits the commissioner's authority under section 2236 of the act or any other section of the act to disapprove or withdraw approval of any form that contains a nonconforming clause or to take any other action authorized by law.

(5) By the first day of the fourth month following the effective date of these rules, each insurer transacting insurance in this state shall submit to the commissioner a list of all forms in effect in this state that contain nonconforming clauses as defined in this rule set and shall submit a certification that the list is complete and accurate. If an insurer has no such forms in effect, it shall submit to the commissioner a report certifying that fact.

History

History: 2010 AACS.

R 501.151 to R 501.158 Written Examination For Health And Accident Agents

Mich. Admin. Code R 501.151 Rescinded {#sec-r-501.151 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 501.151}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

WRITTEN EXAMINATION FOR HEALTH AND ACCIDENT AGENTS

(By authority conferred on the commissioner of insurance by section 210 of Act No. 218 of the Public Acts of 1956, as amended, being S500.210 of the Michigan Compiled Laws)

History

History: 1979 AC; 1983 AACS.

Mich. Admin. Code R 501.152 Rescinded {#sec-r-501.152 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 501.152}

History

History: 1979 AC; 1983 AACS; 1997 AACS.

Mich. Admin. Code R 501.153 Rescinded {#sec-r-501.153 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 501.153}

R 501.154--R 501.156 Rescinded.

History

History: 1979 AC; 1983 AACS; 1991 AACS.
History: 1979 AC; 1983 AACS.

Mich. Admin. Code R 501.157 Limited licenses {#sec-r-501.157 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 501.157}

Rule 7. (1) The commissioner of insurance may issue a limited license to an agent who will be limiting his or her business to certain specified lines of insurance.

(2) An agent may receive a limited license upon qualifying to write the lines of insurance desired under procedures established by the commissioner of insurance.

(3) The insurer's request for licensing and the application of the prospective agent shall conspicuously indicate that the request is for a limited license. An explanation of the reasons for the limitation shall accompany the documents.

(4) An agent issued a limited license shall not submit, and an insurer shall not accept from that agent, any business written for lines of insurance not specifically authorized under the agent's license.

History

History: 1979 AC; 1983 AACS.

Mich. Admin. Code R 501.158 Rescinded {#sec-r-501.158 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 501.158}

History

History: 1979 AC; 1983 AACS.

R 501.201 to R 501.201 Farmers' Mutual Fire Insurance Companies

Mich. Admin. Code R 501.201 Membership fee {#sec-r-501.201 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 501.201}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

FARMERS' MUTUAL FIRE INSURANCE COMPANIES

(By authority of section 13 of chapter IV, part 4, of Act No. 256 of the Public Acts of 1917, being S534.13 of the Michigan Compiled Laws)

Rule 1. On and after October 1, 1952, all farmers' mutual fire insurance companies doing business under section 2, chapter IV, of part 4 of the insurance code, as latest amended, will not charge a membership fee upon the issuance of a policy to a new member or upon the increase of a policy already in force.

History

History: 1979 AC.

R 550.201 to R 550.221 Credit Insurance Rates, Forms, And Standards

Mich. Admin. Code R 550.201 Definitions {#sec-r-550.201 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.201}

DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

CREDIT INSURANCE RATES, FORMS, AND STANDARDS

(By authority conferred on the commissioner of insurance by section 210 of Act No. 218 of the Public Acts of 1956, as amended, being S500.210 of the Michigan Compiled Laws)

Rule 1. (1) As used in these rules:

(a) "Act" means Act No. 173 of the Public Acts of 1958, as amended, being S550.601 et seq. of the Michigan Compiled Laws, and known as the credit insurance act.

(b) "Credit insurance" means both credit life insurance and credit accident and health insurance.

(c) "Credit transaction" means any transaction under which payment may be made at a future date for money loaned or goods, services, or properties sold or leased.

(d) "Joint credit life coverage" means credit life insurance covering 2 individuals, where the individuals are co-obligated on the indebtedness and where the entire sum insured becomes payable upon the death of the first debtor to die while the insurance is in force.

(e) "Open-end credit insurance" means credit insurance provided in connection with an indebtedness incurred under an open-end credit account plan by use of a credit card, check, or other device as the plan may provide. Open-end credit account plan includes a revolving charge account plan.

(f) "Post-claim underwriting" means determining whether an individual meets underwriting criteria after the receipt of a claim and voiding coverage or denying the claim based upon that determination. The term does not include determinations under preexisting conditions exclusion clauses permitted in these rules. The term also does not include determinations where knowledge by the insurer of facts misrepresented on the application would have led to a refusal by the insurer to issue a certificate based upon the insurer's written underwriting criteria on the date of application.

(g) "Underwrite" means applying standards under which the insurer issues, refuses to issue, renews, refuses to renew, or limits coverage. The term includes determinations based upon eligibility criteria or evidence of insurability.

(2) Terms defined in the act have the same meanings when used in these rules.

Editor's note: The rules of the Insurance Bureau, Department of Commerce, entitled "Credit Insurance Rates, Forms, and Standards," being R 550.101 to R 550.121 and appearing in Issue No. 6 of the 1987 Michigan Register, are renumbered R 550.201 to R 550.221.

History

History: 1987 AACS; 1995 AACS.

Mich. Admin. Code R 550.202 Policy or certificate content; acceptable language for notice of proposed insurance; open-end credit insurance; delivery, effective date, duration, issuance, amounts, and annual notice of continuation {#sec-r-550.202 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.202}

Rule 2. (1) Each individual policy or certificate of insurance shall set forth the information that is required by section 9 of the act.

(2) If a notice of proposed insurance is used pursuant to section 11 of the act, the following is acceptable language for such notice:

The front of this contract is marked to show if credit insurance applies to it. As shown by the marking, one or two kinds may apply. One is group credit life insurance. The other is group credit accident and health insurance. The insurer is named on this notice. The insurer may accept or reject the insurance. The insurance covers only those who sign the request for insurance. The charge is shown for each type of insurance to be bought. The term of insurance will begin on the date the debt begins. It will end on the date the debt is first set to end. If the insurer accepts the insurance, the insured will receive a certificate of insurance within 30 days. This will more fully describe the insurance. It will state any limits on coverage. If the debt is prepaid, a refund of the insurance charges will be made when due.

Any notice of proposed insurance given to a debtor shall be as complete as the notice provided in this subrule.

(3) When open-end credit insurance is provided, an individual policy, a certificate, or a notice of proposed insurance need only be delivered once for each account. Under open-end credit insurance, the effective date of the credit insurance policy or certificate is the date on which the debtor establishes the account and agrees to pay the required insurance charge, if any. Unless terminated earlier according to its terms, the open-end credit insurance shall remain in force until the account is cancelled. An individual policy, a certificate, or a notice of proposed insurance need not be issued each time the account is debited. This credit insurance is provided on the outstanding balance of the indebtedness; if no indebtedness exists, the insurance amount is zero and remains so until the account is debited.

The creditor shall send an annual notice regarding the continuation of insurance to all account holders whose accounts have a zero balance. The notice shall explain how an account holder may cancel the credit insurance.

(4) When open-end credit insurance is provided, and where the policy contains a preexisting conditions exclusion permitted by the provisions of subrule 11(5) or subrule 12(2) of these rules, an insurer may apply a preexisting conditions exclusion to each advance under the open-end credit account. In applying this rule, all past and current payments made on the account by the debtor and insurer shall be applied to the earliest outstanding advances.

(5) If an insurer underwrites, then all the following provisions shall apply:

(a) All information from applicants shall be obtained through questions contained in the application form, which shall not be in the loan agreement.

(b) Questions shall be clear and unambiguous. So far as possible, questions shall be designed to elicit a yes or no answer.

(c) Questions to applicants shall be based upon objective matters, such as the diagnosis or treatment of medical conditions. Questions shall not be based upon an applicant's subjective judgment of health conditions.

(6) An insurer shall not engage in post-claim underwriting.

(7) Each individual policy or certificate of insurance shall contain a provision as follows, or other similar language approved by the commissioner of insurance:

Limit on certain defenses: If evidence of insurability or eligibility was required respecting this coverage, the insurer was responsible for making any underwriting decision, including any decision respecting eligibility, based upon that evidence within 60 days of the application for insurance. After that 60 days, failure of the insured to meet any underwriting criteria for the issuance of this coverage shall not be used to void the coverage or to deny a claim. However, material misrepresentations made by the applicant in the application for coverage may be used to void the coverage or to deny a claim.

A misrepresentation is material where knowledge by the insurer of facts misrepresented on the application would have led to a refusal by the insurer to issue the certificate based upon the insurer's written underwriting criteria on the date of application.

(8) The statement in an application for insurance or notice of proposed insurance with respect to a preexisting conditions exclusion shall be printed in not less than 12-point type.

(9) If a credit insurance policy contains restrictions that make a debtor who attains a certain age ineligible for continued coverage, then all of the following provisions shall apply:

(a) Notice with respect to the age restriction shall appear in applications for insurance, notices of proposed insurance, and certificates of insurance.

(b) The reduced term of insurance due to the age restriction shall be taken into account in calculating the premium.

(c) The term of insurance shall extend beyond a debtor's attaining the age at which the restriction applies where the insurer has received premiums for a period of coverage after that date and has not returned the premiums within 60 days after their receipt by the insurer and before a loss occurs that is covered by the policy.

History

History: 1987 AACS; 1990 AACS; 1995 AACS.

Mich. Admin. Code R 550.203 Termination of group credit insurance policy {#sec-r-550.203 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.203}

Rule 3. (1) If a debtor is covered by a group credit insurance policy providing for the payment of single premiums to the insurer, then provision shall be made by the insurer that if the policy is terminated for any reason, insurance coverage with respect to any debtor insured under such policy shall be continued for the entire period for which the single premium has been paid.

(2) If a debtor is covered by a group credit insurance policy providing for the payment of premiums to the insurer on a monthly outstanding balance basis, then the policy shall provide that if the policy is terminated for whatever reason, termination notice thereof shall be given to the insured debtor not less than 30 days before the effective date of termination, except where replacement of the coverage by the same or another insurer in the same or a greater amount takes place without lapse of coverage. The notice required in this subrule shall be given by the insurer or, at the option of the insurer, by the creditor.

History

History: 1987 AACS.

Mich. Admin. Code R 550.204 Remittance of premiums {#sec-r-550.204 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.204}

Rule 4. If the creditor adds identifiable insurance charges or premiums for credit insurance to the indebtedness, and any direct or indirect finance, carrying, credit, or service charge is made to the debtor on such insurance charges or premiums, the creditor shall remit, and the insurer shall collect, such premium within 60 days after it is added to the indebtedness. However, this time limit may be extended a reasonable amount of time, not to exceed 60 days if, due to the processing of the premium data, the creditor is unable to remit such premium to the insurer within the 60 days.

History

History: 1987 AACS.

Mich. Admin. Code R 550.205 Renewal or refinancing of indebtedness {#sec-r-550.205 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.205}

Rule 5. If the indebtedness is discharged due to renewal or refinancing before the scheduled maturity date, the insurance in force shall be terminated before any new insurance may be issued in connection with the renewed or refinanced indebtedness. In all cases of such termination before the scheduled maturity, a refund shall be made promptly as provided in R 550.113.

History

History: 1987 AACS.

Mich. Admin. Code R 550.206 Maximum aggregate provisions {#sec-r-550.206 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.206}

Rule 6. A provision in an individual policy or a certificate that sets a maximum limit on total insurance benefits is operative only if a refund of premium charges has been made on the amount of insurance in excess of the maximum limit, if any, issued to the debtor within 90 days of the effective date of coverage.

History

History: 1987 AACS.

Mich. Admin. Code R 550.207 Voluntary prepayment of indebtedness {#sec-r-550.207 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.207}

Rule 7. If a debtor prepays his or her indebtedness other than as a result of his or her death or through a lump sum disability payment under a credit insurance policy covering the debtor, both of the following provisions apply:

(a) Any credit life insurance covering such indebtedness shall be terminated and an appropriate refund of the credit life insurance premium shall be made in accordance with R 550.113.

(b) Any credit accident and health insurance covering such indebtedness shall be terminated and an appropriate refund of the credit accident and health insurance premium shall be made in accordance with R 550.113. If a claim under such coverage is in process at the time of prepayment, the amount of refund may be determined as if the prepayment did not occur until the payment of benefits terminates. No refund need be made during any period of disability for which credit accident and health benefits are payable. A refund shall be computed as if prepayment occurred at the end of the disability period.

History

History: 1987 AACS.

Mich. Admin. Code R 550.208 Involuntary prepayment of indebtedness {#sec-r-550.208 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.208}

Rule 8. If an indebtedness is prepaid by the proceeds of a credit life insurance policy covering the debtor or by a lump sum payment of a disability claim under a credit insurance policy covering the debtor, then it shall be the responsibility of the insurer to see that the following are paid to the insured debtor, if living, to the beneficiary, other than the creditor, named by the debtor, or to the debtor's estate:

(a) In the case of prepayment by the proceeds of a credit life insurance policy, or by the proceeds of a lump sum total and permanent disability benefit under credit life coverage, an appropriate refund of the credit accident and health insurance premium in accordance with R 550.113.

(b) In the case of prepayment by a lump sum disability claim, an appropriate refund of the credit life insurance premium in accordance with R 550.113.

(c) In either case, the amount of the benefits in excess of the amount required to repay the indebtedness after crediting any unearned interest or finance charges.

History

History: 1987 AACS.

Mich. Admin. Code R 550.209 Policy forms; filing; and reserves {#sec-r-550.209 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.209}

Rule 9. (1) Credit life and credit accident and health insurance shall be issued only in the forms described in section 4 of the act.

(2) All policy forms, certificates of insurance, notices of proposed insurance, applications for insurance, binders, endorsements, and riders to be delivered or issued for delivery in this state and the schedules of maximum premium rates pertaining thereto shall be filed with the commissioner as required by sections 12 and 18 of the act.

(3) For policies and certificates issued after January 1, 1987, the minimum reserve basis for credit life insurance shall be determined in accordance with the 1980 commissioner's extended term table with interest at 5 1/2%.

(4) The minimum reserve basis for active lives on credit accident and health insurance shall be the amount of the premium refund available to the insured.

History

History: 1987 AACS.

Mich. Admin. Code R 550.210 Rates generally {#sec-r-550.210 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.210}

Rule 10. (1) Under section 13 of the act, benefits provided by credit insurance policies shall be reasonable in relation to the premium charged. This requirement is deemed to be satisfied if a premium rate not exceeding the prima facie rate is charged.

(2) If any insurer files for approval of any form providing coverage other than that described in R 550.111 and R 550.112, the insurer shall demonstrate that the rates to be charged for such coverage are actuarially consistent with the applicable prima facie rates.

(3) If no specific charge is made to the debtor for credit insurance, the deviation standards of R 550.114 are not required to be used, but any premium rates resulting from such standards as are used which exceed the premium rate standards set out in R 550.111 and R 550.112 shall be filed with the commissioner. For purposes of this subrule, it will be considered that the debtor is charged a specific amount for insurance if an identifiable charge for insurance is disclosed in the credit or other instrument furnished the debtor which sets out the financial elements of the credit transactions or if there is a differential in finance, interest, service, or other similar charge made to debtors who are in like circumstances, except for their insured or noninsured status.

History

History: 1987 AACS.

Mich. Admin. Code R 550.211 Credit life insurance prima facie rates {#sec-r-550.211 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.211}

Rule 11. (1) Single life credit life insurance prima facie premium rates for the insured portion of an indebtedness repayable in equal monthly installments, where the insured portion of the indebtedness decreases uniformly by the amount of the monthly installment paid, shall be as set forth in subdivisions (a) and (b) of this subrule. Single life credit life insurance prima facie premium rates, when the benefit provided is level term, shall be as set forth in subdivisions (a) and (c) of this subrule. Subdivisions (e) and (f) of this subrule refer to prima facie premium rates for other types of benefits either alone or in combination with the types of benefits applicable to subdivisions (a), (b), and (c) of this subrule. Subdivisions (a) to (g) read as follows:

(a) If premiums are payable on the monthly outstanding balance basis, the premium rate shall be the following amounts per month per $1,000.00 of outstanding balance:

(i) .8000 commencing September 1, 1987.

(ii) .7692 commencing September 1, 1988.

(iii) .7385 commencing September 1, 1989, and continuing thereafter.

(b) If premiums are payable on a single premium basis, where the benefit provided is decreasing term, the single premium rates shall be as follows:

(i) Where the term of insurance equals 12 months, the 12-month single-term premium (SP12) shall equal the following amounts per $100.00 of initial insured indebtedness:

(A) .52 commencing September 1, 1987.

(B) .50 commencing September 1, 1988.

(ii) Where the term of insurance is different than 12 months, SP=SP12 x n/12, where SP is the single-term premium per $100.00 of initial insured indebtedness for insurance with a term different than 12 months, and n is the term of insurance in months.

(c) If premiums are payable on a single premium basis, where the benefit provided is level term, the single premium rates shall be as follows:

(i) Where the term of insurance equals 12 months, the 12-month single-term premium (SP12) shall equal the following amounts per $100.00 of initial insured indebtedness:

(A) .96 commencing September 1, 1987.

(B) .92 commencing September 1, 1988.

(d) Coverage may be offered at the insurer's option, based on either the monthly outstanding balance basis or single premium basis.

(e) The joint credit life rate on the basis specified in subdivision (a), (b), or (c) of this subrule shall be 1.5625 times the specific rate for that type of coverage.

(f) A combination of the appropriate rate for level term and the appropriate rate for decreasing term, with equal decrements, shall be used if coverage provided is a combination of level term and decreasing term, with equal decrements.

(g) If the benefits provided are other than those described in subdivisions (a) to (f) of this subrule, rates for such benefits shall be actuarially consistent with the rates provided in subdivisions (a), (b), (c), and (e) of this subrule.

(2) In connection with indebtedness that is repayable over a period of more than 120 months, when written on a single premium basis, the premium or other identifiable charge for credit life insurance shall be calculated to insure the scheduled amount required to liquidate the indebtedness, exclusive of any unearned interest or finance charge. In connection with indebtedness that is repayable over a period of more than 120 months, when written on a monthly outstanding balance basis, the premium or other identifiable charge for credit life insurance shall be calculated to ensure the actual amount required to liquidate the indebtedness, exclusive of any unearned interest or finance charge.

(3) The premium rates in subrule (1) of this rule shall apply to all policies which provide credit life insurance, which are issued with or without evidence of insurability, which are offered to all eligible debtors, and which do not contain any of the following:

(a) Exclusions, other than suicide within 1 year of the incurred indebtedness.

(b) Age restrictions, other than age restrictions that make debtors who are 71 or over ineligible for initial or continued coverage.

(c) An actively at work test other than one which requires that a debtor is or has been, for the previous 2 weeks, either regularly working a 30-hour week or more or is able to do so.

(4) Any underwriting decision shall be made within 60 days of the application for insurance. An insurer shall not engage in post-claim underwriting.

(5) The premium rates in subrule (1) of this rule shall also apply to all policies which provide credit life insurance, which are to be issued without underwriting, except underwriting that is based upon age, and which do not contain any of the following:

(a) Age restrictions, other than age restrictions that make debtors who are 71 or over ineligible for initial or continued coverage.

(b) A provision excluding or denying a claim for death resulting from preexisting conditions, except for those conditions for which the insured debtor received diagnosis or treatment within 6 months preceding the effective date of the debtor's coverage and which caused loss within the 6 months following the effective date of the coverage.

(6) A preexisting conditions exclusion permitted by subrule (5) of this rule shall apply only to accumulated indebtedness of more than $1,000.00 and where the diagnosis identified the condition.

History

History: 1987 MR 6, Eff. Sept. 1, 1987; 1995 MR 1, Eff. Feb. 3, 1995.

Mich. Admin. Code R 550.212 Credit accident and health insurance prima facie rates {#sec-r-550.212 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.212}

Rule 12. (1) Credit accident and health insurance prima facie premium rates for the insured portion of an indebtedness repayable in equal monthly installments, where the insured portion of the indebtedness decreases uniformly by the amount of the monthly installment paid, shall be as set forth in subdivisions (a) and (b) of this subrule. Subdivisions (c), (d), and (e) of this subrule refer to prima facie premium rates for other types of benefits either alone or in combination with the type of benefits applicable to subdivisions (a) and (b) of this subrule. Subdivisions (a) to (f) read as follows:

(a) If premiums are payable on a single premium basis for the duration of the coverage, the premium rates shall be those set forth in appendix A of R 550.117.

(b) If premiums are paid on the basis of the premium rate per month per thousand of outstanding insured indebtedness, the premium rates shall be those set forth in appendix B of R 550.118.

(c) The actuarial equivalent of subdivision (b) of this subrule shall be used if the coverage provided is a constant maximum indemnity for a given period of time.

(d) An appropriate combination of the premium rate for a constant maximum indemnity for a given period of time and the premium rate for a maximum indemnity which decreases in equal amounts per month shall be used if the coverage provided is a combination of a constant maximum indemnity for a given period of time after which the maximum indemnity begins to decrease in equal amounts per month.

(e) If the benefits provided are other than those described in subdivisions (a) to (d) of this subrule, rates for such benefits shall be actuarially consistent with rates provided in subdivisions (b) and (c) of this subrule.

(f) The outstanding balance rate for credit accident and health insurance may be either a term specified rate or may be a single composite term outstanding balance rate applicable to all loans made under an open-end credit plan.

(2) The premium rates specified in subrule (1) of this rule shall apply to all policies which provide credit accident and health insurance, which are to be issued with or without evidence of insurability, which are to be offered to all eligible debtors, and which do not contain any of the following:

(a) A provision excluding or denying a claim for disability resulting from preexisting conditions, except for those conditions for which the insured debtor received medical advice, diagnosis, or treatment within 6 months preceding the effective date of the debtor's coverage and which caused loss within the 6 months following the effective date of the coverage.

(b) Any provision that excludes or restricts liability in the event of disability caused in a specified manner, except that policies may contain provisions excluding or restricting coverage in the event of normal pregnancy, intentionally self-inflicted injuries, and any act of war, declared or undeclared.

(d) Age restrictions, other than age restrictions that make debtors who are 66 years of age or older ineligible for initial or continued coverage. However, such policies shall contain a daily benefit equal in amount to 1/30 of the monthly benefit payable under the policy for the indebtedness and shall contain a definition of "disability" that is no more restrictive than one requiring that, during the first 12 months of disability, the insured shall be unable to perform the principal duties of his or her occupation at the time the disability occurred and, thereafter, the principal duties of any occupation for which the insured is reasonably suited by education, training, or experience. This requirement regarding the definition of "disability" shall not apply to lump sum accident and health coverage.

(3) Any underwriting decision shall be made within 60 days of the application for insurance. An insurer shall not engage in post-claim underwriting.

(4) If a policy does not contain a provision excluding or denying a claim for disability resulting from preexisting conditions, the premium rates corresponding to those in subrule (1)(a) of this rule shall be as contained in appendix C or appendix D of R 550.119 or R 550.120, and additional rates shall be consistent with the relationship between the premium rates contained in appendix D of R 550.120 and the premium rates contained in appendix B of R 550.118.

History

History: 1987 MR 6, Eff. Sept. 1, 1987; 1995 MR 1, Eff. Feb. 3, 1995.

Mich. Admin. Code R 550.213 Refund formulas {#sec-r-550.213 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.213}

Rule 13. (1) Refund formulas which any insurer desires to use shall be filed with, and approved by, the commissioner before use. The following methods are deemed appropriate for the plans described:

(a) The pro rata unearned gross premium method shall be used for level term credit insurance and for credit insurance coverages under which premiums are collected from the debtor on a basis other than the single premium basis.

(b) The "Rule of 78" or "sum of the digits" unearned premium method shall be used for insurance coverage which reduces in equal amounts per month and for which the premiums are collected on a single premium basis.

(c) An appropriate combination of the pro rata method and the "Rule of 78" method or, at the option of the insurer, the pro rata method shall be used for credit life insurance provided as a combination of level and decreasing term coverage and for credit accident and health insurance wherein the insured is covered for a constant maximum indemnity for a given period of time, after which the maximum indemnity begins to decrease in equal amounts per month.

(2) For other modes of premium payment and for other patterns of insurance, each insurer shall file for approval and include in the policy appropriate formulas or factors for refund or reference to such formulas or factors that are on file with the commissioner.

(3) In the event of termination, a charge for credit insurance shall not be made for the first 15 days of a loan month and a full month may be charged for 16 days or more of a loan month, unless refunds are made on a pro rata basis for each day within the loan month.

(4) The requirements that refund formulas be filed with the commissioner shall be considered fulfilled if the refund formulas are set forth in the individual policy or group certificate filed with the commissioner. If the appropriate refund formula is the "sum of the digits" formula, commonly known as the "Rule of 78," it shall be sufficient to refer to such formula by either phrase.

(5) If the total of all refunds due a debtor or joint debtors is $1.00 or less, no refund need be made.

(6) Refunds required to be made shall be paid or credited promptly to the person entitled thereto.

History

History: 1987 AACS.

Mich. Admin. Code R 550.214 Deviation procedures {#sec-r-550.214 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.214}

Rule 14. (1) As used in this rule:

(a) "Account" means the coverage for a single plan of benefits offered by 1 creditor. Single life and joint life together is 1 plan of benefits; however, the various elimination and retroactive terms on accident and health create separate plans of benefits. The definition of "account" includes coverage which is written on a group or individual policy basis.

(b) "Adjusted actual loss ratio (AALR)," for a case, means the ratio of actual incurred claims to actual earned premium adjusted to prima facie as described in subdivision (f) of this subrule.

(c) "Average number of life years" means the average number of group certificates or individual policies in force during the experience period, without regard to multiple coverage, times the number of years in the experience period, or some equivalent calculation.

(d) "Case" means a single account case, a multiple account case, or a pooled account case as follows:

(i) "Single account case" means an account that has a credibility factor of not less than .65 for the experience period, excluding all of these accounts which have been included in multiple account cases.

(ii) "Multiple account case" means, with the approval of the commissioner, that 2 or more accounts of the same insurer having similar underwriting characteristics are combined by the insurer for premium rating purposes, excluding all cases defined in paragraph (i) of this subdivision and which, when combined, have a credibility factor of not less than .65 for the experience period.

(iii) "Pooled account case" means a combination of all the insurer's accounts of the same plan of insurance and class of business, which combination has experience in this state, excluding all cases defined in paragraphs (i) and (ii) of this subdivision.

(e) "Credibility measure" means 1 of the following, chosen by the insurance company:

(i) Number of claims.

(ii) Average number of life years.

(iii) Earned premium. The same measure shall be used for life and accident and health and for the entire state. An insurer shall notify the commissioner in advance of which method it will use to measure the credibility of all its cases in this state and shall not change its method without the prior approval of the commissioner.

(f) "Earned premium" means premiums earned at the level of the prima facie rates. If the rates applicable to an account are not at the prima facie level or at a level percentage of the prima facie rates, the amount of premium which would have been earned at the prima facie rates may be calculated using reasonable approximations.

(g) "Experience period" means the most recent 3 experience years or a lower number of full years, if full credibility is reached (credibility factor equals 1.00), for that case as shown in the credibility table. The same period shall be used for determining credibility and upward deviations.

(h) "Experience year," for a group policy, means a 12-month period ending on the policy anniversary or renewal date or on a calendar year end. Experience year for individual policies or a case means a calendar year. Experience for a given case shall be reported consistently from year to year.

(i) "Incurred claim count" means the number of claims incurred for the case during the experience period. This means the total number of claims reported during the experience period, whether paid or in the process of payment, plus an incurred but not reported (IBNR) at the end of the experience period, less the number of claims incurred but not reported at the beginning of the experience period. If a debtor has been issued more than 1 certificate for the same plan of insurance, only 1 claim is counted. If a debtor receives disability benefits, only the initial claim payment for that period of disability is counted.

(j) "Incurred claims" means total claims paid during the experience period, adjusted for the change in the claim reserve.

(k) "Minimum loss ratio" (MLR) is .60.

(2) Credibility shall be determined in accordance with appendix E of R 550.221.

(3) Upward rate deviations may be obtained by an insurer under the following circumstances:

(a) For cases where AALR is greater than MLR, the case rate shall be derived using the credible loss ratio (CLR) where CLR = c(AALR) + (1-c)(MLR) and c = credibility factor of the case, according to the upward rate deviation procedure following:

(i) If the case rate applies to a pool of accounts, the case rate will continue to apply to every account which was pooled for determination of the case rate and only to those accounts.

If an account which was not pooled becomes insured with a new insurer, the case rate will continue to apply to that account for the duration of the effective period.

(ii) If a pooled account becomes insured with a new insurer, the case rate will continue to apply to the account for the duration of the previous insurer's effective period or to the end of the current insurer's effective period, whichever is later, but in no event later than 1 year.

(b) If the credible loss ratio is greater than the minimum loss ratio the new case rate shall be the prima facie rate times the upward deviation factor f where: f = [1 + 1.25 (CLR-MLR)]

(4) A designated officer of the insurer shall sign the deviation request and a certification deemed necessary by the commissioner. An insurer may use a deviation procedure, other than described in subrule (3) of this rule, only with the approval of the commissioner. Such procedure may have alternative definitions and calculations, including basis for credibility and experience period and a definition of "case."

(5) Nothing in this rule shall be construed to prevent the commissioner from accepting for filing a schedule of rates not developed in strict conformance with this rule.

(6) Any insurer that has rates on file which are equal to or lower than prima facie rates may retain on file and use those rates without further proof of their reasonableness, whether or not such rates develop the MLR.An insurer may at any time use a rate for an account that is lower than its filed rate without notice to the commissioner. An upward deviation may be filed with the commissioner for use if an insurer's credible loss ratio is greater than the minimum loss ratio. If the commissioner does not object to the filing of the upward deviation within 30 days after receipt of the filing, rates not higher than the deviation rates which were filed may be placed in effect by the insurer.

History

History: 1987 AACS.

Mich. Admin. Code R 550.215 Disclosure {#sec-r-550.215 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.215}

Rule 15. When a premium or identifiable charge is payable by a debtor for credit insurance coverage offered by a creditor, at the time such insurance is applied for, disclosures shall be made to the principal debtor and copies given and retained in accordance with state and federal law. The creditor shall also disclose the optional nature of the coverage, premium, or identifiable charge separately by type of coverage. These disclosures may be made in conjunction with any of the following:

(a) The federal truth-in-lending disclosure.

(b) A notice of proposed insurance.

History

History: 1987 AACS.

Mich. Admin. Code R 550.216 Effective date of rules; effect {#sec-r-550.216 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.216}

Rule 16. (1) These rules shall take effect on September 1, 1987.

(2) All policies, group certificates, and related forms issued or renewed on or after the date upon which these rules become effective shall be in compliance with these rules.

(3) Rates which exceed the new prima facie rates cannot be used on or after the effective date of these rules, except for a case for which an upward rate deviation may be placed in effect in accordance with R 550.214(3).

(4) Approval of all policies, group certificates, and related forms not in compliance with these rules is hereby withdrawn upon the effective date of these rules. No such form may be issued or renewed on or after the effective date of these rules unless it has been submitted to, and approved by, the commissioner pursuant to these rules or unless an approved rider has been attached bringing such form into compliance with these rules.

History

History: 1987 AACS.

Mich. Admin. Code R 550.217 Appendix A {#sec-r-550.217 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.217}

Rule 17. Appendix A reads as follows:

Figure for 550.217

History

History: 1987 AACS.

Mich. Admin. Code R 550.218 Appendix B {#sec-r-550.218 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.218}

Rule 18. Appendix B reads as follows:

Figure for 550.218 (Part 1 of 3)

Figure for 550.218 (Part 2 of 3)

Figure for 550.218 (Part 3 of 3)

History

History: 1987 AACS.

Mich. Admin. Code R 550.219 Appendix C {#sec-r-550.219 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.219}

Rule 19. Appendix C reads as follows:

Figure for 550.219

History

History: 1987 AACS.

Mich. Admin. Code R 550.220 Appendix D {#sec-r-550.220 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.220}

Rule 20. Appendix D reads as follows:

Figure for 550.220 (Part 1 of 2)

Figure for 550.220 (Part 2 of 2)

History

History: 1987 AACS.

Mich. Admin. Code R 550.221 Appendix E {#sec-r-550.221 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.221}

Rule 21. Appendix E reads as follows:

Figure for 550.221

History

History: 1987 AACS.

R 550.301 to R 550.302 Credit Insurance Policy Forms - Discretionary Clauses

Mich. Admin. Code R 550.301 Definitions {#sec-r-550.301 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.301}

DEPARTMENT OF LABOR AND ECONOMIC GROWTH

OFFICE OF FINANCIAL AND INSURANCE SERVICES

CREDIT INSURANCE POLICY FORMS - DISCRETIONARY CLAUSES

(By authority conferred on the commissioner of the Office of Financial and Insurance Services by section 22 of the credit insurance act, 1958 PA 173, 1969 PA 306, E.R.O. No 2000-2, and E.R.O. No 2003-1; MCL 550.622, MCL 24.231 to MCL 24.233, MCL 445.2003, and MCL 445.2011)

Rule 1. As used in these rules:

(a) "Appeal" means an appeal by a policyholder or other claimant of a claim denial by an insurer. It includes appeals to administrative agencies, arbitrators, courts, and mediators.

(b) "Commissioner" means the commissioner of the office of financial and insurance services.

(c) "Discretionary clause" is a provision in a form that purports to bind the claimant to or grant deference in subsequent proceedings to the credit insurer's decision, denial, or interpretation on terms, coverage, or eligibility for benefits including, but not limited to, a form provision that does any of the following:

(i) Provides that a policyholder or other claimant may not appeal a denial of a claim.

(ii) Provides that the insurer's decision to deny policy coverage is binding upon a policyholder or other claimant.

(iii) Provides that on appeal the insurer's decision-making power as to policy coverage is binding.

(iv) Provides that the insurer's interpretation of the terms of a form is binding upon a policyholder or other claimant.

(v) Provides that on appeal the insurer's interpretation of the terms of a form is binding.

(vi) Provides that or gives rise to a standard of review on appeal that gives deference to the original claim decision.

(vii) Provides that or gives rise to a standard of review on appeal other than a de novo review.

(d) "Form" means a form identified in section 13 of the credit insurance act, 1958 PA 173, MCL 550.613.

(e) Terms defined in the credit insurance act, 1958 PA 173, as amended, MCL 550.601 to MCL 550.624, and R 550.201 to R 550.216 have the same meanings when used in these rules.

History

History: 2007 AACS.

Mich. Admin. Code R 550.302 Discretionary clauses prohibited {#sec-r-550.302 omnilex-key=us-mi-regs-official--dept-insurance-and-financial-services--R 550.302}

Rule 2. (a) A discretionary clause is unjust, unfair, inequitable, misleading, deceptive, and encourages misrepresentation of a policy within the meaning of section 13 of the credit insurance act.

(d) Nothing in this rule limits the commissioner's authority under sections 13 and 15 of the credit insurance act, 1958 PA 173, MCL 550.613 and MCL 550.615, to disapprove or withdraw approval of any form that contains a discretionary clause.

History

History: 2007 AACS.