Michigan Administrative Code
Department - Insurance and Financial Services
Insurance
Fire And Inland Marine Insurance Rates
Section R. 500.1307 - Unfairly discriminatory rates
Current through Vol. 24-04, March 15, 2024
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.
(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:
(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.