Michigan Mandates Insurers File Home, Auto Insurance Forms with State

Michigan’s insurance regulator is reinstating a requirement that insurance companies submit all home and auto insurance documents and forms to the state insurance department for review prior to using them with the public.

The order from the Office of Financial and Insurance Regulation (OFIR) requires that all new or revised personal automobile forms be filed starting July 1 and homeowner insurance forms starting Sept. 1.

OFIR will have 30 days after a form is submitted to disapprove it. Until then, the insurer cannot use the new or renewal form. If it is not disapproved by OFIR by that time then it is deemed approved and the insurer can use it, according to OFIR spokesman Jason Moon.

The order amends a 1997 order by former Insurance Commissioner Joe Olson, who exempted certain contracts from filing requirements. Olson found at the time that prior review of insurance contracts was unnecessary for the protection of the public.

Current Insurance Commissioner Ken Ross said that recent legal developments show that the review of these forms has become necessary for the protection of the public. “Michigan consumers deserve to have their insurance contracts scrubbed to make sure the fine print isn’t unreasonable,” Ross said.

In particular, Ross cited a 2005 Michigan Supreme Court case that he said “dramatically changed the landscape.” In Rory v Continental Insurance Co., the court announced that Michigan courts could no longer amend insurance contracts based upon unreasonable clauses. The court said that it was the responsibility of the insurance commissioner, not the courts, to review clauses for legality.

The disputed contract clause in Rory was a one-year limitation period for bringing uninsured motorist claims. According to Ross, “many policyholders, as with the plaintiffs in that case, could not comply with a one-year limitation period, making their coverage, illusory.”

In December 2005, then-Commissioner Linda Watters issued an order barring insurance companies from imposing one-year limitations on legal suits involving uninsured motorist coverage.

OFIR said it has since discovered that the use of such clauses by insurers to be “commonplace” and that it “has spent years securing the removal of these and other unreasonable clauses from auto and home insurance policies as they have been brought to the agency’s attention by other court cases, attorneys, and complaints to the agency from policyholders.”

Ross said the Rory case meant policyholders lost their last line of defense in the court system. “These issues demonstrated that the protection of the public requires the review of personal auto and home insurance policies before they are put into use,” he said in a statement announcing the regulatory change.

The change is not welcome news to insurers. They argue that adding regulation will only impede introduction of new products and increase costs.

“Subjecting personal lines policy forms to filing and prior approval requirements is contrary to all ‘speed to market’ and regulatory modernization trends and could result in higher rates and less choice in the marketplace,” Joseph Thesing, state affairs director for the National Association of Mutual Insurance Companies, told the insurance department last May when the idea was raised.

“Furthermore, rescinding this exemption would slow the introduction of new products to the marketplace and quite possibly stagnate product innovation. Rescinding the order would also increase regulatory burdens on OFIR, which is arguably understaffed,” he also said.

Topics Carriers Auto Legislation Michigan