Insurance: no-fault; penalties for lapse of insurance policy; eliminate. Amends secs. 2116b, 2118 & 2120 of 1956 PA 218 (MCL 500.2116b et seq.) & repeals sec. 2116a of 1956 PA 218 (MCL 500.2116a).
Summary
Senate Bill 329 amends Michigan’s Insurance Code provisions governing automobile insurance underwriting and eligibility. The bill removes a specific penalty that allowed insurers to refuse coverage, limit coverage, charge a reinstatement fee, or raise premiums solely because an applicant previously let required auto insurance lapse on a vehicle they owned. That protection in section 2116b would remain available only for applicants who apply before January 1, 2022, and the bill also repeals section 2116a.
The bill also revises the list of permissible underwriting factors in sections 2118 and 2120, largely reorganizing and cross-referencing existing standards. It continues to allow insurers to consider factors such as driving-related eligibility points, certain household members’ point accumulations, vehicle modifications, vehicle type, commercial use, minimum deposits, comprehensive claim experience, limited alcohol-abstinence underwriting for long-standing insurers, and incidents of threats or assaults against insurer personnel. The bill preserves the general rule that insurers may not deny or limit coverage except under these specified underwriting rules.
Impact
SB 329 would change the state’s no-fault auto insurance underwriting rules by eliminating a lapse-of-coverage penalty and repealing a related statutory section, while leaving most other underwriting criteria in place. In practical terms, insurers would no longer be able to use a prior lapse in required insurance, by itself, as a basis to refuse, nonrenew, surcharge, or impose reinstatement fees on eligible applicants, subject to the bill’s timing and eligibility limits. The bill amends MCL 500.2116b, 500.2118, and 500.2120, affecting how automobile insurers evaluate applicants and how affiliated insurers and separate rating plans may be structured under the Insurance Code.
Sentiment
The available voting history suggests the bill was received favorably in committee, passing 5-2 to be reported without amendment. That indicates majority support for the bill’s approach, likely reflecting interest in reducing penalties tied to prior insurance lapses while keeping the broader underwriting framework intact. No committee transcript was provided, so the record here shows support in the vote but not detailed debate.
Contention
The main point of contention appears to be whether insurers should be allowed to penalize applicants for a prior lapse in required auto insurance. Supporters likely view the change as a consumer-protection measure that reduces barriers to obtaining coverage after a lapse, while opponents may be concerned that removing this underwriting factor could weaken incentives to maintain continuous coverage and increase risk for insurers. The 5-2 committee vote suggests some disagreement remained, but the bill advanced without amendment.