Issued and entered February 10, 1993 by David J. Dykhouse,
Commissioner of Insurance
It has been brought to the attention of the Commissioner that
some insurers may be imposing restrictions on home and automobile
agents apparently for the purpose of avoiding the underwriting
requirements of the Essential Insurance Act, which is contained
in Chapter 21 of the Michigan Insurance Code of 1956, as amended
(Code), MCLA 500.100 et seq.; MSA 24.1100 et seq. The Commissioner
is issuing this bulletin to alert insurers and agents to practices
that have the potential of violating the Essential Insurance
Agents' duties under the Essential Insurance Act are clearly
delineated in Section 2116(1) of the Code, MCLA 500.2116(1);
MSA 24.12116(1), and include the duty to not attempt to channel
an eligible person away from an insurer or insurance coverage
with the purpose or effect of avoiding an agent's obligation
to submit an application or an insurer's obligation to accept
an eligible person.
To protect agents in meeting their obligations, Section 1209
of the Code, MCLA 500.1209; MSA 24.11209, prohibits an insurer
from terminating an agent's authority for carrying out the agent's
duties under the Essential Insurance Act. Section 2116(2) of
the Code, MCLA 500.2116(2); MSA 24.12116(2), prohibits a company
from paying an agent less than normal commissions or normal
compensation or salary because of the expected or actual experience
produced by the agent's business or because of the geographic
location of business written by the agent.
Rules for home and automobile insurance are set forth in Sections
2117 and 2118 of the Code, MCLA 500.2117 and MCLA 500.2117;
MSA 24.12117 and MSA 24.12118, respectively. Section 2119 of
the Code, MCLA 500.2119; MSA 24.12119, requires that insurers
shall apply these rules without exception throughout this state
so that every applicant or insured conforming with them will
be insured or renewed.
Accordingly the following practices, none of which are authorized
by the Essential Insurance Act, could be violations of that
act, if engaged in by insurers or their agents.
1. The establishment of quotas for agents for applications
from eligible persons for automobile insurance in those situations
where the insurer is not writing or has not received applications
for both the automobile and home insurance for that eligible
2. The establishment of territorial restrictions within the
state on an agent's solicitation of application for automobile
or home insurance.
3. Utilization of claims experience of eligible persons as
a basis for refusing to issue or renew a policy of automobile
insurance or to issue a policy of home insurance.
4. Insurer programs which encourage or provide incentives
to agents to have them persuade insureds to cancel policies
of home or automobile insurance rather than submit a claim.
5. Insurer practice of designating young drivers as the primary
driver under a policy of automobile insurance, when that designation
is not justified by proportionate use of the insured vehicle.
6. The establishment of programs with regard to underwriting
or processing of applications, which are applied selectively
as a means of discouraging an eligible person from pursuing
an application with that insurer, when the insurer wishes to
avoid insuring that eligible person but has no basis for refusing
to do so under the Essential Insurance Act.
7. The practice by an insurer of threatening to or actually
restricting or terminating an agent's binding authority to bind
home insurance or automobile insurance because of the agent's
refusal or failure to adhere to the insurer's practices which
are themselves violations of the Essential Insurance Act.
8. Practices of insurers with respect to the compensation
of agents which have as a principal effect the provision of
inducements or incentives for the agent to adhere to insurer
practices which are themselves violations of the Essential Insurance
Act or to avoid performance of an agent's duties under that