Michigan Regulator: Home, Auto Insurance Forms Must Be Filed 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.

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 homeowners 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, said OFIR spokesman Jason Moon.

The order amends a 1997 order by former Insurance Commission-er 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 Commissioner Ken Ross said 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,” he 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 ruled 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 a statement announcing the regulatory change, Ross said the “issues demonstrated that the protection of the public requires the review of personal auto and home insurance policies before they are put into use.”

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