State RegulationsMI specificDifficulty 2/5
Which Michigan underwriting practice is lawful?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Michigan's selection-criteria rule, M.C.L. 500.2027, allows insurers to use underwriting criteria that genuinely relate to the risk, applied consistently within a class; the prohibition is on unfair discrimination between insureds of the same class and equal expectation of life (M.C.L. 500.2019 for life and M.C.L. 500.2020 for accident and health). Risk-based, consistently applied distinctions are the essence of lawful underwriting under the Michigan Insurance Code.
Why the other options are wrong
- B) Arbitrary differences among insureds of the same class and equal expectation of life are unfair discrimination under the Michigan Insurance Code.
- C) Rebating anything of value not specified in the contract violates M.C.L. 500.2024; the only exception is merchandise with an invoice value not exceeding $5.00 per life applicant under M.C.L. 500.2024a.
- D) Declining an equally situated applicant without any risk-based reason is unfair discrimination, not underwriting.
Memory hook
Criteria must measure the risk — not reward the friend.