State RegulationsMI specificDifficulty 2/5
Which use of selection criteria by a Michigan insurer is consistent with M.C.L. 500.2027?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
M.C.L. 500.2027 addresses the selection of risks and prohibits selection criteria that are unfairly discriminatory. Michigan law leaves insurers free to classify and select risks using legitimate, risk-related underwriting factors, but those criteria must be applied consistently to similarly situated applicants. Underwriting that evaluates the actual risk is the lawful exercise of selection, while criteria that burden people for reasons unrelated to the risk cross into unfairly discriminatory selection that the Michigan Department of Insurance and Financial Services (DIFS) can challenge.
Why the other options are wrong
- A) Charging different rates to same-class applicants with equal expectation of life is unfair discrimination under M.C.L. 500.2019.
- B) A factor with no relationship to the insurance risk is not a legitimate selection criterion and results in unfairly discriminatory selection.
- D) Declining applicants based on neighborhood alone, without regard to individual risk, is unfairly discriminatory selection.
Memory hook
Risk-related and consistent, or it is discrimination.