State RegulationsMI specificDifficulty 2/5
An insurer charges two accident and health applicants with the same classification and the same expectation of risk different premium rates because one of them once filed a complaint with the insurance regulator. Under M.C.L. 500.2020, the insurer's action is:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
M.C.L. 500.2020 of the Michigan Insurance Code prohibits an accident and health insurer from discriminating between insureds of the same class and equal expectation of risk. A prior regulatory complaint says nothing about the applicant's health risk, so the rate differential rests on an impermissible reason — retaliation for exercising a legal right — rather than any true risk distinction, and DIFS can sanction the insurer for it.
Why the other options are wrong
- A) A consumer complaint is not a risk factor; calling the differential experience rating does not make a punitive rate increase lawful.
- C) Premium setting is underwriting, not claims handling, and no claims process justified the differential.
- D) Coercion under M.C.L. 500.2012 involves pressure forcing a transaction, which is a different unfair practice from unequal premium treatment.
Memory hook
Punishing a complainer with higher rates = unfair discrimination, not rating.