State RegulationsMI specificDifficulty 2/5
A lender in Flint tells borrowers they must buy their credit-related insurance from the lender's own affiliated agency or the loan will be denied, even though coverage from other insurers would satisfy the loan terms. Under M.C.L. 500.2012, this practice is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
M.C.L. 500.2012 of the Michigan Insurance Code prohibits coercion and intimidation — using pressure connected to a transaction to compel a person to buy insurance. Conditioning loan approval on purchasing coverage from the lender's own agency, when other coverage would satisfy the terms, is a textbook forced-purchase arrangement, and the director can pursue cease-and-desist action and penalties through DIFS.
Why the other options are wrong
- B) Ownership of the agency does not authorize the pressure; the offense is the compelled purchase, not the affiliation itself.
- C) Unfair discrimination under M.C.L. 500.2019 and 500.2020 concerns unequal premium treatment of similarly situated insureds, not forced purchases through pressure.
- D) No false or maliciously critical statement about any insurer's financial condition was made, so defamation under M.C.L. 500.2009 does not apply.
Memory hook
"Buy from us or no loan" = coercion, plain and simple.