State RegulationsMI specificDifficulty 2/5
A Michigan life insurer charges two applicants of the same class and equal expectation of life materially different premium rates based on factors unrelated to their risk. Under Michigan law, 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. 500.2019 makes it an unfair trade practice for a life insurer to discriminate between insureds of the same class and equal expectation of life, and M.C.L. 500.2020 imposes the parallel rule for accident and health coverage. Michigan law permits classification of risks on sound, risk-related grounds, but once two applicants sit in the same class with equal life expectancy, their premiums may not diverge for reasons unrelated to the risk. The Michigan Department of Insurance and Financial Services (DIFS) polices this through its unfair-trade-practice authority.
Why the other options are wrong
- B) Insurance rates are not individually negotiable; Michigan law requires classification to be consistent and risk-based.
- C) Issuing coverage at a discriminatory price does not cure the discrimination; the pricing itself is the violation.
- D) Rebating is a separate violation under M.C.L. 500.2024, and it provides no authorization for discriminatory premium differences.
Memory hook
Same class, equal risk, same rate.