230-RICR-20-60-1
230-RICR-20-60-1. Consumer Credit Insurance (version Periodic Refile, 01/02/2002 to 06/30/2010)
Page 1 of 30
Reg. # 9
State of Rhode Island and Providence Plantations
DEPARTMENT OF BUSINESS REGULATION
Division of Insurance
233 Richmond Street
Providence, RI 02903
INSURANCE REGULATION 9
CREDIT LIFE, ACCIDENT AND HEALTH INSURANCE
Table of Contents
Section 1
Purpose and Authority
Section 2
Definitions
Section 3
Rights and Treatment of Debtors
Section 4
Policy Forms and Related Material
Section 5
Determination of Reasonableness of Benefits in Relation to Premium Charge
Section 6
Credit Life Insurance Rates
Section 7
Credit Accident and Health Insurance
Section 8
Refund Formulas
Section 9
Experience Reports
Section 10
Use of Rates – Direct Business Only
Section 11
Supervision of Credit Insurance Operations
Section 12
Severability
Section 13
Effective Date
Appendix I – Credit Insurance Experience Report
Appendix II – Credit Accident and Health Insurance Single Premium Rates per $100 of Initial
Indebtedness
Section 1
Purpose and Authority
The purpose of this Regulation is to protect the interests of debtors and the public in this
state by providing a system of rate, policy form, and operating standards for the transaction of
short term credit life and credit accident and health insurance, as described in R.I. Gen. Laws §§
27-30-2 and 27-31-2. This Regulation is promulgated and adopted pursuant to R.I. Gen. Laws §§
27-30-12, 27-31-13 and it interprets and implements R.I. Gen. Laws §§ 27-30-1 et seq and 27-
31-1 et seq.
Section 2
Definitions
As used in this Regulation:
(1)
"Credit accident and health insurance" means insurance as defined in R.I. Gen.
Laws § 27-31-3 Laws including loans of unspecified duration, unless it can be
Page 2 of 30
Reg. # 9
shown that such loans can be reasonably expected to have durations in excess of
fifteen (15) years.
(2)
"Credit insurance" means both credit life insurance and credit accident and health
insurance.
(3)
"Credit life insurance" means insurance as defined in R.I. Gen. Laws § 27-30-2,
including loans of unspecified duration, unless it can be shown that such loans can
be reasonably expected to have durations in excess of fifteen (15) years. With
respect to lease obligations, "credit life insurance" may cover only those leases by
which a successor to the lessee, or his estate, is obligated upon the death of the
lessee either to purchase the property subject to the lease or to continue the lease
to the end of its term.
(4)
"Gross coverage" means a schedule of uniformly-decreasing credit life insurance
in which the amount of life insurance at any time shall not exceed the sum of the
remaining periodic payments on the debt. If the credit transaction provides for a
variable interest rate and premiums are on a single premium basis, the amounts of
coverage shall not exceed the greater of
(a)
the amount calculated as if the initial interest rate remained constant, or
(b)
the amount calculated with the actual interest rate(s) in effect.
(5)
"Net coverage" means credit life insurance in which the amount of life insurance
during any payment period is not greater than the actual debt less any finance
charge remaining unearned at the end of such period, plus an allowance for not
more than two months' interest at the contract rate for accrued interest that may be
due at death. If the credit transaction provides for a variable interest rate, the
amount of coverage shall not exceed the greater of
(a)
the amount calculated as if the initial interest rate remained constant, or
(b)
the amount calculated with the actual interest rate(s) in effect.
(6)
"Net written premium" means gross written premium minus refunds on
termination.
(7)
"Indebtedness" means total amount repayable including principal, interest and
finance charges. If the credit transaction provides for a variable interest rate, such
amount shall not exceed the greater of
(a)
the amount calculated as if the initial interest rate remained constant, or
(b)
the amount calculated with the actual interest rate(s) in effect.
Page 3 of 30
Reg. # 9
Section 3
Rights and Treatment of Debtors
(1)
Multiple Plans of Insurance. If a creditor makes available to the debtors more than
one plan of credit life insurance or more than one plan of credit accident and
health insurance, all debtors must be informed of such plans.
(2)
Substitution. When a creditor requires credit life insurance, credit accident and
health insurance, or both, as additional security for an indebtedness, the debtor
shall be given the option of furnishing the required amount of insurance through
existing policies of insurance owned or controlled by the debtor procuring and
furnishing the required coverage through any insurer authorized to transact
insurance business in this state. If this subsection is applicable, the debtor shall be
informed by the creditor of the right to provide alternative coverage before the
transaction is completed.
(3)
Evidence of Coverage.
(a)
All credit insurance shall be evidenced by an individual policy, or, in the
case of group insurance, by a certificate of insurance. The individual
policy or certificate of insurance shall be delivered to the debtor in
accordance with R.I. Gen. Laws §§ 27-30-6 and 27-31-7.
(b)
Each individual policy or certificate of insurance shall set forth such
information as is required by R.I. Gen. Laws §§ 27-30-6, 27-30-7, 27-30-
8, 27-31-7, 27-31-8 and 27-31-9, and any other appropriate sections of the
General Laws.
(4)
Claims Processing. All credit insurance claims shall be processed in accord with
R.I. Gen. Laws §§ 27-30-10 and 27-31-11.
(5)
Termination of group credit insurance policy.
(a)
If a debtor is covered by a group credit insurance policy providing for the
payment of single premiums to the insurer, then provision shall be made
by the insurer that in the event of termination of the policy for any reason,
insurance coverage with respect to any debtor insured under such policy
shall be continued for the entire period for which the single premium has
been paid.
(b)
If a debtor is covered by a group credit insurance policy providing for the
payment of premiums to the insurer on a monthly outstanding balance
basis, then the policy shall provide that, in the event of termination of such
policy for whatever reason, termination notice thereof shall be given to the
insured debtor at least thirty (30) days prior to the effective date of
termination except where replacement of the coverage by the same or
another insurer in the same or greater amount takes place without lapse of
Page 4 of 30
Reg. # 9
coverage. The notice required in this paragraph shall be given by the
insurer or, at the option of the insurer, by the creditor.
(6)
Interest on Premiums. If the creditor adds identifiable insurance charges or
premiums for credit insurance to the indebtedness, and any direct or indirect
finance, carrying, credit, or service charge is made to the debtor on such insurance
charges or premiums, the creditor must remit and the insurer shall collect such
premium within sixty (60) days after it is added to the indebtedness.
(7)
Renewal or Refinancing of Indebtedness. If the indebtedness is discharged due to
renewal or refinancing prior to the scheduled maturity date, the insurance in force
shall be terminated before any new insurance may be issued in connection with
the renewed or refinanced indebtedness. In all cases of such termination prior to
scheduled maturity, a refund shall be paid or credited to the debtor as provided in
Section 8 of this Regulation. In any renewal or refinancing of the indebtedness,
the effective date of the coverage as respects any policy provision shall be
deemed to be the first date on which the debtor became insured under the policy
covering the indebtedness which was renewed or refinanced, at least to the extent
of the amount and term of the indebtedness outstanding at the time of renewal and
refinancing of the debt.
(8)
Maximum Aggregate Provisions. A provision in a policy or certificate that sets a
maximum limit on total payments must apply only to that policy or certificate;
except that a certificate issued under a group policy may contain a notice of a
limitation applicable to all insurance covering any one person insured under such
group policy.
(9)
Voluntary Prepayment of Indebtedness. If a debtor prepays the indebtedness other
than as a result of death or through a lump sum disability payment:
(a)
Any credit life insurance covering such indebtedness shall be terminated
and an appropriate refund of the credit life insurance premium shall be
paid to the debtor in accordance with Section 8 of this Regulation; and
(b)
Any credit accident and health insurance covering such indebtedness shall
be terminated and an appropriate refund of the credit accident and health
insurance premium shall be paid to the debtor in accordance with Section
8 of this Regulation. If a claim under such coverage is in progress at the
time of prepayment, the amount of refund may be determined as if the
prepayment did not occur until the payment of benefits terminates. No
refund need be paid during any period of disability for which credit
accident and health benefits are payable. A refund shall be computed as if
prepayment occurred at the end of the disability period.
(10)
Involuntary Prepayment of Indebtedness. If an indebtedness is prepaid by the
proceeds of a credit life insurance policy covering the debtor or by a lump sum
Page 5 of 30
Reg. # 9
payment of a disability claim under a credit insurance policy covering the debtor,
then it shall be the responsibility of the insurer to see that the following are paid
or credited promptly to the insured debtor if living or the beneficiary, other than
the creditor, named by the debtor or to the debtor's estate:
(a)
If there is more than one credit insurance benefit covering one
indebtedness and such indebtedness is liquidated through any one of the
credit insurance benefits, then the remaining coverages must be terminated
as of the date of liquidation and appropriate premium refunds made in
accordance with Section 8 of this Regulation; and
(b)
If there is any amount of benefits in excess of the amount required to
repay the indebtedness after crediting any unearned interest or finance
charges, such amount shall be paid or credited.
(11)
Amounts to be Insured:
(a)
Credit life insurance may provide gross coverage, or net coverage, at the
option of the insurer, for terms not exceeding sixty one (61) months.
Credit life insurance may only provide net coverage for terms exceeding
sixty one (61) months. Premium charges shall be computed on the same
basis as the benefits provided. The amount of credit life insurance
provided to cover a lessee shall not exceed the amount or amounts that the
lessee's successor, or his estate, becomes obligated to pay, either in one
sum or in periodic payments, on the death of the lessee. For leases having
terms not exceeding sixty one (61) months, such amount(s) may be
increased to include unearned lease charges.
(b)
Credit accident and health insurance may provide benefits not exceeding
the amount of outstanding indebtedness inclusive of unearned interest or
finance charges, or, with respect to insurance covering a lease, not at any
time exceeding the sum of the periodic lease payments remaining due.
Credit accident and health insurance may provide for indemnity against all
periodic payments or may be limited either in number or amount as
defined in the policy.
Section 4
Policy Forms and Related Material
(1)
Permissible Forms. Credit life and credit accident and health insurance shall be
issued only in the forms described in R.I. Gen. Laws §§ 27-30-3, 27-30-6, 27-31-
4 and 27-31-7.
(2)
Filing Requirements. All policy forms, certificates of insurance, notices of
proposed insurance, applications for insurance, endorsements and riders to be
delivered or issued for delivery in this state and the schedules of maximum
premium rates pertaining thereto shall be filed with the Commissioner as required
by R.I. Gen. Laws §§ 27-30-7 and 27-31-8.
Page 6 of 30
Reg. # 9
Section 5
Determination of Reasonableness of Benefits in Relation to Premium Charge
(1)
General Standard. Under R.I. Gen. Laws §§ 27-30-7 and 27-31-8, rates charged
for credit insurance policies must appear by reasonable assumptions not to be
excessive in relation to benefits. This requirement is satisfied if the premium rate
charged develops or may be reasonably expected to develop a loss ratio, of not
less than sixty percent (60%) for credit life insurance and sixty percent (60%) for
credit accident and health insurance.
(2)
Nonstandard Coverage. If any insurer files for approval of any form providing
coverage more restrictive than that described in Sections 6 and 7 of this
Regulation, the insurer shall demonstrate to the satisfaction of the Commissioner
that the premium rates to be charged for such restricted coverage will develop or
may be reasonably expected to develop a loss ratio not less than that contemplated
for standard coverage at the premium rates described in these sections.
Section 6
Credit Life Insurance Rates
(1)
Premium Rate. Credit life insurance premium rates for the insured portion of an
indebtedness repayable in equal monthly installments, where the insured portion
of the indebtedness decreases uniformly by the amount of the monthly installment
paid or decreases on a schedule designed to provide net coverage shall be as set
forth in Paragraphs (a) and (b) below. Paragraphs (c), (d), and (e) below, refer to
premium rates for other types of benefits either alone or in combination with the
type of benefits applicable to (a) and (b).
(a)
Seventy two cents ($.72) per month per one thousand ($1,000) of
outstanding insured indebtedness if premiums are payable on a monthly
outstanding balance basis.
(b)
If premiums are payable on a single premium basis, the following formula
shall be used to develop single premium rates from the outstanding
balance rate:
For gross coverage –
SPn = (n + 1) Op_____
20 (1 + 0.0019n)
where SPn is the single premium per
one hundred dollars ($100) of initial gross coverage, n is the credit term in
months, and Op is the monthly outstanding balance rate per one thousand
dollars ($1,000) of insured indebtedness.
For net coverage, actuarial balances --
Page 7 of 30
Reg. # 9
SPn = (n – an] ) Op_______
10 i an] (1 + .0021n)
where SPn is the single premium per
one hundred dollars ($100) of initial net coverage, n is the credit term in
months, an] is an annuity at interest rate i, i is the loan contract annual
percentage rate divided by twelve (12), and Op is the monthly outstanding
balance rate per one thousand dollars ($1,000) of outstanding insured
indebtedness. The resulting rates may be increased by a factor of (1 + i) or
( 1+2i) if one or two months’ accrued interest is included in the schedule
of insurance.
For net coverages, rule of 78 balances --
SPn = n(n – 1) + 2an] (n + 2) Op
60 an] (1 + .0021n)
where SPn is the single premium per
$100 of initial net coverage, and n, an], i, and Op are as defined above.
The resulting rates may be increased by a factor of (1 + i) or (1 + 2i) if one
or two months’ accrued interest is included in the schedule of insurance.
(c)
If premiums are payable on a single premium basis when the benefit
provided is level term, the following formula shall be used to develop
single premium rates from the outstanding balance rate:
SPn = n (Op)_______
10 (1 + .0027n)
where SP is the single premium per $100 of
initial insured indebtedness, n is the credit term in months, and Op is the
monthly outstanding balance rate per one thousand dollars ($1,000) of
outstanding insured indebtedness.
(d)
Joint coverage on any of the bases in (a), (b) or (c) of subsection (1), shall
be one hundred and sixty percent (160%) of the specific rate for that type
of coverage.
(e)
A combination of the appropriate rate for level term and the appropriate
rate for decreasing term (with equal decrements), if coverage provided is a
combination of level term and decreasing term (with equal decrements).
(f)
If the benefits provided are other than those described in Subsection (1)
above, rates for such benefits shall be actuarially consistent with the rates
provided in Paragraphs (a), (b), (c), and (d).
(2)
The premium rate in Subsection (1) shall apply to policies providing credit life
insurance to be issued with or without evidence of insurability, to be offered to all
debtors, and containing:
Page 8 of 30
Reg. # 9
(a)
No exclusion other than suicide within six months of the incurred
indebtedness; and
(b)
Either no age restriction or age restrictions making ineligible for coverage
debtors 65 or over at the time the indebtedness is incurred or debtors
having attained age 66 or over on the maturity date of the indebtedness.
(c)
A revolving credit insurance policy may exclude from the classes eligible
for insurance classes of debtors determined by age, and provide for the
cessation of insurance or reduction in the amount of insurance upon
attainment of not less than age 65.
Section 7
Credit Accident and Health Insurance
(1)
Premium Rate. Credit accident and health insurance premium rates for the insured
portion of an indebtedness repayable in equal monthly installments, where the
insured portion of the indebtedness decreases uniformly by the amount of the
monthly installment paid, shall be as set forth in (a) and (b) below. (c), (d), and (e)
below, refer to premium rates for other types of benefits either alone or in
combination with the type of benefits applicable to (a) and (b).
(a)
As set forth in Appendix II if premiums are payable on a single-premium
basis for the duration of the coverage; or
(b)
If premiums are paid on the basis of a premium rate per month per
thousand of outstanding insured indebtedness for loans of one hundred
twenty one (121) months duration or less, these premiums shall be
computed according to the following formula or according to a formula
approved by the Commissioner which produces rates actuarially
equivalent to the single premium rates in Appendix II:
Opn = 20 (1 + .0017n) SPn
n + 1
Where SPn = Single Premium Rate per one hundred dollars ($100) of initial
insured indebtedness repayable in n equal monthly installments (Appendix II).
Opn = Monthly Outstanding Balance Premium Rate per $1,000.
n = Original repayment period, in months, and is equal to, or less than,
121.
(c)
The actuarial equivalent of (a) and (b) above shall be used if the coverage
provided is a constant maximum indemnity for a given period of time.
Page 9 of 30
Reg. # 9
(d)
An appropriate combination of the premium rate for a constant maximum
indemnity for a given period of time and the premium rate for a maximum
indemnity which decreases in even amounts per month, if the coverage
provided is a combination of a constant maximum indemnity for a given
period of time after which the maximum indemnity begins to decrease in
even amounts per month.
(e)
If the benefits provided are other than those described in Section 7(1) of
this Regulation above, rates for such benefits shall be actuarially
consistent with rates provided in (a), (b), (c), and (d) above.
(f)
The outstanding balance rate for credit accident and health insurance may
be either a term specified rate or may be a single composite term
outstanding balance rate applicable to all loans.
(2)
The premium rates in Section 7(1) above shall apply to policies providing credit
accident and health insurance to be issued with or without evidence of
insurability, to be offered to all eligible debtors, and containing:
(a)
No provision excluding or denying a claim for disability resulting from
pre-existing conditions except for those conditions for which the insured
debtor received medical advice, diagnosis, or treatment within six (6)
months preceding the effective date of the debtor's coverage and which
caused loss within the six months following the effective date of coverage.
(b)
No other provision which excludes or restricts liability in the event of
disability caused in a specified manner except that it may contain
provisions excluding or restricting coverage in the event of normal
pregnancy and intentionally self-inflicted injuries.
(c)
No Actively at Work Test may require that the debtor be employed more
than thirty (30) hours per week.
(d)
No age restrictions or only age restrictions making ineligible for coverage
debtors sixty five (65) or over at the time the indebtedness is incurred or
debtors who will have attained age sixty six (66) or over on the maturity
date of the indebtedness.
(e)
A daily benefit equal in amount to one-thirtieth (1/30th) of the monthly
benefit payable under the policy for the indebtedness.
(f)
A definition of "disability" which provides that during the first twelve (12)
months of disability the insured shall be unable to perform the duties of
his occupation at the time the disability occurred, and thereafter, the duties
of any occupation for which the insured is reasonably fitted by education,
Page 10 of 30
Reg. # 9
training, or experience. This paragraph shall not apply to lump sum
disability coverage.
(g)
A revolving credit insurance policy may exclude from the classes eligible
for insurance classes of debtors determined by age, and provide for the
cessation of insurance or reduction in the amount of insurance upon
attainment of not less than age sixty five (65).
Section 8
Refund Formulas
(1)
Refund formulas which any insurer desires to use must be filed with and approved
by the Commissioner prior to use. The following methods are deemed appropriate
for the plans described:
(a)
Pro Rata Method. The pro rata unearned gross premium method shall be
used for level term credit life insurance, credit accident and health
insurance wherein the insured is covered for a constant maximum
indemnity for a given period of time, after which the maximum indemnity
begins to decrease in even amounts per month (i.e., so-called "critical
period" coverage), and for credit insurance coverage under which
premiums are collected from the debtor on a basis other than the single
premium basis.
(b)
"Sum of the digits method." The "Rule of 78" or "sum of the digits"
unearned premium method may be used for single premium, gross
coverage, life insurance.
(c)
Rule of Anticipation. The Rule of Anticipation may be used for single
premium, gross coverage, life insurance and for coverages (including
accident and health insurance providing other than so-called "critical
period" coverage) other than those described in (a) and (b) above. Under
the Rule of Anticipation the refund shall be equal to the premium that
would be charged to cover the debt scheduled to be outstanding
immediately prior to prepayment, for the remainder of the scheduled term
of the debt.
(2)
In the event of termination, no charge for credit insurance may be made for the
first fifteen (15) days of a loan month and full month may be charged for sixteen
(16) days or more of a loan month; except that, in any case where the creditor is
permitted to earn a full month's interest on the loan to which credit insurance is
subject, when such loan has been terminated after one (1) day or more of a loan
month, then a full month may be charged for credit insurance for one (1) day or
more of a loan month.
(3)
The requirements of the Credit Insurance Law that refund formulas be filed with
the Commissioner shall be considered fulfilled if the refund formulas are set forth
Page 11 of 30
Reg. # 9
in the individual policy or group certificate filed with the Commissioner. If the
appropriate refund formula is the "Rule of 78" or the Rule of Anticipation, it shall
be sufficient to refer to it by name.
(4)
No refund of three dollars ($3) or less need be made.
Section 9
Experience Reports
(1)
Each insurer doing credit insurance business in this state shall submit experience
reports as provided in this section for the experience period of each class of
business.
(2)
"Class of business" means any of the following:
(a)
credit unions;
(b)
commercial and savings banks;
(c)
finance companies;
(d)
motor vehicle dealers;
(e)
other sales finance;
(f)
production credit associations; bank agricultural loans;
(g)
all others.
(3)
The reports required by this section shall be submitted in the manner prescribed
by Forms A, B, and C in Appendix I. Insurers are expected to reproduce the form
for use according to their needs. Such experience reports shall be submitted not
later than June 1st of each calendar year following the effective date of this
Regulation.
(4)
The experience reports required by this section shall replace all other annual
reports of credit insurance experience except for reports required by the National
Association of Insurance Commissioners annual statement. The experience
reports required by this section are separate and distinct from the NAIC annual
statement and are not used in any manner to determine the financial condition of
the company.
Section 10
Use of Rates -- Direct Business Only
(see glossary of "terms and definitions" herein)
(1)
Minimum Loss Ratio Test
Page 12 of 30
Reg. # 9
(a)
Loss Ratio Test. Benefits will be considered reasonable in relation to the
premium charged if the ratio of claims incurred to premium earned
(adjusted for investment income in the case of single premium coverage)
during the most recent experience period at the rates in use produces a loss
ratio that equals or exceeds the Minimum Loss Ratio Standard specified in
Section 5 above.
(b)
Broad Test. This test will be made separately for:
(i)
the total credit life insurance experience of the insurer in this state
for all classes of business and plans of insurance combined, and for
(ii)
the total credit accident and health insurance experience of the
insurer in this state for all classes of business and plans of
insurance combined, provided, however,
(iii)
a separate test is not required for each class of business or plan of
insurance therein.
(c)
Scope of Test When Deviated Rates are in Use. If an insurer has deviated
rates approved under (3)(a) or (3)(b) below, the test will exclude the
experience of the accounts for which deviated rates are in use. The
reasonableness of rates for those accounts will be determined by
subsection (3) below.
(d)
Frequency of Test. The test will be made each year when submitting the
experience reports required by Section 9 of this Regulation.
(2)
Use of Prima Facie Rates
An insurer that has rates on file which are equal to or lower than prima facie rates
may retain on file and use those rates without further proof of their reasonableness
while the experience of the insurer in this state for the accounts to which they are
applied continues to satisfy the Minimum Loss Ratio Test specified (1) above. An
insurer may at any time use a rate for an account that is lower than its filed rate
without notice to the Commissioner.
(3)
Use of Deviated Rates
(a)
Use of Rates Higher Than Prima Facie Rates
If the Minimum Loss Ratio Test produces a loss ratio that exceeds the
Minimum Loss Ratio Standard, the insurer may file for approval and use
rates that are higher than prima facie rates if it can be expected that the use
of such higher rates will continue to produce a loss ratio for the accounts
to which they are applied that will satisfy the Minimum Loss Ratio Test.
Page 13 of 30
Reg. # 9
(b)
Use of Rates Lower Than Prima Facie Rates
If the Minimum Loss Ratio Test produces a loss ratio that is lower than the
Minimum Loss Ratio Standard, the insurer shall file adjusted rates that can
be expected to produce a loss ratio that will satisfy the minimum Loss
Ratio Test.
(c)
Determination of Deviated Rates
If deviated rates are to be filed under (a) or (b) above, the insurer may file
rates for approval that will be:
(i)
Applied uniformly to all accounts of the insurer.
(ii)
Applied according to the Standard Case Rating Procedure specified
herein on an equitable basis approved by the Commissioner to only
one or more accounts of the insurer for which the experience has
been more favorable or less favorable than expected, or
(iii)
Applied according to a case rating procedure on file with the
Commissioner (an insurer electing to file a case rating procedure
may either file its own plan for the approval of the Commissioner
or may use the Standard Case Rating Procedure specified herein by
notice to him).
The rate for each account which has been deviated must be redetermined
on the same basis thereafter or until the rate for the account is no longer
deviated.
(4)
Use of Rates Determined by Standard Case Rating Procedure
An insurer, by written notice to the Commissioner of its election to do so, may
file and use premium rates determined by this Standard Case Rating Procedure. If
elected, this procedure will be used by the insurer to rate all of its credit insurance
in this state. Once elected, the procedure will remain in effect for the insurer until
a different procedure has been filed with the Commissioner and approved by him.
(a)
Determination of Case Rate
An insurer may use a rate for an account not greater than the case rate for
that account as follows:
(i)
Single Account Cases and Multiple Account Cases
Page 14 of 30
Reg. # 9
If the account is within the definition of a single account case or of
a multiple account case as filed by the insurer, the case rate for the
account or for each account comprising the multiple account case
will be determined by the formula set forth in (b) below.
(ii)
Pooled Account Cases
If the account is in a pooled account case, the case rate for each
account comprising the case will be the case rate for that pooled
account case as determined by the formula set forth in (b) below.
(iii)
New Accounts Without Experience
If a new account of an insurer has no experience in this state, the
case rate for the account will be the prima facie rate under Sections
6 and 7 of this Regulation.
(b)
Calculation of Case Rate
(i)
Symbols and Definitions
NCR = New Case Rate (redefined in (ii) below)
= PFR (CLR) + AE
PFR
= Prima Facie Rate
ALR = Actual Loss Ratio for case at Prima Facie Rate Basis
ELR
= Minimum Loss Ratio Required by Section 5
SLR
= The loss ratio at prima facie rates based on the most
recent published state experience for the applicable plan of
insurance and class of business. If appropriate published
experience is not available, then SLR = ELR.
Z
= Credibility Factor for Case
CLR
= Credibility Adjusted Case Loss Ratio at Prima Facie
Basis
= Z(ALR) + (1 - Z)(SLR)
E
= Expense Loading in prima facie rate
= (1 - ELR) PFR
AE
= Adjusted Expense Loading (defined in (ii) below)
(ii)
New Case Rate
((a))
If CLR is less than ELR for credit life insurance or for
credit accident and health insurance.
AE = E
NCR = PFR [(1 - (ELR - CLR)]
((b))
If CLR is greater than ELR for credit life insurance.
Page 15 of 30
Reg. # 9
AE = E + .1(CLR - ELR)
NCR = PFR [1 + 1.1 (CLR - ELR)]
((c))
If CLR is greater than ELR for credit accident and health
insurance.
AE = E + .1(CLR - ELR)
NCR = PFR [1 + 1.1 (CLR - ELR)]
(c)
Minimum Changes
If the new case rate does not differ by more than five percent (5%) from
the current case rate, the new case rate will be the current case rate.
(d)
Case Rate Period
A case rate will be in effect for a period of time not longer than the
experience period used to establish the case rate (i.e., 1 year, 2 years, 3
years). An insurer may file for a new case rate before the end of a case rate
period, but not more often than once during any twelve (12) month period.
(e)
Change of Insurers
If a creditor changes insurers, the case rate in effect for his account on the
date of the change will continue to be in effect for the account with the
succeeding insurer for the remainder of the case rate period.
(5)
Filing of Rates
When submitting the Experience Reports required by Section 9of this Regulation
an insurer who has elected to file higher rates under (3)(a) above or who is
required to file reduced rates under (3)(b) above, or who has elected the Standard
Case Rating Procedure for all of his accounts, shall also file a new schedule of
rates as determined by those subsections. If the Commissioner does not
disapprove the new schedule of rates within thirty (30) days after receipt of the
filing, or July 1, whichever is later, rates not higher than the new rates shall be
placed in effect on September 1 next following unless a different effective date
has been approved by the Commissioner. In no event, however, may a rate
increase be placed in effect earlier than the date rate decreases are required to be
placed in effect.
(6)
Glossary of Terms and Definitions as Used in Section 10
(a)
"Account" means the aggregate credit life insurance or credit accident and
health insurance coverage for a single plan of insurance and for a single
class of business written through a single creditor by the insurer whether
coverage is written on a group or individual policy basis. With the
Page 16 of 30
Reg. # 9
approval of the Commissioner, the account may also mean the credit life
insurance or the credit accident and health insurance of two or more plans
of insurance or two or more classes of business of a single creditor.
(b)
"Case" means a "Single Account Case" or a "Multiple Account Case" or a
"Pooled Account Case" as follows:
(i)
"Single Account Case", means an account that is at least as
credible as the minimum level of credibility elected by the insurer
for defining a single account case excluding all of these accounts
which have been included in multiple account cases.
An insurer may make this election by notice to the Commissioner,
in writing, of the minimum credibility factor it will use to define a
"Single Account Case". Once notified, the minimum credibility
factor will remain in effect for the insurer until a different factor
has been filed by the insurer and approved by the Commissioner. If
an insurer makes no written election, its minimum credibility
factor will be one hundred percent (100%).
(ii)
"Multiple Account Case" means, with the approval of the
Commissioner, two or more accounts of the same insurer having
similar underwriting characteristics which are combined by the
insurer for premium rating purposes, excluding all cases defined in
(i) above and which, when combined, are at least as credible as the
minimum level of credibility elected in (i) above.
(iii)
"Pooled Account Case" means a combination of all the insurer's
accounts of the same plan of insurance and class of business which
combination has experience in this state, excluding all cases
defined in (i) and (ii) above.
(c)
"Plan of Insurance" unless otherwise filed and approved means
(i)
credit life insurance on a flat rated basis other than revolving
accounts (i.e., including joint and single life coverage, decreasing
and level insurance, outstanding balance and single premium),
(ii)
credit life insurance on a revolving account basis,
(iii)
credit life insurance on an age-graded basis other than on revolving
accounts,
(iv)
credit accident and health insurance other than on revolving
accounts combining outstanding balance and single premium but
Page 17 of 30
Reg. # 9
separately for each combination of waiting period and retroactive
or nonretroactive.
(v)
credit accident and health insurance on a revolving account basis
separately for each combination of waiting period and retroactive
or nonretroactive.
(d)
"Experience" means "earned premiums", incurred claims, "incurred claim
count", number of life years insured, and "average amount of insurance"
during the experience period.
(e)
"State experience" means the most recent published claim rates or loss
ratios based on the experience of all insurers in this state for a plan of
insurance and class of business. However, if this state enters into
agreements with other similar states, the use of the appropriate multi-state
experience will be substituted for the experience in this state. If published
experience is not available for this state or multi-state region, the claim
rates assumed in this state's prima facie rates and the minimum loss ratio
required by Section 5 of this Regulation will be used.
(f)
"Experience Period" means the most recent period of time for which
experience is reported, but not for a period longer than three (3) full years.
(i)
If a case develops one hundred percent (100%) credibility in less
than three (3) years, the experience period for that case will be the
number of full years needed to develop credibility.
(ii)
If a case develops the minimum credibility elected by the insurer in
less than three years, the experience period for that case, at the
option of the insurer, will be the number of full years needed to
develop minimum credibility or three full years.
Experience incurred in the period immediately preceding the
effective date of this Regulation may be used to the extent
necessary to fill out the experience periods, if it is available in
proper form.
(iii)
New Accounts With Experience
If a new account of an insurer has experience in this state with a
prior insurer, the new insurer must use the most recent experience
of the account to the extent necessary to fill out an experience
period.
(iv)
Accounts with Multi-State Experience
Page 18 of 30
Reg. # 9
If an account has experience in more than this state, an insurer may
use only the experience of the account in this state to rate the case
or with the approval of the Commissioner may use the multi-state
experience of the account for this purpose applied on an equitable
basis.
Note -- The term "year", as used in this definition, for individual
policies means a calendar year and for group policies means either
a calendar year or a policy year at the option of the insurer.
(g)
"Prima Facie Rates" means those rates shown in Sections 6 and 7 of this
Regulation, including the rates in Appendix II.
(h)
"Earned premiums at rates in use" means actual earned premiums, that is,
the premiums earned at the premium rates actually charged and in force
during the experience period in accordance with the instructions and
method of calculation for Reporting Form A.
(i)
"Earned premium at prima facie rate" means the actual earned
premiums adjusted to the amount which would have been earned
had the premium rate during the experience period been equal to
the current prima facie rate in accordance with instructions and
method of calculation for Reporting Form A; if the insurer receives
single premiums, such premiums must further be adjusted to
recognize investment income at a rate of six percent (6%).
Reasonable methods of approximation may be used.
(j)
"Incurred Claims" means total claims paid during the experience period,
adjusted for the change in the claim reserve.
(k)
"Credibility Factor" means the extent to which the past experience of a
case can be expected to recur in the future. For the Standard Case Rating
Procedure, the credibility factor may be based on either the Number of
Claims incurred or on the "Average Number of Life Years" for the case
during the experience period using the Credibility Table. The insurer shall
notify the Commissioner in advance which method it will use to measure
the credibility of all its cases in this state and may not change its method
without the prior approval of the Commissioner. If "Claim Count" or "Life
Year" data is not available, reasonable methods of approximation
approved by the Commissioner may be used until such data is developed.
(l)
"Incurred Claim Count" means the number of claims incurred for the case
during the experience period. This means the total number of claims
reported during the experience period, whether paid or in the process of
payment plus any incurred but not reported (IBNR) at the end of the
experience period less the number of claims incurred but not reported at
Page 19 of 30
Reg. # 9
the beginning of the experience period. If a debtor has been issued more
than one certificate for the same plan of insurance, only one claim is
counted. If a debtor receives disability benefits, only the initial claim
payment for that period of disability is counted.
(m)
"Average Number of Life Years" means the average number of group
certificates or individual policies in force during the Experience Period
(without regard to multiple coverage) times the number of years in the
experience period, or some equivalent calculation.
(n)
Credibility Table for Purposes of the Standard Case Rating Procedure
means the following table:
CREDIBILITY TABLE
Average Number of Life Years
Credit Accident and Health Plans
Retroactive and Nonretroactive
Incurred
Credibility
Credit Life
Waiting Periods
Claim Count
Factor
14 Day
30 Day
1
1
1
1
.00
1,800
141
209
9
.25
2,400
188
279
12
.30
3,000
234
349
15
.35
3,600
281
419
18
.40
4,600
359
535
23
.45
5,600
438
651
28
.50
6,600
516
767
33
.55
7,600
594
884
38
.60
9,600
750
1,116
48
.65
11,600
906
1,349
58
.70
14,600
1,141
1,698
73
.75
17,600
1,375
2,047
88
.80
20,600
1,609
2,395
103
.85
25,600
2,000
2,977
128
.90
30,600
2,391
3,558
153
.95
40,000
3,125
4,651
200
1.00
The above integral numbers represent the lower end of the bracket for each Z factor.
The upper end is 1 less than the lower end for the next higher Z Factor.
Section 11
Supervision of Credit Insurance Operations
(1)
Each insurer transacting credit insurance in this state shall be responsible to
conduct a thorough periodic review of creditors with respect to their credit
Page 20 of 30
Reg. # 9
insurance business with such creditors to assure compliance with the insurance
laws of this state and the Regulation promulgated by the Commissioner.
(2)
Written records of such reviews shall be maintained by the insurer for review by
the Insurance Commissioner. Each such record shall be retained for at least five
(5) years.
Section 12
Severability
If any provision or clause of this Regulation or the application thereof to any person or
situation is held invalid, such invalidity shall not affect any other provision or application of the
Regulation which can be given effect without the invalid provision or application, and to this end
the provisions of this Regulation are declared severable.
Section 13
Effective Date
(1)
This Regulation shall take effect immediately as to premium rates filed on or after
October 1, 1983. It shall take effect January 1, 1984, with respect to all other
premium rates.
(2)
Approval of all forms not in compliance with this Regulation is hereby withdrawn
as of January 1, 1984. No such form may be issued after January 1, 1984 unless it
has been submitted to and approved by the Commissioner subsequent to October
1, 1983, or unless a rider approved subsequent to such date has been attached
bringing such form into compliance with this Regulation.
EFFECTIVE:
August 1, 1963
AMENDED:
October 1, 1968
August 4, 1983
REFILED:
January 2, 2002
Page 21 of 30
Reg. # 9
APPENDIX I
CREDIT INSURANCE EXPERIENCE REPORT
INSTRUCTIONS TO FORMS A, B AND C
FORM A
The purpose of this form is to provide statewide experience data under various classifications
which will permit the review and regulation of premium rates and loss ratios at both company
and state level.
A.
Class of business means any of the following:
1.
credit unions;
2.
commercial & savings banks;
3.
finance companies;
4.
motor vehicle dealers;
5.
other sales finance;
6.
production credit associations; and bank agricultural loans;
7.
all others.
B.
Earned Premiums.
1.
Actual earned premiums (Line 1f) -- The total of all premiums earned at the
premium rate(s) actually charged and in force during the experience period.
2.
Earned premiums at prima facie rate (Line 1g) -- Actual earned premiums
adjusted (on Form B) to the amount which would have been earned had the
premium rate during the experience period been equal to the current prima facie
rate. Note that if premiums in force differ from the current prima facie rate, Line
1f will not equal line 1g.
3.
Earned premiums at prima facie rate, adjusted for investment income (Form A,
line 1, h) -- Investment income at six percent (6%) per annum must be imputed to
gross premiums (if written on a single-premium basis) by a generally-accepted
actuarial procedure, which procedure must be explained in detail.
C.
Experience Period.
1.
The experience period will consist of a maximum of three calendar years, except
that in the first and second years after implementation of this Regulation, the
experience period may, at the insurer's option, include only one (1) or two (2)
years' experience, respectively. Thereafter, three (3) years' experience will be
required.
Page 22 of 30
Reg. # 9
2.
Data included in this report is to be the direct business of the current insurer, only,
without adjustment for reinsurance assumed or ceded.
FORM B
The purpose of this form is to convert actual earned premiums (Form A, Line 1f) to the amount
of premiums which would have been earned had all business been written at the current prima
facie rate.
Form B1 is applicable to Credit Life insurance and Form B2 is applicable to Credit Disability
insurance.
GENERAL
A.
A Form B (Life or Disability Section) must be completed for each Form A where prima
facie earned premium differs from actual earned premium. More than one Form B may
be required when more than one year's data is presented, due to changes in prima facie
rates or other factors.
B.
Actual earned premiums are to be converted to prima facie earned premiums by the use
of a conversion factor which is the ratio of the prima facie premium rate to the actual
premium rate. This conversion must be performed for each premium rate with premiums
in force during the experience period.
C.
The overall totals presented on Form B (either life or disability) must agree to the
appropriate lines on the Form A to which they are attached.
D.
Note that both Form B1 and Form B2 include actual earned premium at prima facie rate
on Line A. This data is for balancing purposes, only, and in no way indicates that Form B
must be completed if actual earned premium is equal to prima facie earned premium.
FORM B1 Credit Life Insurance
A.
Prima facie earned premium (Col. 5) is the product of actual earned premium (Col. 1)
times the conversion factor (Col. 2 - Col. 3).
B.
See also General note C.
FORM B2 Credit Disability Insurance
A.
The conversion of actual earned premiums to prima facie earned premiums is
accomplished in basically the same manner as described in Section IA, above. The
conversion factor to be utilized, however, is the average of three (3) ratios taken between
prima facie and actual rates for twelve (12), twenty four (24) and thirty six (36) month
terms. The sum of these ratios, divided by three (3), becomes the conversion factor.
Page 23 of 30
Reg. # 9
B.
Prima facie premium rates are to be presented on Form B2, Line A, Col. 2-4. All ratios
(Line b) are to be calculated by dividing Line A by Line a.
C.
This form should be reproduced as necessary to present the required conversion for all
premium rates in force during the experience period.
D.
See also General note C.
FORM C
The purpose of this form is to present a reconciliation between current year data presented on the
various Forms A and the totals presented on Page 46 of the Annual Statement.
A.
Due to the volume of Forms A which may be filed, each form will be listed by page
number only. All Forms A must be included on Form C to insure agreement to Page 46 of
the Annual Statement.
B.
Line references included in column headings refer to Form A.
C.
This form should be reproduced as necessary to include all Forms A.
Page 24 of 30
Reg. # 9
CREDIT LIFE & DISABILITY INSURANCE EXPERIENCE REPORT
STATE OF RHODE ISLAND
CALENDAR YEAR OF 19 __
FORM A
CLASSES OF BUSINESS: Check one:
[ ]
(a)
credit unions;
[ ]
(e)
other sales finance;
[ ]
(b)
commercial & savings banks;
[ ]
(f)
production credit associations;
[ ]
(c)
finance companies;
bank agricultural loans;
[ ]
(d)
motor vehicle dealers;
[ ]
(g)
all others.
Mode of Premium Payment [ ] Single Premium [ ] Outstanding Balance (Monthly Premium)
Plan of Benefits:
[ ] Credit Life:
[ ] Decreasing
[ ] Single Life
[ ] Gross
[ ] Level
[ ] Joint Life
[ ] Net
[ ] Credit Disability __ Days,
[ ] Retro
[ ] Non-Retro
19__
19__
19__
Total
1. Actual Earned Premiums
a. Gross premium written
(before deduction for
Dividends and Experience
Rating Credits)
_____
_____
_____
_____
b. Refunds on terminations
_____
_____
_____
_____
c. Net (a - b)
_____
_____
_____
_____
d. Premium reserve,
beginning of period
_____
_____
_____
_____
e. Premium reserve, end
of period
_____
_____
_____
_____
f. Actual earned premiums
(c + d - e)
_____
_____
_____
_____
g. Earned premiums at prima
facie rate (Form B)
_____
_____
_____
_____
Page 25 of 30
Reg. # 9
h. Earned premiums at
prima facie rate,
adjusted for
investment income
(attach explanation)
_____
_____
_____
_____
2.
Incurred Claims
a. Claims paid
_____
_____
_____
_____
b. Unreported claims,
beginning of period
_____
_____
_____
_____
c. Unreported claims,
end of period
_____
_____
_____
_____
d. Claim Reserve,
beginning of period
_____
_____
_____
_____
e. Claim reserve, end
of period
_____
_____
_____
_____
f. Incurred Claims
(a - b + c - d + e)
3.
Loss Ratio
a.
Actual loss ratio
(2f / 1f)
_____
_____
_____
_____
b.
Loss ratio at prima
facie rate (2f / 1g)
_____
_____
_____
_____
c.
Adjusted loss ratio
(2f / 1h)
_____
_____
_____
_____
____________________
(Company)
____________________
(Signature)
____________________
(Title)
Page 26 of 30
Reg. # 9
CREDIT DISABILITY INSURANCE EXPERIENCE REPORT
STATE OF RHODE ISLAND
PRIMA FACIE EARNED PREMIUM
FORM B-1
Class of Business
Calendar Year 19 _
Premium Mode
Plan of Benefits
Credit Life Insurance
Actual Earned
Premiums
Col. 1
Prima Facie
Rate
Col. 2
Actual
Premium Rate
Col. 3
Prima Facie
Earned Premium
Col. 4
A Earned premiums at
Prima facie rate
__________
XXX
XXX
__________
B Earned premiums at
Other than prima
Facie rates:
1.
__________
__________
__________
__________
2.
__________
__________
__________
__________
3.
__________
__________
__________
__________
4.
__________
__________
__________
__________
5.
__________
__________
__________
__________
6.
__________
__________
__________
__________
Totals
__________
XXX
XXX
__________
To Form A,
Line 1f
To Form A,
Line 1g
Page 27 of 30
Reg. # 9
CREDIT LIFE INSURANCE EXPERIENCE REPORT
STATE OF RHODE ISLAND
PRIMA FACIE EARNED PREMIUM
FORM B-2
Class of Business
Calendar Year 19 _
Premium Mode
Plan of Benefits _______________
Credit Disability Insurance
Actual
Earned
Premium Rates:
Prima
Facie
Earned
Premium
12 mo.
24 mo.
36 mo.
Premium
Col. 1
Col. 2
Col. 3
Col. 4
Col. 5
A Earned premium at prima
Facie Rate
________
________
_______
_______
_______
B Earned Premium at other
Than prima facie rate:
1.
a. Actual Rate
XXX
________
________
________
________
b. Ratio
XXX
________
________
________
________
c. Earned Premium
________
________
________
________
________
2.
a. Actual Rate
XXX
________
________
________
XXX
b. Ratio
XXX
________
________
________
XXX
c. Earned Premium
________
________
________
________
________
3.
a. Actual Rate
XXX
________
________
________
XXX
b. Ratio
XXX
________
________
________
XXX
c. Earned Premium
________
________
________
________
________
Totals
________
XXX
XXX
XXX
________
____________
____________
To Form A
Line if
To Form A,
Line 1g
Page 28 of 30
Reg. # 9
CREDIT LIFE INSURANCE EXPERIENCE
RECONCILIATION TO STATE PAGE
STATE OF RHODE ISLAND
FOR THE CURRENT YEAR 19 ____
FORM C-1
. Premiums .
. Claims .
Written
Earned
Paid
Incurred
(Line 1c)
(Line 1f)
(Line 2a)
(Line 2f)
Credit Life:
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
__________
__________
__________
__________
Total Life
__________
__________
__________
__________
Annual Statement
Page 46, Line 28
__________
__________
__________
__________
Explain any differences between "Total Life" and Page 46, Line 28.
Page 29 of 30
Reg. # 9
CREDIT DISABILITY INSURANCE EXPERIENCE
RECONCILIATION TO STATE PAGE
STATE OF RHODE ISLAND
FOR THE CURRENT YEAR 19 ____
FORM C-2
. Premiums .
. Claims .
Written
Earned
Paid
Incurred
(Line 1c)
(Line 1f)
(Line 2a)
(Line 2f)
Credit Disability:
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
Page ___ of ___
__________
__________
__________
__________
__________
__________
__________
__________
Total Life
__________
__________
__________
__________
Annual Statement
Page 46, Line 31
__________
__________
__________
__________
Explain any differences between "Total Disability" and Page 46, Line 31.
Page 30 of 30
Reg. # 9
APPENDIX II
CREDIT ACCIDENT AND HEALTH INSURANCE
Single Premium Rates Per $100 of Initial Indebtedness
Term in
14 Day Waiting Period
30 Day Waiting Perion
Months
Non-retro
Retro
Non-retro
Retro
12
$ 1.88
$ 2.74
$ 1.25
$ 2.13
24
2.38
3.26
1.76
2.67
36
2.76
3.64
2.15
3.07
48
3.12
4.02
2.51
3.45
60
3.48
4.37
2.86
3.81
72
*
*
3.14
*
84
*
*
3.33
*
96
*
*
3.49
*
108
*
*
3.61
*
120
*
*
3.71
*
Rates or forms that have an exclusion period of less than fourteen (14) days or a retroactive
period of less than fourteen (14 ) days retroactive to the first day shall not be accepted.
*
There are no prima facie rates for these categories nor for loans in excess of one
hundred twenty (120) months. Subject to approval by the Commissioner, such
loans may be insured on any monthly premium basis that can be actuarially
demonstrated to produce an anticipated loss ratio of at least sixty percent (60%).