230-RICR-20-60-1
230-RICR-20-60-1. Consumer Credit Insurance (version Technical Revision, 06/30/2010 to 01/04/2022)
1.1 Purpose and Authority
The purpose of this Part 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 credit life and credit accident and health, and
credit unemployment insurance. This Part interprets and implements
R.I. Gen. Laws Chapter 27-30.
1.2 Definitions
A. As used in this Part:
1. “Affiliate” has
the same meaning as defined in R.I. Gen. Laws § 27-35-1.
2. “Closed-end credit”
means a credit transaction that does not meet the definition of
open-end credit.
3. “Control” has
the same meaning as defined in R.I. Gen. Laws § 27-35-1.
4. “Evidence of
individual insurability” means a statement furnished by the
debtor, as a condition of insurance becoming effective that relates
specifically to the health status or to the health or medical history
of the debtor.
5. “Loss ratio”
means incurred claims divided by the sum of earned premiums and
imputed interest earned on unearned premiums.
6. “Open-end credit”
means credit extended by a creditor under an agreement in which:
a. The creditor reasonably
contemplates repeated transactions;
b. The creditor imposes a
finance charge from time to time on an outstanding unpaid balance;
and
c. The amount of credit that
may be extended to the debtor during the term of the agreement (up to
any limit set by the creditor) is generally made available to the
extent that any outstanding balance is repaid.
7. “Person” has
the same meaning as defined in R.I. Gen. Laws § 27-35-1.
8. “Preexisting
condition” means any condition for which the insured debtor
received medical advice, consultation or treatment within six (6)
months before the effective date of the coverage and from which the
insured debtor becomes disabled within six (6) months after the
effective date of this coverage.
1.3 Rights and Treatment of
Debtors
A. Multiple Plans of
Insurance. If a creditor makes available to the debtors more than one
plan of consumer credit life insurance every debtor must be informed
of each plan for which the debtor is eligible and of the premium or
insurance charge for each.
B. Substitution. When a
creditor requires insurance as additional security for a debt, 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 or of 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.
C. Termination of group
consumer credit insurance policy.
1. If a debtor is covered by a
group consumer credit insurance policy providing for the payment of
single premiums to the insurer, or any other premium payment method
which prepays coverage beyond one month, 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.
2. If a debtor is covered by a
group consumer credit insurance policy providing for the payment of
premiums to the insurer on a monthly basis, then the policy shall
provide that, in the event of termination of such policy, termination
notice 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 coverage. The insurer shall
provide or cause to be provided this required information to the
debtor.
3. Remittance on Premiums. If
the creditor adds identifiable insurance charges or premiums for
consumer credit insurance to the debt, 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 the premium within sixty (60) days after it is
added to the debt.
4. Refinancing of the Debt. If
the debt is discharged due to refinancing prior to scheduled
maturity, the insurance in force shall be terminated before any new
insurance may be issued in connection with the refinanced debt. In
all cases of termination prior to scheduled maturity, a refund of all
unearned premium or unearned insurance charges paid by the debtor
shall be paid or credited to the debtor as provided in § 1.9 of
this Part. In any refinancing of the debt, the effective date of
coverage as respects any policy provision shall be deemed to be the
first date on which the debtor became insured under the policy with
respect to the debt which was refinanced, at least to the extent of
the amount and term of the debt outstanding at the time of
refinancing of the debt.
5. Maximum Aggregate
Provisions. A provision in an individual policy or group certificate
that sets a maximum limit on total claim payments must apply only to
that individual policy or group certificate.
6. Prepayment of Debt. If a
debtor prepays the debt in full then any consumer credit insurance
covering the debt shall be terminated and an appropriate refund of
the consumer credit insurance premium shall be paid or credited to
the debtor in accordance with § 1.9 of this Part. However, if
the prepayment is a result of death or any other lump sum consumer
credit insurance payment, no refund shall be required for the
coverage under which the lump sum was paid. If a claim under credit
accident and health coverage or credit unemployment 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
or during any period of unemployment for which credit unemployment
benefits are payable. A refund shall be computed as if prepayment
occurred at the end of the disability period or at the end of the
unemployment period.
7. If a creditor has opened a
line of credit for a debtor and, under R.I. Gen. Laws §§
27-30-4(a)(5) or (6), is charging for this line of credit rather than
the amount of debt in the event of the death of the debtor, the
insured amount due is the amount of the established amount of credit
against which premium was last charged.
1.4 Determination of
Reasonableness of Benefits in Relation to Premium Charge
A. Benefits provided by
consumer credit insurance policies must be reasonable in relation to
the premiums charged. This requirement is satisfied if the premium
rate charged develops or may reasonably be expected to develop a loss
ratio, of not less than sixty percent (60%). With the exception of
deviations approved under § 1.11 of this Part, the rates shown
in §§ 1.6 and 1.7 of this Part, as adjusted pursuant to §
1.10 of this Part, shall be presumed to satisfy this standard.
Anticipated losses that develop or are expected to develop a loss
ratio of not less than sixty percent (60%) shall be presumed
reasonable. Any insurer filing a deviation in accordance with §
1.11 of this Part must satisfy the sixty percent (60%) loss ratio
standard on their total consumer credit insurance business, including
that of affiliated insurers, for each type of insurance defined in
R.I. Gen. Laws Chapter 27-30 for which the deviation is being filed.
B. Nonstandard Coverage. If
any insurer files for approval of any form providing coverage
different than that described in §§ 1.6 through 1.8 of this
Part, the insurer shall demonstrate to the satisfaction of the
Commissioner that the premium rates to be charged for such coverage
are
1. reasonably expected to
develop a loss ratio not less than sixty percent (60%), or
2. actuarially consistent with
the rates used for standard coverages.
1.5 Limitation on Compensation
A. An insurer shall not pay
compensation in excess of thirty percent (30%) of the net written
prima facie premium of which not more than twenty-five percent (25%)
of net written prima facie premium may be paid to a creditor.
B For the purpose of §
1.5(A) of this Part, prima facie premium means premium using the
premium rates set out in §§ 1.6 and 1.7 of this Part, or
actuarially consistent premium rates for plans not described in §§
1.6 and 1.7 of this Part, without any adjustment pursuant to §
1.10 of this Part.
1.6 Credit Life Insurance Rates
A. Premium Rate. Subject to
the conditions and requirements in §§ 1.6(B) and 1.11 of
this Part, the prima facie rates shown below are considered to meet
the requirements of § 1.4 of this Part, and may be used without
filing additional actuarial support.
1. Monthly outstanding balance
basis: Sixty six cents ($.66) per month per one thousand ($1,000) of
outstanding insured debt on single life and one dollar and five cents
($1.05) per month per $1,000 of outstanding insured debt on joint
life if premiums are payable on a monthly outstanding balance basis.
2. Single premium basis: If
the premium is charged on a single premium basis, the rate shall be
computed according to the following formula or according to a formula
approved by the commissioner which produces rates substantially the
same as those produced by the following formula:
n Op
It
Sp
= ∑ ( _____ x _____ x (vt - 1 ))
t
= 1 10 Ii
1
v
= -----------
1
+ (dis)
Sp
= Single Premium per $100 of initial consumer credit life
insurance coverage.
Op
= $0.66 or $1.05, the prima facie consumer credit life insurance
premium rate for monthly outstanding balance coverage from §
1.6(A)(1) of this Part.
It
= The scheduled amount of insurance for month t.
Ii
= Initial amount of insurance. For a net insurance policy, Ii
equals the initial principal balance of the loan.
dis
= .0020, representing an annual discount rate of 1.924 percent
for interest plus 0.4 percent for mortality.
n
= The number of months in the term of the insurance.
3. If the benefits provided
are other than those described in the introduction to this
subsection, premium rates for such benefits shall be actuarially
consistent with the rates provided in §§ 1.6(A)(1) and (2)
of this Part.
B. The premium rate in §
1.6(A) of this Part shall apply to contracts providing credit life
insurance that are offered to all eligible debtors, that do not
require evidence of individual insurability, from any eligible debtor
electing to purchase coverage within thirty (30) days of the date the
debtor becomes eligible and that contain the provisions below:
1. Coverage for death by
whatever means caused, except that coverage may exclude death
resulting from:
a. War or any act of war;
b. Suicide within six (6)
months after the effective date of the coverage; or,
c. Subject to the provisions
of § 1.6(B)(1) of this Part, a preexisting condition or
conditions.
2. For the purpose of §
1.6(B)(1)(c) of this Part:
a. Preexisting condition means
any condition for which the debtor received medical advice or
treatment within six (6) months preceding the effective date of
coverage;
b. No preexisting condition
exclusion shall apply unless death is caused by or substantially
contributed to by the preexisting condition and unless death occurs
within six (6) months following the effective date of coverage; and,
c. A preexisting condition
exclusion shall apply only if and to the extent that the amount of
coverage to which it would otherwise apply (in the absence of this
limitation) exceeds $1,000.
3. For the exclusions listed
in §§ 1.6(B)(1) and (2) of this Part, the effective date of
coverage for each part of the insurance attributable to a different
advance or a charge to the plan account is the date on which the
advance or charge occurs.
4. At the option of the
insurer and in lieu of a preexisting condition exclusion on insurance
written in connection with open-ended consumer credit, a provision
may be included to limit the amount of insurance payable on death due
to natural causes to the balance as it existed six (6) months prior
to the date of death if there has been one or more increases in the
outstanding balance during the six-month period and if evidence of
individual insurability has not been required in the six-month period
prior to the date of death. This provision applies only if and to
the extent that the amount of coverage to which it would otherwise
apply (in the absence of this limitation) exceeds $1,000.
5. An age restriction
providing that no insurance will become effective on debtors on or
after the attainment of age sixty-six (66) and that all insurance
will terminate upon attainment by the debtor of age sixty‑six
(66).
C. Application of Rates:
1. If the insurer, its agent,
or the application form for credit life insurance does not request or
require that the debtor provide evidence of insurability, then the
premium rates deemed reasonable will be the prima facie rates in §
1.6(A) of this Part.
2. Except as provided in §
1.6(C)(3) of this Part, if the insurer, its agent, or the application
form for credit life insurance requests or requires that the debtor
provide evidence of insurability and the initial amount of insurance
is $15,000 or less, then the premium rates deemed reasonable will be
the rates in § 1.6(A) of this Part multiplied by 90 percent
(.90).
3. If the insurer, its agent,
or the application form for credit life insurance requests or
requires that the debtor provide evidence of insurability and the
initial amount of insurance is above $15,000 or the applicant elects
to purchase coverage more than thirty (30) days after the date the
debtor became eligible under a group plan of insurance, then the
premium rates deemed reasonable will be the prima facie rates in §
1.6(A) of this Part. For policies insuring open lines of credit, the
insurer may require evidence of insurability for advances which
increase the outstanding debt above $15,000.
D. Insurers may use the same
application forms for credit life insurance whether or not
underwriting questions are asked pursuant to § 1.6(C) of this
Part. The commissioner will presume that any application form for
which all relevant underwriting questions have been left unanswered
represents a policy which has not been underwritten and for which
prima facie rates are permissible. A form for which any relevant
underwriting questions have been answered or filled in represents a
policy for which premium decreases pursuant to § 1.6(C) of this
Part are required. Insurers should maintain in their files their
rules for those circumstances where underwriting questions shall be
asked. Those rules shall be communicated to and followed by the
insurer’s agents or other producers.
1.7 Credit Accident and Health
Insurance
A. Premium Rate. Subject to
the conditions and requirements in §§ 1.6(B) and 1.11 of
this Part, the prima facie rates shown below are considered to meet
the requirements of § 1.4 of this Part, and may be used without
filing additional actuarial support.
1. If premiums are payable on
a single-premium basis for the duration of the coverage the prima
facie rate per $100 of initial insured debt for single accident and
health is as set forth in the table below (rates for monthly periods
other than those listed shall be interpolated or extrapolated):
Original
Number
of
Equal
Monthly
Installments
14
Day
Non-
Retroactive
Policies
14
Day
Retroactive
Policies
30
Day
Non
Retroactive
Policies
30
Day
Retroactive
Policies
6
0.90
1.32
1.02
1.02
12
1.50
2.19
1.70
1.70
24
1.90
2.61
2.14
2.14
36
2.21
2.91
2.46
2.46
48
2.50
3.22
2.76
2.76
60
2.78
3.50
3.05
3.05
72
*
*
1.02
*
84
*
*
1.70
*
96
*
*
2.14
*
108
*
*
2.46
*
120
*
*
2.76
*
*
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%).
2. If premiums are paid on the
basis of a premium rate per month per thousand of outstanding insured
gross debt, these premiums shall be computed according to the
following formula or according to a formula approved by the
Commissioner which produces rates actuarially consistent with the
single premium rates in § 1.7(A)(1) of this Part:
10
SPn
OPn
= ___________________________
n
{∑
(vt - 1 x ( n-t+1 ))}
t
= 1 n
1
where
v =
1
+ (dis)
Where
SPn = Single Premium Rate per $100 of initial insured debt
repayable in n equal monthly installments as shown in §
1.7(A)(1) of this Part.
OPn
= Monthly Outstanding Balance Premium Rate per $1,000.
n
= The number of months in the term of the insurance.
dis
= .0016, representing an annual discount rate of 1.924 percent for
interest.
3. If the coverage provided is
a constant maximum indemnity for a given period of time, the
actuarial equivalent of §§ 1.7(A)(1) and (2) of this Part
shall be used.
4. 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, 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 shall be used.
5. 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.
B. Subject to the conditions
and requirements in §§ 1.7(A) and 1.11 of this Part, the
prima facie rates for credit accident and health insurance shown
below are considered to meet the requirements of § 1.4 of this
Part in the situation where the insurance is written on an open-end
loan. These prima facie rates and the formulae used to calculate
them may be used without filing additional actuarial support. Other
formulae to convert from a closed-end credit rate to an open-end
credit rate may be used if approved by the commissioner.
1. If the maximum benefit of
the insurance equals the net debt on the date of disability, the term
of the loan is calculated according to the formula: 1/(minimum
payment percent). The prima facie rate is determined by applying the
calculated term to the rates shown in § 1.7(A) of this Part. A
composite minimum payment percentage may be used in place of the
minimum payment percentage for a specific credit transaction.
2. If the maximum benefit of
the insurance equals the outstanding balance of the loan on the date
of disability plus any interest accruing on that amount during
disability, the term of the insurance (n) is estimated by using the
following formula:
n
= ln{1-(1000i/x)}/ln(v)
where:
i
= interest rate on the account or a composite interest rate used
for the type of policy;
x
= monthly payment per $1000 of coverage consistent with the term
calculated above; and,
v
= 1/(1 + i).
The
calculated value of the term is used to look up an initial rate in
§ 1.7(1) of this Part. The final prima facie rate is
calculated by multiplying the initial rate by:
the
adjustment n/an
where:
n
is the term calculated above; and
n
an
= ( 1 - v )/i.
C. If the accident and health
coverage is sold on a joint basis (involving two people), the rate
for the joint coverage shall be filed with the commissioner prior to
use.
D. If the benefits provided
are other than those described in §§ 1.7(A) or 1.7(B) of
this Part above, rates for those benefits shall be actuarially
consistent with rates provided in §§ 1.7(A) and 1.7(B) of
this Part.
E. The premium rates in §
1.7(A) of this Part shall apply to contracts providing credit
accident and health insurance that are offered to all eligible
debtors, that do not require evidence of individual insurability from
any eligible debtor electing to purchase coverage within thirty (30)
days of the date the debtor becomes eligible and that contain the
provisions below:
1. Coverage for disability by
whatever means caused, except that coverage may be excluded for
disabilities resulting from:
a. normal pregnancy;
b. war or any act of war;
c. elective surgery;
d. intentionally
self-inflicted injury;
e. sickness or injury caused
by or resulting from the use of alcoholic beverages or narcotics
(including hallucinogens) unless they are administered on the advice
of and taken as directed, by a licensed physician other than the
insured;
f. flight in any aircraft
other than a commercial scheduled aircraft;
g. a preexisting condition.
2. For the exclusion listed in
§ 1.7(F)(3) of this Part, the effective date of coverage for
each part of the insurance attributable to a different advance or a
charge to the plan account is the date on which the advance or charge
occurs.
3. A definition of disability
providing that for the first twelve (12) months of disability, total
disability shall be defined as the inability to perform the essential
functions of the insured’s own occupation. Thereafter, it
shall mean the inability of the insured to perform the essential
functions of any occupation for which he or she is reasonably suited
by virtue of education, training or experience.
4. No employment requirement
more restrictive than one requiring that the debtor be employed
full-time on the effective date of coverage and for at least twelve
(12) consecutive months prior to the effective date of coverage.
“Full time” means a regular work week of not less than
thirty (30) hours.
5. An age restriction
providing that no insurance will become effective on debtors on or
after the attainment of age sixty-six (66) and that all insurance
will terminate upon attainment by the debtor of age sixty‑six
(66).
6. A daily benefit equal in
amount to one-thirtieth (1/30th) of the monthly benefit payable under
the policy.
F. Application of Rates:
1. If the insurer, its agent,
or the application form for credit life insurance does not request or
require that the debtor provide evidence of insurability, then the
premium rates deemed reasonable will be the prima facie rates in §
1.7(A) of this Part.
2. Except as provided in §
1.7(B) of this Part, if the insurer, its agent, or the application
form for credit life insurance requests or requires that the debtor
provide evidence of insurability and the initial amount of insurance
is $15,000 or less, then the premium rates deemed reasonable will be
the rates in § 1.7(A) of this Part multiplied by 90 percent
(.90).
3. If the insurer, its agent,
or the application form for credit life insurance requests or
requires that the debtor provide evidence of insurability and the
initial amount of insurance is above $15,000 or the applicant elects
to purchase coverage more than thirty (30) days after the date the
debtor became eligible under a group plan of insurance, then the
premium rates deemed reasonable will be the prima facie rates in §
1.7(A) of this Part. For policies insuring open lines of credit, the
insurer may require evidence of insurability for advances which
increase the outstanding debt above $15,000.
G. Insurers may use the same
application forms for credit accident and health insurance whether or
not underwriting questions are asked pursuant to § 1.7(F) of
this Part. The commissioner will presume that any application form
for which all relevant underwriting questions have been left
unanswered represents a policy which has not been underwritten and
for which prima facie rates are permissible. A form for which any
relevant underwriting questions have been answered or filled in
represents a policy for which premium decreases pursuant to §
1.7(F) of this Part are required. Insurers should maintain in their
files their rules for those circumstances where underwriting
questions shall be asked. Those rules shall be communicated to and
followed by the insurer’s agents or other producers.
1.8 Credit Unemployment Insurance
Rates
A. Each insurer filing rates
for credit unemployment insurance shall include in its rate filing
with the commissioner the appropriate rate formula upon which its
rates are based, including a provision for anticipated losses.
Anticipated losses that develop or are expected to develop a loss
ratio of not less than sixty percent (60%) shall be presumed
reasonable. Anticipated losses may include an amount for fluctuation
in loss due to catastrophe based on the experience of at least the
latest nine (9) policy years or as long as the company has been
writing this line of business.
B. Credit unemployment
insurance policies must contain benefits at least as favorable to
insureds as the provisions below:
1. Coverage for unemployment
for any reason, except that coverage may be excluded for:
a. voluntary forfeiture of
salary, wage or other employment income;
b. resignation;
c. retirement;
d. general strike;
e. illegal walk out;
f. war;
g. separation from the
military;
h. willful misconduct or
criminal misconduct or unlawful behavior; and
i. disability caused by
injury, sickness or pregnancy.
2. For credit unemployment
insurance which provides for a monthly benefit in the event of
unemployment, benefits must start after a waiting period of not
longer than thirty (30) days but need not be retroactive to the first
day of unemployment and must have a maximum benefit period that is no
shorter than six (6) months.
C. Credit unemployment
insurance policies may not contain eligibility requirements more
restrictive than the restrictions below:
1. Exclusion from
qualification for coverage:
a. self employed individuals;
b. workers in seasonal or
temporary jobs, defined as jobs designed to last six (6) consecutive
months or less; and,
c. debtors who have been
notified either orally or in writing of any layoff or of employment
termination either now or within the next sixty (60) days. This
exclusion must be disclosed to all prospective insureds.
2. No employment requirement
more restrictive than one requiring that the debtor be employed
full-time on the effective date of coverage for at least twelve (12)
consecutive months prior to the effective date of coverage. “Full
time” means a regular work week of not less than thirty (30)
hours.
3. An age restriction
providing that no insurance will become effective on debtors on or
after the attainment of age sixty-six (66) and that all insurance
will terminate upon attainment by the debtor of age sixty‑six
(66).
1.9 Refund Formulas
A. In the event of
termination, no charge for credit insurance may be made for the first
fifteen (15) days of a month and full month may be charged for
sixteen (16) days or more of a month.
B. The requirements of the
Consumer Credit Insurance Law that refund formulas be filed with the
Commissioner shall be considered fulfilled if the refund formulas are
set forth in the individual policy or group certificate filed with
the Commissioner.
C. No refund of five dollars
($5) or less need be made.
1.10 Experience Reports and
Adjustment of Prima Facie Rates
A. Each insurer doing
insurance business in this state shall annually file with the
commissioner and the National Association of Insurance Commissioners
(NAIC) Support and Services Office a report of consumer credit
insurance written on a calendar year basis. The report shall utilize
the Credit Insurance Supplement—Annual Statement Blank as
approved by the NAIC, and shall contain data separately for each
state, rather than an allocation of the company’s countrywide
experience. The filing shall be made in accordance with and no later
than the due date in the Instructions to the Annual Statement.
B. The commissioner will, on a
triennial basis, review the loss ratio standards set forth in §
1.4 of this Part and the prima facie rates set forth in §§
1.6 and 1.7 of this Part and determine therefrom the rate of expected
claims on a statewide basis, compare such rate of expected claims
with the rate of actual claims for the preceding three (3) years
determined from the incurred claims and earned premiums at prima
facie rates reported in the Annual Statement Supplement or other
available source, and publish the adjusted actual statewide prima
facie rates to be used by insurers during the next triennium. The
rates will reflect the difference between:
1. actual claims based on
experience; and
2. expected claims based on
the loss ratio standards set forth in § 1.4 of this Part applied
to the prima facie rates set forth in §§ 1.6 and 1.7 of
this Part.
C. The commissioner will, on a
triennial basis, review the discount rates for interest included in
the formulae in § 1.7(A)(2) of this Part, and adjust those
discount rates to equal the average of the rates being paid at that
time on three‑year United States Treasury Notes as reported in
the Wall Street Journal on the last day of sale in the most recent
three (3) calendar years.
1.11 Use of Rates -- Direct
Business Only
A. Use of Prima Facie Rates.
An insurer that files rates or has rates on file that are equivalent
to the prima facie rates shown in §§ 1.6 and 1.7 of this
Part, to the extent adjusted pursuant to § 1.10 of this Part,
may use those rates without further proof of their reasonableness.
B. Use of Rates Higher Than
Prima Facie Rates. An insurer may file for approval of and use rates
that are higher than the prima facie rates shown in §§ 1.6
and 1.7 of this Part, to the extent adjusted pursuant to § 1.10
of this Part, as long as the filed rates are consistent with the
provisions of § 1.4 of this Part.
C. If rates higher than the
prima facie rates shown in §§ 1.6 and 1.7 of this Part, to
the extent adjusted pursuant to § 1.10 of this Part, are filed
for approval, the filing shall specify the account or accounts to
which the rates apply. The rates may be:
1. Applied uniformly to all
accounts of the insurer; or
2. Applied on an equitable
basis approved by the commissioner to only one or more accounts of
the insurer for which the experience has been less favorable than
expected; or
3. Applied according to a
case-rating procedure on file with the commissioner.
D. Approval Period of Deviated
Rates
1. A deviated rate will be in
effect for a period of time not longer than the experience period
used to establish the rate (i.e. one year, two years or three years).
An insurer may file for a new rate before the end of a rate period,
but not more often than once during any twelve-month period.
2. Notwithstanding the
provision of § 1.11(A) of this Part, if an account changes
insurers, the rate approved to be used for the account by the prior
insurer is the maximum rate that may be used by the succeeding
insurer for the remainder of the rate approval period approved for
the prior insurer or until a new rate is approved for use on the
account, if sooner.
E. Use of Rates Lower Than
Filed Rates. An insurer may at any time use a rate for an account
that is lower than its filed rate without notice to the commissioner.
F. Glossary of Terms and
Definitions as Used in § 1.11 of this Part:
1. “Experience”
means “earned premiums” and “incurred losses during
the experience period.
2. “Experience period”
means the most recent period of time for which earned premiums and
incurred losses are reported, but not for a period longer than three
(3) full years.
3. “Incurred losses”
means total claims paid during the experience period, adjusted for
the change in claim reserve.
1.12 Supervision of Consumer
Credit Insurance Operations
A. Each insurer transacting
credit insurance in this state shall be responsible for conducting a
thorough periodic review of creditors with respect to their credit
insurance business with such creditors to assure compliance with the
insurance laws of this state and the Part promulgated by the
Commissioner.
B. Written records of such
reviews shall be maintained by the insurer for review by the
Insurance Commissioner in accordance with Part 4
of this Subchapter.
1.13 Prohibited Transactions
A. The following practices,
when engaged in by insurers in connection with the sale or placement
of credit insurance, or as an inducement thereto, shall constitute
unfair methods of competition and shall be subject to the Unfair
Trade Practices Act of this State.
1. The offer or grant by an
insurer to a creditor of any special advantage or any service not set
out in either the group insurance contract or in the agency contract,
other than the payment of agent’s commissions;
2. Agreement by an insurer to
deposit with a bank or financial institution money or securities of
the insurer with the design or intent that the same shall affect or
take the place of a deposit of money or securities which otherwise
would be required of the creditor by the bank or financial
institution as a compensating balance or offsetting deposit for a
loan or other advancement; and
3. Deposit by an insurer of
money or securities without interest or at a lesser rate of interest
than is currently being paid by the creditor, bank or financial
institution to other depositors of like amounts for similar
durations. This subsection shall not be construed to prohibit the
maintenance by an insurer of such demand deposits or premium deposit
accounts as are reasonably necessary for use in the ordinary course
of the insurer’s business.
1.14 Readability
A. The commissioner shall not
approve any form unless the policy or certificate is written in
non-technical, readily understandable language, using words of common
everyday usage:
1. Each insurer is required to
test the readability of its policies or certificates by use of the
Flesch Readability Formula, as set forth in Rudolf Flesch, The Art of
Readable Writing, (1949, as revised 1974);
2. A total readability score
of forty (40) or more on the Flesch scale is required;
3. All policies or
certificates within the scope of this section shall be filed with the
commissioner, accompanied by a certification setting forth the Flesch
score and certifying the compliance with the guidelines set forth in
this Section.
1.15 Severability
If any provision or clause of
this Part or the application thereof to any person or situation is
held invalid, such invalidity shall not affect any other provision or
application of the Part which can be given effect without the invalid
provision or application, and to this end the provisions of this Part
are declared severable.
1.16 Effective Date
A. This regulation shall take
effect November 1, 2010 as to premium rates.
B. Approval of all forms not
in compliance with this Regulation is hereby withdrawn as of November
1, 2010. No such form may be issued after said date unless it has
been submitted to and approved by the Commissioner subsequent to June
1, 2010 or unless a rider approved subsequent to such date has been
attached bringing such form into compliance with this Regulation.
C. Any deviations thought to
be appropriate by an insurer as a result of promulgation of this
regulation shall be filed in accordance with the provisions of §
1.11 of this Part no later than July 1, 2010.
D. Certificates, notices of
proposed insurance and premium rates in connection with existing
group policies shall conform to the requirements of this regulation
not later than the anniversary date of the group policy next
following the effective date of this regulation.
E. Any group policy issued to
replace an existing group policy of consumer credit insurance or an
amendment to an existing group policy of consumer credit insurance
shall be ignored for the purposes of determining the anniversary date
if the change is made on or after May 1, 2010.