Chapter 292
2009 -- H 5822 SUBSTITUTE A
Enacted 11/13/09
A N A C T
RELATING TO INSURANCE
Introduced By: Representative Brian C. Newberry
Date Introduced: February 26, 2009
It is enacted by the
General Assembly as follows:
SECTION 1. The title of Chapter 27-30 of the General Laws
entitled "Credit Life
Insurance" is hereby
amended to read as follows:
CHAPTER
27-30
Credit
Life Insurance
CHAPTER
27-30
CONSUMER
CREDIT INSURANCE
SECTION 2. Sections 27-30-1, 27-30-2, 27-30-3 and 27-30-4 of
the General Laws in
Chapter 27-30 entitled
"Credit Life Insurance" are hereby amended to read as follows:
27-30-1.
Purpose. -- The purpose of this chapter is to
promote the public welfare by
regulating consumer credit life insurance. Nothing
in this chapter is intended to prohibit or
discourage reasonable competition. The provisions of this
chapter shall be liberally construed.
27-30-2.
Short title -- Applicability -- Definitions Scope and definitions.
-- (a) Citation
and scope.
(1) This chapter may be
cited as "The Model Act for the Regulation of Credit Life
Consumer Credit Insurance Act."
(2) All life consumer
credit insurance sold in connection with loans or other credit
transactions for personal, family or household purposes shall
be subject to the provisions of this
chapter except: those of over fifteen (15) years
duration or more and except insurance for which
no charge is made by or through the creditor to the debtor,
shall be subject to the provisions of
this chapter.
(i)
Insurance written in connection with a credit transaction that is:
(A) Secured by a
first mortgage or deed of trust; and
(B) Made to finance
the purchase of real property or the construction of a dwelling
thereon, or to refinance a prior credit transaction made for
such a purpose;
(b) Insurance sold as
an isolated transaction on the part of the insurer and not related to
an agreement or a plan for insuring debtors of the creditor.
(c) Insurance for
which no identifiable charge is made to the debtor.
(d) Insurance on
accounts receivable.
(b) (e) Definitions. - For the purpose of this chapter:
(1)
"Commissioner" means the insurance commissioner director of
the department of
business regulation or his or designee;
(2)
"Compensation: means commissions, dividends, retrospective rate credits,
service
fees, expense allowances or reimbursements, gifts,
furnishing of equipment, facilities, goods or
services, or any other form of remuneration resulting directly
from the sale of consumer credit
insurance;
(2) (3)
"Credit life Consumer credit insurance" means
insurance issued on the is a general
term used in this chapter to refer to any or all of credit
life of a debtor pursuant to or in
connection with a specific loan or other credit transaction; insurance, credit accident and health
insurance, credit unemployment insurance specifically defined
in this chapter;
(4) "Credit
accident and health insurance" means insurance on a debtor to provide
indemnity for payments or debt becoming due on a specific loan
or other credit transaction while
the debtor is disabled as defined in the policy;
(5) "Credit life
insurance" means insurance on a debtor or debtors, pursuant to or in
connection with a specific loan or other credit transaction, to
provide for satisfaction of a debt, in
whole or in part, upon the death of an insured debtor;
(6) "Credit
transaction" means any transaction by the terms of which the repayment of
money loaned or loan commitment made, or payment for goods,
services or properties sold or
leased, is to be made at a future date or dates;
(7) "Credit
unemployment insurance" means insurance on a debtor to provide indemnity
for payments or debt becoming due on a specific loan or
other credit transaction while the debtor
is involuntarily unemployed as defined in the policy;
(3) (8)
"Creditor" means the lender of money or vendor or lessor
of goods, services, or
property, rights, or privileges, for which payment is arranged
through a credit transaction or any
successor to the right, title, or interest of any such
lender, vendor, or lessor, and an affiliate,
associate, or subsidiary of any of them or any director, officer,
or employee of any of them or any
other person in any way associated with any of them;
(4) (9)
"Debtor" means a borrower or co-borrower of money or a
purchaser or co-
purchaser or lessee or co-lessee of goods, services,
property, rights, or privileges for which
payment is arranged through a credit transaction and
provided further that any joint debtor, co-
maker, endorser, and/or guarantor in a credit transaction
shall qualify as a debtor within the
meaning of this chapter;
(5) "Indebtedness"
means the total amount payable by debtor to a creditor in connection
with a loan or other credit transaction;
(6)
"Person" means an individual, partnership, association, firm,
corporation, or any other
legal entity; and
(7) The singular shall
include the plural.
(10) "Gross
debt" means the sum of the remaining payments owed to the creditor by the
debtor;
(11)
"Identifiable charge" means a charge for a type of consumer credit
insurance that is
made to debtors having such insurance and not made to
debtors not having such insurance; it
includes a charge for insurance that is disclosed in the
credit or other instrument furnished to the
debtor which sets out the financial elements of the credit
transaction and any difference in the
finance, interest, service or other similar charge made to
debtors who are in like circumstances
except for the insured or non-insured status of the debtor
or of the property used as security for
the credit transaction;
(12) "Net
debt" means the amount necessary to liquidate the remaining debt in a
single
lump-sum payment, excluding all unearned interest and other
unearned finance charges;
(13) "Open-end
credit" means credit extended by a creditor under an agreement in which:
(i)
The creditor reasonably contemplates repeated transactions;
(ii) The creditor
imposes a finance charge from time to time on an outstanding unpaid
balance; and
(iii) The amount of
credit that may be extended to the debtor during the term of the
agreement (up to any set limit by the creditor) is generally
made available to the extent that any
outstanding balance is repaid.
27-30-3. Forms
of credit life insurance Types of consumer credit insurance. -- Credit
life insurance shall be issued only in the following
forms:
(1) Individual
policies of life insurance issued to debtors on the term plan;
(2) Group policies
of life insurance issued to creditors providing insurance upon the lives
of debtors on the term plan; and
(3) A policy or
policies under either subdivision (1) or (2) of this section may be issued
with respect to two (2) or more joint debtors.
The types of consumer
credit insurance defined in section 27-30-2 may each be written
separately or in combination with other types of consumer credit
insurance on an individual
policy or group policy basis. The commissioner may by
regulation prohibit or limit any
combination.
27-30-4.
Amount of credit life insurance Amount of consumer credit insurance.
-- (a)
Credit life insurance.
(1)
The amount of credit life insurance shall not exceed the indebtedness at
no time
exceed the greater of the actual net debt or the scheduled
net debt.
(b) Where an
indebtedness repayable in substantially equal installments is secured by an
individual policy of credit life insurance the amount of
insurance shall at no time exceed the
scheduled amount of indebtedness and, where secured by a group
policy of credit life insurance,
shall at no time exceed the amount of unpaid indebtedness.
(2) If the coverage
is written on the actual net debt, then the amount payable at the time
of loss may not be less than the actual net debt less
any payments more than two (2) months
overdue.
(3) If the coverage
is written on the scheduled net debt, then the amount payable at the
time of loss shall be:
(i)
If the actual net debt is less than or equal to the scheduled net debt, then
the scheduled
net debt;
(ii) If the actual
net debt is greater than the scheduled net debt but less than or equal to
the scheduled net debt plus two (2) months of payments,
the actual net debt; or
(iii) If the actual
net debt is greater than the scheduled net debt plus two (2) months of
payments, then scheduled net debt plus two (2) months of
payments.
(4) If a premium is
assessed to the debtor on a monthly basis and is based on the actual
net debt, then the amount payable at the time of loss
shall be the actual net debt on the date of
death. When such premium is computed on the basis of a
balance which does not include accrued
past due interest, then the amount payable at the time of
loss shall not be less than the actual net
debt less any accrued interested more than two (2) months
past due.
(5) Notwithstanding
the provisions of subdivision (1) of this subsection, insurance on
agricultural loan commitments, not exceeding one year in duration,
may be written up to the
amount of the loan commitment, on a non-decreasing or level term
plan.
(6) Notwithstanding
the provisions of subdivision (1) of this subsection, insurance on
educational loan commitments may be written for net unpaid
indebtedness plus any unused
commitment.
(7) Coverage may be
written for less than the net debt by the following methods:
(i)
The amount of insurance may be the lesser of a stated level amount and the
amount
determined by of subdivision (2) of this subsection;
(ii) The amount of
insurance may be the lesser of a stated level amount and the amount
determined by subdivision (3) of this subsection;
(iii) The amount of
insurance may be a constant percentage of the amount determined by
subdivision (2) of this subsection;
(iv)
The amount of insurance may be a constant percentage of the
amount determined by
subdivision (3) of this subsection; or
(v) In the absence of
any preexisting condition exclusions, the amount of insurance
payable in the event of death due to natural causes may be
limited to the balance as it existed six
(6) months prior to the date
of death if:
(A) There has been
one or more increase in the outstanding balance during the six (6)
month period, other than those due to the accrual of
interest or late charges; and
(B) Evidence of
individual insurability has not been required during the six (6) month
period.
(8) Other patterns of
insurance may be used which are not inconsistent with the rest of
this subsection.
(b) Credit accident
and health insurance and consumer credit unemployment insurance.
(1) The total amount
of periodic indemnity payable by credit accident and health
insurance or credit unemployment insurance in the event of
disability or unemployment, as
defined in the policy, shall not exceed the aggregate of the
periodic scheduled unpaid installments
of the gross debt; and the amount of each periodic
indemnity payment shall not exceed the
original gross debt divided by the number of periodic
installments.
(2) Notwithstanding the
provisions of subdivision (1) of this subsection, for credit
accident and health insurance or credit unemployment insurance
written in connection with an
open-end credit agreement, the amount of insurance shall not
exceed the gross debt which would
accrue on that amount using the periodic indemnity. Subject
to any policy maximum, the
periodic indemnity must not be less than the creditor's
minimum repayment schedule.
SECTION 3. Sections 27-30-5, 27-30-6, 27-30-7, 27-30-8,
27-30-9, 27-30-10 and 27-30-
11 of the General Laws in
Chapter 27-30 entitled "Credit Life Insurance" are hereby amended to
read as follows:
27-30-5.
Term of credit life insurance Term of consumer credit insurance.
-- The (a)
Effective date of coverage.
(1) For consumer
credit insurance made available to and elected by the debtor before or
contemporaneous with a credit transaction to which the insurance
relates, the term of any credit
life insurance shall, subject to acceptance by the
insurer, commence on the date when the debtor
becomes obligated to the creditor, except that, where a
group policy provides coverage with
respect to existing obligations, the insurance on a debtor
with respect to the indebtedness shall
commence on the effective date of the policy. The term of the
insurance shall not extend more
than fifteen (15) days beyond the scheduled maturity date
of the indebtedness except when the
term of the insurance is extended with the consent of the
debtor or when the term is extended
without additional cost to the debtor. If the indebtedness is
discharged due to a new loan, renewal,
or refinancing prior to the scheduled maturity date, the
insurance in force with respect to the
indebtedness shall be terminated before any new insurance may be
issued in connection with the
new loan or renewed or refinanced indebtedness. In all
cases of termination prior to scheduled
maturity, a refund shall be paid or credited as provided in
section 27-30-8. when
evidence of
individual insurability is required and such evidence is
furnished more than thirty (30) days after
the date when the debtor becomes obligated to the
creditor, the term of the credit insurance may
commence on the date on which the insurance company determines
the evidence to be
satisfactory.
(2) For insurance
coverage made available to and elected by the debtor on a date
subsequent to the date of the consumer credit transaction to
which the insurance relates, the
insurance shall, subject to acceptance by the insurer, commence
on a date not earlier that the date
the election is made by the debtor nor later than thirty
(30) days following the date on which the
insurance company accepts the risk for coverage, according to
an objective method such as one
related to a particular date within the billing or repayment
cycle or a calendar month.
(3) Notwithstanding
the provisions of subdivisions (1) and (2) of this subsection, when a
group policy provides coverage with respect to debts
existing on the policy effective date, the
insurance relating to the debt shall not commence before the
effective date of the group policy.
(4) In no event shall
a charge for insurance be made to the debtor and retained by the
creditor or insurer for any time prior to commencement of the
consumer credit insurance to which
the charge is related.
(b) Termination date
of coverage.
(1) The term of any
consumer credit insurance shall not extend beyond the termination
date specified in the policy. The termination date of
insurance may precede, coincide with or
follow the scheduled maturity date of the debt to which it
relates, subject to any other
requirements and restrictions of this chapter.
(2) The term of any
consumer credit insurance shall not extend more than fifteen (15)
days beyond the scheduled maturity date of the debt except
when extended without additional
cost to the debtor or except when extended pursuant to a
written agreement, signed by the debtor,
in connection with a variable interest rate credit
transaction or a deferral, renewal, refinancing or
consolidation of debt.
(3) If the debt is
discharged due to renewal, financing or consolidation prior to the
scheduled termination date of insurance, any insurance in force
shall be terminated before any
new insurance may be written in connection with the
renewed, refinanced or consolidated debt.
(4) In all cases of
termination of insurance prior to the scheduled termination of the
insurance, an appropriate refund or credit to the debtor shall
be made of any unearned insurance
charge paid by the debtor for a term of insurance after the
date of the termination, except that no
refund is required of a charge made for insurance if the
insurance is terminated by performance of
the insurer's obligation with respect to insurance.
(5) An insured debtor
may terminate consumer credit insurance at any time by providing
advance request to the insurer. The individual policy or
group certificate may require that the
request be in writing or that the debtor surrender the
individual policy or group certificate, or
both. The debtor's right to terminate coverage may also be
subject to the terms of the credit
transaction contract.
27-30-6. Provisions
of policies and certificates of insurance -- Delivery to debtors
Disclosure to debtors and
provisions of policies and certificates of insurance. – (a)
Pre-
purchase disclosure. Before the debtor elects to purchase
consumer credit insurance in connection
with a credit transaction, the following shall be
disclosed to the debtor in writing:
(1) That the purchase
of consumer credit insurance is optional and not a condition of
obtaining credit approval;
(2) If more than one
kind of consumer credit insurance is being made available to the
debtor, whether the debtor can purchase each kind separately
or the multiple coverages only as a
package;
(3) The conditions of
eligibility;
(4) That, if the
consumer has another insurance that covers the risk, he or she may not
want or need credit insurance;
(5) That within the
first thirty (30) days after receiving the individual policy or group
certificate, the debtor may cancel the coverage and have all
premium paid by the debtor refunded
or credited. Thereafter, the debtor may cancel the
policy at any time during the term of the loan
and receive a refund of any unearned premium. However,
only in those instances where
insurance is a requirement for the extension of credit, the
debtor may be required to offer
evidence of alternative insurance acceptable to the creditor
at the time of cancellation;
(6) A brief
description of the coverage, including a description of the amount, the term,
any exception, limitations and exclusions, the insured
event, any waiting or elimination period,
any deductible, any applicable waiver of premium
provision, to whom the benefits would be paid
and the premium rate for each coverage or for all coverages in a package;
(7) That if the premium
or insurance charge is financed, it will be subject to finance
charges at the rate applicable to the credit transaction.
(b) The disclosures
required in subsection (a) above shall be provided in the following
manner:
(1) In connection with
the consumer credit insurance offered contemporaneously with the
extension of credit or offered through direct mail
advertisements, disclosure shall be made in
writing and presented to the consumer in a clear and
conspicuous manner;
(2) In conjunction
with the offer of credit insurance subsequent to the extension of credit
by other than direct mail advertisements, disclosure may
be provided orally so long as written
disclosures are provided to the debtor no later than the earlier
of:
(i) Ten (10) days after the offer; or
(ii) The date any
other written material is provided to the debtor.
(a) (c)
All consumer credit life insurance sold shall be evidenced by an
individual policy,
or in the case of group insurance by a certificate of
insurance, which individual policy or
a group
certificate of insurance which shall be delivered to the
debtor.
(b) Each individual
policy or group certificate of credit life insurance, shall, in addition
to other requirements of law, set forth the name and
home office address of the insurer and the
identity by name or otherwise of the person or persons
included, the rate or amount of payment, if
any, by the debtor separately for credit life insurance,
a description of the amount, term, and
coverage including any exceptions, limitations, or
restrictions, and shall state that the benefits
shall be paid to the creditor to reduce or extinguish the
unpaid indebtedness and, wherever the
amount of insurance may exceed the unpaid indebtedness, that
any excess shall be payable to a
beneficiary, other than the creditor, named by the debtor or to
his or her estate.
(c) The individual
policy or group certificate of insurance shall be delivered to the
insured debtor at the time the indebtedness is incurred or
within thirty (30) days: (1) after the
indebtedness is incurred; or (2) after the debtor's application
for insurance has been accepted by
the insurer, whichever is later.
(d) The individual
policy or group certificate shall, in addition to other requirements of
law, set forth the following:
(1) The name and home
office address of the insurer;
(2) The name or names
of the debtor or debtors, or, in the case of a group certificate, the
identity by name or otherwise of the debtor or debtors;
(3) The premium or
amount of payment by the debtor separately for each kind of
coverage or for all coverages in a
package, except that for open-end loans, the premium rate and
the basis of premium calculation (e.g. average daily
balance, prior monthly balance) shall be
specified;
(4) A full
description of the coverage or coverages, including
the amount and term
thereof, and any exceptions, limitations and exclusions;
(5) A statement that
the benefits shall be paid to the creditor to reduce or extinguish the
unpaid debt and, whenever the amount of insurance benefit
exceeds the unpaid debt that any such
excess shall be payable to a beneficiary, other than the
creditor, named by the debtor, or to the
debtor's estate; and
(6) If the scheduled
term of insurance is less than the scheduled term of the credit
transaction, a statement to that effect on the face of the
individual policy or group certificate in
not less than ten (10) point bold face type.
(e) Unless the
individual policy or group certificate of insurance is delivered to the debtor
at the time the debt is incurred, or at such other time
that the debtor elects to purchase coverage, a
copy of the application for the policy or a notice of
proposed insurance, signed by the debtor and
setting forth the name and home office address of the
insurer, the name or names of the debtor,
the premium rate or amount of payment by the debtor for
the insurance and the amount, term and
a brief description of the coverage provided, shall be
delivered to the debtor at the time the debt is
incurred or the election to purchase coverage is made. The
copy of the application for or notice
of proposed insurance shall also refer exclusively to
insurance coverage, and shall be separate and
apart from the loan, sale or other credit statement of
account, instrument or agreement, unless the
information required by this subsection is prominently set forth
therein. Upon acceptance of the
insurance by the insurer and within thirty (30) days of the
date upon which the debt is incurred or
the election to purchase coverage is made, the insurer
shall cause the individual policy or group
certificate of insurance to be delivered to the debtor. The
application or notice of proposed
insurance shall state that upon acceptance by the insurer, the
insurance shall become effective as
provided in section 27-30-5.
(f) The application,
notice of proposed insurance or certificate may be used to fulfill all of
the requirements of subsections (a) and (d) if it
contains all the information required by those
subsections.
(g) The debtor has
thirty (30) days from the date that he or she receives either the
individual policy or the group certificate to review the
coverage purchased. At any time within
the thirty (30) day period, the debtor may contact the
creditor or insurer issuing the policy or
certificate and request that the coverage be cancelled. The
individual policy or group certificate
may require the request to be in writing or that the
policy or certificate be returned to the insurer
or both. The debtor shall, within thirty (30) days of
the request, receive a full refund or credit of
all premiums or insurance charges paid by the debtor.
(h) If the named
insurer does not accept the risk, the debtor shall receive a policy or
certificate of insurance setting forth the name and home office
address of the substituted insurer
and the amount of the premium to be charged, and, if the
amount of premium is less than that set
forth in the notice of proposed insurance, an appropriate
refund shall be made within thirty (30)
days. In no insurer accepts the risk, then all premiums
paid shall be refunded or credited within
thirty (30) days of application to the person entitled
thereto.
(i)
For the purpose of subsection (e) of this section, an individual policy or
group
certificate delivered in conjunction with an open-end consumer
credit agreement or any consumer
credit insurance requested by the debtor after the date of
the debt shall be deemed to be delivered
at the time the debt is incurred or election to purchase
coverage is made if the delivery occurs
within thirty (30) days of the date the insurance is
effective.
(j) An individual
policy or group certificate delivered in conjunction with an open-end
credit agreement shall continue from its effective date
through the term of the agreement unless
the individual policy or group certificate is terminated
in accordance with its terms at an earlier
date.
27-30-7.
Filing, approval, and withdrawal of forms. -- (a) Forms
of all All
policies,
certificates of insurance, notices of proposed insurance, disclosure
notices, applications for
insurance, endorsements, and riders delivered or issued for
delivery in this state and the schedules
of premium rates pertaining thereto shall be filed with the commissioner before being
used. No
policy, certificate of insurance, notice of proposed
insurance, nor any application, endorsement,
or rider, shall be issued or used until the expiration
of thirty (30) days after the form for it has
been filed, unless the commissioner shall give his or her
prior written approval to it.
(b) The commissioner may
shall, within thirty (30) days after the filing of forms of any
policy such policies, certificate certificates
of insurance, notice notices of proposed insurance,
disclosure notices,
application for insurance, endorsement endorsements, and rider
riders,
disapprove any such form if the table of premium rates
charged or to be charged appears by
reasonable assumptions to be excessive in relation to benefits if the benefits provided are not
reasonable in relation to the premium charged, or if it contains provisions which are unjust,
unfair, inequitable, misleading, deceptive or encourage
misrepresentation of the coverage, or are
contrary to any provision of the general laws or public laws
of this state relating to insurance or of
any rule or regulation promulgated thereunder.
If the commissioner does not disapprove a filing
within thirty (30) days, it may be deemed approved.
(c) If the commissioner
notifies the insurer that the form is disapproved, it is unlawful
after this thereafter
for the insurer to issue or use the form. In the such notice, the
commissioner
shall specify the reason for his or her disapproval
and state that a hearing will be granted within
twenty (20) days after request in writing by the insurer. No
such policy, certificate of insurance,
notice of proposed insurance, disclosure notices, nor any
application, endorsement or rider, shall
be issued or used until the expiration of thirty (30)
days after it has been so filed, unless the
commissioner shall give prior written approval.
(d) The commissioner
may, at any time after a hearing, held not less than twenty (20)
days after written notice to the insurer, withdraw his
or her approval of any such form on any
ground set forth in subsection (b) of this section. The
written notice of the hearing shall state the
reasons for the proposed withdrawal.
(e) It is not lawful
for the insurer to issue forms or use them after the effective date of the
withdrawal.
(f) If a group policy
of consumer credit insurance:
(1) Has been
delivered in this state before the effective date of this chapter; or
(2) Has been or will
be delivered in another state before or after the effective date of this
chapter then the insurer shall be required to file only the
group certificate and notice of proposed
insurance delivered or issued for delivery in this state as
specified in subsections 27-30-6(c) and
(e) and such forms shall be
approved by the commissioner if they conform with the requirements
specified in these subsections and if the schedules of premium
rates applicable to the insurance
evidenced by such certificate or notice are not in excess of
the insurer's schedules of premium
rates filed with the commissioner; provided, however the
premium rate in effect on existing group
policies may be continued until the first policy anniversary
date following the date this chapter
becomes operative as provided in section 27-30-12. However,
all other forms specified in
subsection 27-30-7(a) shall also be filed as specified in this
section unless the group policy has
been or is delivered in another state which has adopted
statutes, regulations or other provisions
similar to this statute. In that event, the forms should be
filed for informational purposes.
However, the insurer shall be prohibited from using
any form filed for informational purposes if
the commissioner subsequently determines that the form is
not in substantive compliance with the
requirements of this statute.
(f) (g) Any order or final determination of the commissioner
under the provisions of this
section shall be subject to judicial review in accordance
with chapter 42-35.
27-30-8.
Premiums and refunds. -- (a) Each
insurer issuing credit life insurance shall
file with the commissioner its schedule of premium rates
for use in connection with that
insurance. Any
An insurer may revise the its
schedules of premium rates from time to time, and
shall file the revised schedules with the commissioner. No
insurer shall issue any consumer credit
life insurance policy for which the premium rate exceeds
that determined by the schedules of the
insurer as then on file with the commissioner. The
commissioner may require the filing of the
schedule of premium rates for use in connection with and as a
part of the specific policy filings as
provided by section 27-30-7. The commissioner shall have the authority to promulgate
regulations to assure that the premium rates are reasonable in
relation to the benefits provided,
including the authority to regulate the compensation component
of the premium rates. In
determining whether the premium rates are reasonable in relation
to the benefits provided, the
Commissioner shall consider and provide for: actual
and expected loss experience, general and
administrative expenses, loss settlement and adjustment expenses,
reasonable creditor
compensation, investment income, the manner in which premiums are
charged, and other
acquisition costs, reserves, taxes, regulatory license fees and
fund assessments, reasonable insurer
profit and other relevant data, consistent with generally
accepted actuarial standards.
(b) Each individual
policy, or group certificate, or notice of insurance shall
provide that
for a refund in
the event of termination of the insurance prior to the scheduled maturity date
of the
indebtedness, any insurance
and upon notice to the insurer from the debtor with the debtor's
contact information. The refund of an amount paid by the debtor for insurance shall be paid or
credited promptly to the person entitled to it thereto;
provided, however, that the commissioner
shall prescribe a minimum refund and no refund which would
be less than the such minimum
need be made. Refund formulas which any insurer desires
to use must develop refunds which are
at least as favorable to the debtor as refunds equal to
the premium cost of scheduled benefits
subsequent to the date of cancellation or termination, computed
at the schedule of premium rates
in effect on the date of issue. The formula to be used in computing the such refund shall be filed
with and approved by the commissioner.
(c)
If a creditor requires a debtor to make any payment for consumer credit life
insurance
and an individual policy or group certificate of
insurance is not issued, the creditor shall
immediately give written notice to the debtor and shall promptly
make an appropriate credit to the
account or issue a refund.
(d) The amount charged by
the creditor to the debtor for any consumer credit life
insurance shall not exceed the premium rate filed with the
commissioner for the coverage
provided premiums charged by the insurer, as computed at
the time the charge to the debtor is
determined.
27-30-9.
Issuance of policies. -- (a) All
policies of consumer credit life insurance shall be
delivered or issued for delivery in this state only by an
insurer authorized to do an insurance
engage in the
business in this state of insurance thereto, and shall be issued
only through holders
of licenses or authorizations issued by the
commissioner.
(b) The premiums for
individual policies of credit life insurance issued to debtors or the
cost to debtors of life insurance coverage under group
policies of life insurance issued to
creditors, whether or not written by or through any lender or
other creditor, its affiliate, associate,
or subsidiary or a director, officer, or employee of any
of them, shall not be deemed interest or
charges nor consideration or any amount for any examination,
service, brokerage, commission,
compensation for services, incidental expenses, or other thing or
otherwise, in addition to or in
excess of permitted interest or charges in connection with
the loan or credit transaction. Any gain,
participation, or advantage to any lender or other creditor, its
affiliate, associate, or subsidiary or
to a director, officer or employee of any of them
arising out of the premium or cost by way of
commission, dividend, or otherwise, shall not be deemed interest
or charges nor consideration or
any amount for any examination, service, brokerage,
commission, compensation for services,
incidental expenses, or other thing or otherwise, in addition to
or in excess of permitted interest or
charges in connection with the loan or credit transaction,
and shall not be deemed a violation of
any law, general or special, civil, or criminal, of this
state.
(c) Notwithstanding
any other provision of law, a creditor to whom a group policy of life
insurance is issued shall not be deemed to be action as an
insurance producer of insurance for the
insurance company issuing the policy or for any other person or
persons, and no creditor shall,
solely by reason of the issuance of group policy, be required
to qualify as a licensed insurance
producer or otherwise to be licensed or authorized by the
commissioner.
(d) Any creditor
doing business in the state of Rhode
place of business where the creditor transacts business,
obtain life insurance upon the life of a
borrower or purchaser or one of them if there are two (2) or
more in connection with the making
of a loan or sale.
27-30-10.
Claims. -- (a) All claims shall be promptly
reported to the insurer or its
designated claim representative, and the insurer shall maintain
adequate claim files. All claims
shall be settled as soon as possible and in accordance with
the terms of the insurance contract.
(b) All claims shall be
paid either by draft drawn upon the insurer, by electronic funds
transfer, or by
check of the insurer to the order of the claimant to whom payment of the claim
is
due pursuant to the policy provisions, or upon direction
of the claimant to one specified.
(c) No plan or
arrangement shall be used by which any person, firm, or corporation other
than the insurer or its designated claim representative
shall be authorized to settle or adjust
claims. The creditor shall not be designated as claim
representative for the insurer in adjusting
claims; provided, that a group policyholder may, by
arrangement with the group insurer, draw
drafts, or
checks or electronic transfers in payment of claims due to the group
policyholder
subject to audit and review by the insurer.
(d) All claims for
consumer credit insurance shall be subject to all applicable chapters of
the
27-30-11.
Existing insurance -- Choice of insurer. -- When consumer
credit life
insurance is required as additional security for any indebtedness,
and if the premium for it is the
subject of a separate charge to the debtor, the debtor shall, upon request to the creditor, have
the
option of furnishing the required amount of insurance
through existing policies of insurance
owned or controlled by him or her the debtor
or of procuring and furnishing the required coverage
through any insurer authorized to transact an insurance
business within this state.
SECTION 4. Sections 27-30-12, 27-30-13, 27-30-14 and
27-30-16 of the General Laws
in Chapter 27-30 entitled "Credit Life
Insurance" are hereby amended to read as follows:
27-30-12.
Regulations -- Enforcement Enforcement.
-- The commissioner may, after
notice and hearing, issue rules and regulations referenced
to the section or sections that set forth
the legislative standards which they interpret or apply as the commissioner deems appropriate for
the supervision of this chapter. Whenever the commissioner finds that there has been
a violation
of this chapter or any rules or regulations issued
pursuant to it, after written notice of the violation
and hearing given to the insurer or other person authorized
or licensed by the commissioner, he or
she shall set forth the details of his or her the
findings together with an order for compliance by a
specified date. The order shall be binding on the insurer and
other persons authorized or licensed
by the commissioner on the specified date unless sooner
withdrawn by the commissioner or a stay
from the order has been ordered by a court of competent
jurisdiction. The commissioner may set
forth by regulation prima facie reasonable premium rates,
together with corresponding safe-
harbor benefit provisions, which premium rates shall be
conclusively presumed reasonable in
relation to the benefits provided when used for policies
containing such benefit provisions.
27-30-13. Judicial review. -- In addition to any other
remedy he or she may have, any
person considering himself or herself aggrieved by any act,
decision, order, or omission of the
commissioner, may within thirty (30) days of that act, decision,
order, or omission, bring a suit in
the superior court to review that act, decision, order,
or omission. The extent of the review shall
be limited to questions of law. The court may, on its
own motion or on the motion of any party,
issue any orders necessary to preserve the rights of the
parties. Any person aggrieved by the
decision of the superior court in the suit may appeal to the
supreme court. Any party to the
proceeding affected by any order of the commissioner shall be
entitled to judicial review pursuant
to chapter 42-35.
27-30-14.
Penalties. -- In addition to any other penalty
provided by law, any person who
violates an order of the commissioner after it has become
final, and while the order is in effect,
shall, upon proof of it to the satisfaction of the court,
forfeit and pay to the state a sum not to
exceed two hundred fifty dollars ($250) which may be
recovered in a civil action, except that if
the violation is found to be willful, the amount of the
penalty shall be a sum not to exceed one
thousand dollars ($1,000). The commissioner, in his or her discretion, may revoke or suspend the
license or certificate of authority of the person guilty
of the or proscribe whatever additional
penalty is warranted pursuant to section 42-14-16 for any violation of this chapter. The order for
suspension or revocation
penalties shall be upon provide for notice and hearing,
and shall be
subject to judicial review as provided in section 27-30-13
42-35-15.
27-30-16.
Constitutionality Duties of an insurer. -- Should
the court declare any
section or clause of this chapter unconstitutional, then that
decision shall affect only the section or
clause declared to be unconstitutional, and shall not affect
any other section or clause of this
chapter. Except
as otherwise prohibited by law, duties imposed upon an insurer within this
chapter may be carried out by a creditor if the creditor is
acting as a common law or statutory
agent on behalf of the insurer.
SECTION 5. Section 27-30-17 of the General Laws in Chapter 27-30
entitled "Credit
Life Insurance" is
hereby repealed.
27-30-17.
Applicability. -- All the provisions
of this chapter shall be applicable and
effective, notwithstanding the provisions of any other acts of
the general assembly previously
enacted and now in force and effect.
SECTION 6. Chapter 27-31 of the General Laws entitled
"Credit Accident and Health
Insurance" is hereby
repealed in its entirety.
CHAPTER
27-31
Credit
Accident and Health Insurance
27-31-1.
Purpose -- Construction of chapter. --
The purpose of this chapter is to
promote the public welfare by regulating credit accident and
health insurance. Nothing in this
chapter is intended to prohibit or discourage reasonable
competition. The provisions of this
chapter shall be liberally construed.
27-31-2.
Citation and scope. -- This chapter
may be cited as "The Model Act for the
Regulation of Credit Accident and
Health Insurance". All
accident and health insurance sold in
connection with loans or other credit transactions, except those
of over fifteen (15) years duration
or more and except insurance for which no charge is made
by or through the creditor to the
debtor, shall be subject to the provisions of this chapter.
27-31-3.
Definitions. -- For the purpose of
this chapter:
(1)
"Commissioner" means the insurance commissioner;
(2) "Credit
accident and health insurance" means insurance on a debtor to provide
indemnity for payments becoming due on a specific loan or other
credit transaction while the
debtor is disabled as defined in the policy;
(3)
"Creditor" means the lender of money or vendor or lessor
of goods, services,
property, rights, or privileges, for which payment is arranged
through a credit transaction or any
successor to the right, title, or interest of any lender,
vendor, or lessor, and an affiliate, associate,
or subsidiary of any of them or any director, officer,
or employee of any of them or any other
person in any way associated with any of them;
(4)
"Debtor" means a borrower of money or a purchaser or lessee of goods,
services,
property, rights, or privileges for which payment is arranged
through a credit transaction;
(5)
"Indebtedness" means the total amount payable by a debtor to a
creditor in
connection with a loan or other credit transaction;
(6)
"Person" means an individual, partnership, association, firm,
corporation, or any
other legal entity; and
(7) The singular
shall include the plural.
27-31-4. Forms
of credit accident and health insurance. -- Credit accident and
health
insurance shall be issued only in the following forms:
(1) Individual
policies of accident and health insurance to insure debtors on a term plan
or disability benefit provisions in individual policies
of credit life insurance; and
(2) Group policies
of accident and health insurance issued for delivery to creditors on a
term plan insuring debtors or disability benefit provisions
in group credit life insurance policies to
provide this coverage.
27-31-5.
Amount of credit accident and health insurance. --
The total amount of
periodic indemnity payable by credit accident and health
insurance in the event of disability as
defined in the policy shall not exceed the aggregate of the
periodic scheduled unpaid installments
of the indebtedness and the amount of each periodic
indemnity payment shall not exceed the
original indebtedness divided by the number of periodic installments.
27-31-6.
Term of credit accident and health insurance. --
The term of any credit
accident and health insurance shall, subject to acceptance by
the insurer, commence on the date
when the debtor becomes obligated to the creditor or the date
from which interest or finance
charges accrue if later, except that where a group policy
provides coverage with respect to
existing obligations, the insurance on a debtor with respect
to the indebtedness shall commence
on the effective date of the policy. Where evidence of
insurability is required and that evidence is
furnished more than thirty (30) days after the date when the
debtor becomes obligated to the
creditor, the term of the insurance may commence on the date
on which the insurance company
determines the evidence to be satisfactory and in this event
there shall be an appropriate refund or
adjustment of any charge to the debtor for insurance. The term
of the insurance shall not extend
more than fifteen (15) days beyond the scheduled maturity
date of the indebtedness except when
extended without additional cost to the debtor. 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 termination prior to scheduled maturity a
refund shall be paid or credited as provided
in section 27-31-9.
27-31-7.
Provisions of policies and certificates of insurance -- Delivery to debtors. --
(a) All credit accident and health insurance sold
shall be evidenced by an individual policy, or in
the case of group insurance by a certificate of
insurance, which individual policy or group
certificate of insurance shall be delivered to the debtor.
(b) Each individual
policy or group certificate of credit accident and health shall, in
addition to other requirements of law, set forth the name and
home office address of the insurer
and the identity by name or otherwise of the person or
persons included, the rate or amount of
payment, if any, by the debtor separately for credit accident
and health insurance, a description of
the amount, term, and coverage including any exceptions,
limitations, or restrictions, and shall
state that the benefits shall be paid to the creditor to
reduce or extinguish the unpaid indebtedness
and, wherever the amount of insurance may exceed the
unpaid indebtedness, that any excess shall
be payable to a beneficiary, other than the creditor,
named by the debtor or to his or her estate.
(c) The individual
policy or group certificate of insurance shall be delivered to the
insured debtor at the time the indebtedness is incurred or
within thirty (30) days: (1) after the
indebtedness is incurred; or (2) after the debtor's application
for insurance has been accepted by
the insurer, whichever is later.
27-31-8.
Filing, approval, and withdrawal of forms. --
(a) Forms of all policies,
certificates of insurance, notices of proposed insurance,
applications for insurance, endorsements,
and riders delivered in this state shall be filed with
the commissioner. No policy, certificate of
insurance, notice of proposed insurance, nor any application,
endorsement, or rider, shall be
issued or used until the expiration of thirty (30) days
after the form for it has been filed, unless the
commissioner shall give his or her prior written approval to it.
(b) The commissioner
may, within thirty (30) days after the filing of forms of any policy,
certificate of insurance, notice of proposed insurance,
application for insurance, endorsement, and
rider, disapprove any form if the table of premium rates
charged or to be charged appears by
reasonable assumptions to be excessive in relation to benefits,
or if it contains provisions which
are unjust, unfair, inequitable, misleading, deceptive,
or encourage misrepresentation of the
coverage, or are contrary to any provision of the general laws
or public laws of this state relating
to insurance.
(c) If the
commissioner notifies the insurer that the form is disapproved, it is unlawful
after this for the insurer to issue or use the form. In the
notice, the commissioner shall specify the
reason for his or her disapproval and state that a hearing
will be granted within twenty (20) days
after request in writing by the insurer.
(d) The commissioner
may, at any time after a hearing, held not less than twenty (20)
days after written notice to the insurer, withdraw his or
her approval of any form on any ground
set forth in subsection (b) of this section. The written
notice of the hearing shall state the reasons
for the proposed withdrawal.
(e) It is not lawful
for the insurer to issue the forms or use them after the effective date of
the withdrawal.
(f) Any order or
final determination of the commissioner under the provisions of this
section shall be subject to judicial review.
27-31-9.
Premiums and refunds. -- (a) Each insurer issuing credit accident and health
insurance shall file with the commissioner its schedule of
premium rates for use in connection
with that insurance. Any insurer may revise the schedules
and shall file the revised schedules with
the commissioner. No insurer shall issue any credit
accident and health insurance policy for
which the premium rate exceeds that determined by the
schedules of the insurer as then on file
with the commissioner. The commissioner may require the
filing of the schedule of premium
rates for use in connection with and as a part of the
specific policy filings as provided by section
27-31-8.
(b) Each individual
policy, group certificate, or notice of insurance shall provide that in
the event of termination of the insurance prior to the
scheduled maturity date of the indebtedness,
any refund of an amount paid by the debtor for insurance
shall be paid or credited promptly to the
person entitled to the refund; provided, that the commissioner
shall prescribe a minimum refund
and no refund which would be less than that minimum need
be made. The formula to be used in
computing the refund shall be filed with and approved by the
commissioner.
(c)
If a creditor requires a debtor to make any payment for credit accident and
health
insurance and an individual policy or group certificate of
insurance is not issued, the creditor shall
immediately give written notice to the debtor and shall promptly
make an appropriate credit to the
account.
(d) The amount
charged by the creditor to the debtor for any credit accident and health
insurance shall not exceed the premium rate filed with the
commissioner for the coverage
provided.
27-31-10.
Issuance of policies. -- (a) All policies of credit accident and health insurance
shall be delivered or issued for delivery in this state
only by an insurer authorized to do an
insurance business in this state, and shall be issued only
through holders of licenses or
authorizations issued by the commissioner.
(b) The premiums for
individual policies of credit accident and health insurance issued to
debtors or the cost to debtors of accident and health
insurance coverage under group policies of
accident and health insurance issued to creditors, whether or
not written by or through any lender
or other creditor, its affiliate, associate, or
subsidiary or a director, officer, or employee of any of
them, shall not be deemed interest or charges nor
consideration or any amount for any
examination, service, brokerage, commission, compensation for
services, incidental expenses, or
other thing or otherwise, in addition to or in excess of
permitted interest or charges in connection
with the loan or credit transaction. Any gain,
participation, or advantage to any lender or other
creditor, its affiliate, associate, or subsidiary or to a
director, officer, or employee of any of them
arising out of the premium or cost by way of commission,
dividend, or otherwise, shall not be
deemed interest or charges nor consideration or any amount
for any examination, service,
brokerage, commission, compensation for services, incidental
expenses, or other thing or
otherwise, in addition to or in excess of permitted interest or
charges in connection with the loan
or credit transaction, and shall not be deemed a
violation of any law, general or special, civil, or
criminal, of this state.
(c) Notwithstanding
any other provision of law, a creditor to whom a group policy of
accident and health insurance is issued shall not be deemed to
be acting as an insurance producer
of the insurance for the insurance company issuing the
policy or for any other person or persons,
and no creditor to whom a group policy of accident and
health insurance is issued shall, solely by
reason of the insurance of the group policy, be required to
qualify as a licensed insurance
producer or otherwise to be licensed or authorized by the
commissioner.
(d) Any creditor
doing business in the state of Rhode
place of business where the creditor transacts business,
obtain accident and health insurance upon
a borrower or purchaser or one of them if there are two
(2) or more in connection with the making
of a loan or sale.
27-31-11.
Claims. -- (a) All claims shall be
promptly reported to the insurer or its
designated claim representative, and the insurer shall maintain
adequate claim files. All claims
shall be settled as soon as possible and in accordance with
the terms of the insurance contract.
(b) All claims shall
be paid either by draft upon the insurer or by check of the insurer to
the order of the claimant to whom payment of the claim is
due pursuant to the policy provisions,
or upon direction of the claimant to one specified.
(c) No plan or
arrangement shall be used by which any person, firm, or corporation other
than the insurer or its designated claim representative
shall be authorized to settle or adjust
claims. The creditor shall not be designated as claim
representative for the insurer in adjusting
claims; provided, that a group policyholder may, by
arrangement with the group insurer, draw
drafts or checks in payment of claims due to the group
policyholder subject to audit and review
by the insurer.
27-31-12.
Existing insurance -- Choice of insurer. --
When credit accident and health
insurance is required as additional security for any
indebtedness, and if the premium for the
insurance is the subject of a separate charge to the debtor,
the debtor shall, upon request to the
creditor, have the option of furnishing the required amount of
insurance through existing policies
of insurance owned or controlled by him or her or of
procuring and furnishing the required
coverage through any insurer authorized to transact an
insurance business within this state.
27-31-13.
Regulations -- Enforcement. -- The
commissioner may, after notice and
hearing, issue rules and regulations referenced to the
section or sections that set forth the
legislative standards which they interpret or apply. Whenever the
commissioner finds that there
has been a violation of this chapter or any rules or
regulations issued pursuant to it, after written
notice of the violation and hearing given to the insurer or
other person authorized or licensed by
the commissioner, he or she shall set forth the details
of his findings together with an order for
compliance by a specified date. The order shall be binding on the
insurer and other persons
authorized or licensed by the commissioner on the specified date
unless sooner withdrawn by the
commissioner or a stay of the order has been ordered by a court of
competent jurisdiction.
27-31-14. Judicial review. -- In addition to any other
remedy he or she may have, any
person considering himself or herself aggrieved by any act,
decision, order, or omission of the
commissioner, may within thirty (30) days of that act, decision,
order, or omission, bring a suit in
the superior court to review the act, decision, order, or
omission. The extent of the review shall be
limited to questions of law. The court may, on its own motion
or on the motion of any party, issue
any orders necessary to preserve the rights of the parties.
Any person aggrieved by the decision of
the superior court in the suit may appeal to the supreme
court.
27-31-15.
Penalties. -- In addition to any
other penalty provided by law, any person who
violates an order of the commissioner after it has become
final, and while the order is in effect,
shall, upon proof of it to the satisfaction of the court,
forfeit and pay to the state a sum not to
exceed two hundred fifty dollars ($250) which may be
recovered in a civil action, except that if
the violation is found to be willful, the amount of the
penalty shall be a sum not to exceed one
thousand dollars ($1,000). The commissioner, in his or her
discretion, may revoke or suspend the
license or certificate of authority of the person guilty of
the violation. The order for suspension or
revocation shall be upon notice and hearing, and shall be
subject to judicial review as provided in
section 27-31-14.
27-31-16.
Severability. -- If any provision of
this chapter, or the application of the
provision to any person or circumstances, shall be held
invalid, the remainder of the chapter, and
the application of the provision to any person or
circumstances other than those as to which it is
held invalid, shall not be affected by that invalidity.
27-31-17.
Constitutionality. -- Should the
court declare any section or clause of this
chapter unconstitutional, then that decision shall affect
only the section or clause declared to be
unconstitutional, and shall not affect any other section or clause of
this chapter.
27-31-18.
Applicability. -- All the provisions
of this chapter shall be applicable and
effective, notwithstanding the provisions of any other acts of
the general assembly previously
enacted and now in force and effect.
SECTION 7. This section and sections 1, 2, 4, 5 and 6 shall
take effect upon passage.
Section 3 shall take effect
ninety (90) days after the effective date of this act; provided, however,
that the department of business regulation, in his or her
discretion, may extend said period by no
more than one additional ninety (90) day period.
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LC01669/SUB A
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