CHAPTER 4. CREDIT LIFE AND CREDIT ACCIDENT AND HEALTH INSURANCE
IC 27-8-4
Chapter 4. Credit Life and Credit Accident and Health Insurance
IC 27-8-4-1
Purpose
Sec. 1. The purpose of this chapter is to promote the public
welfare through the establishment of unified and consistent rules
relating to the implementation and administration of the laws of this
state pertaining to credit life insurance and credit accident and health
insurance, as such insurances are defined and limited in this chapter.
(Formerly: Acts 1961, c.47, s.1.) As amended by P.L.252-1985,
SEC.295.
IC 27-8-4-2
Citation; scope; definitions
Sec. 2. (a) Citation and Scope:
(1) This chapter may be cited as the Model Act for the
Regulation of Credit Life Insurance and Credit Accident and
Health Insurance.
(2) All life insurance and all accident and health insurance of
the nature in this chapter defined in connection with loans or
other credit transactions shall be subject to the provisions of
this chapter, except such insurance issued in relation to an
isolated transaction on the part of the insurer not related to an
agreement or a plan for insuring debtors of the creditor.
(b) Definitions. For the purpose of this chapter:
(1) "Credit life insurance" means insurance on the life of a
debtor pursuant to or in connection with a specific loan or other
credit transaction.
(2) "Credit accident and health insurance" means insurance on
a debtor to provide funds 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 such lender,
vendor, or lessor, and any 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. The
term includes the following:
(A) A joint debtor.
(B) A co-maker.
(C) An endorser.
(D) A guarantor.
(5) "Indebtedness" means the total amount payable by a debtor
to a creditor in connection with a loan or other credit
transaction.
(6) "Commissioner" means insurance commissioner of Indiana.
(7) The term "accident and health insurance" has the same
meaning as "accident and sickness insurance" sometimes used
in other statutes relating to insurance against accident and
sickness.
(Formerly: Acts 1961, c.47, s.2.) As amended by P.L.252-1985,
SEC.296; P.L.153-1986, SEC.4; P.L.132-1994, SEC.2.
IC 27-8-4-3
Forms of insurance
Sec. 3. Credit life insurance and credit accident and health
insurance shall be issued only in the following forms:
A. Individual policies of life insurance issued to debtors on the
term plan;
B. Individual policies of accident and health insurance issued to
debtors on a term plan or disability benefit provisions in individual
policies of credit life insurance;
C. Group policies of life insurance issued to creditors providing
insurance upon the lives of debtors on the term plan;
D. Group policies of accident and health insurance issued to
creditors on a term plan insuring debtors or disability benefit
provisions in group credit life insurance policies to provide such
coverage.
(Formerly: Acts 1961, c.47, s.3.)
IC 27-8-4-4
Limitations on amount of insurance
Sec. 4. A. Credit Life Insurance. The initial amount of credit life
insurance shall not exceed the total amount repayable under the
contract of indebtedness and, when an indebtedness is repayable in
substantially equal installments, the amount of insurance shall at no
time exceed the scheduled or actual amount of unpaid indebtedness,
whichever is greater. Notwithstanding the provisions of this
paragraph, insurance on agriculture credit transaction commitments,
not exceeding one (1) year in duration, may be written up to the
amount of the loan commitment on a non-decreasing or level term
plan.
B. Credit Accident and Health Insurance. The aggregate amount
of periodic benefits payable by credit accident and health insurance
in the event of disability, as defined in the policy, shall not, in the
case of an indebtedness payable in installments, exceed the aggregate
of the periodic scheduled unpaid installments of the indebtedness or
in the case of an indebtedness payable in one sum, the unpaid amount
of such indebtedness; and the amount of each periodic benefit
payment shall not exceed the original indebtedness divided by the
number of periodic installments.
(Formerly: Acts 1961, c.47, s.4.)
IC 27-8-4-5
Term of insurance
Sec. 5. The term of any credit life insurance or credit accident and
health 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 such indebtedness shall commence on the effective date of the
policy. This rule shall apply when no evidence of insurability is
required and, as well, when such evidence is required and is
furnished within the period of thirty (30) days after the date when the
debtor becomes obligated to the creditor; but should such evidence
of insurability be furnished after such thirty (30) day period, the term
of the insurance may commence on the date on which the insurance
company determines the evidence to be satisfactory, and in such
event there shall be an appropriate refund or adjustment of any
charge to the debtor for insurance. The term of such 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 8 of this chapter.
(Formerly: Acts 1961, c.47, s.5.) As amended by P.L.252-1985,
SEC.297.
IC 27-8-4-6
Policy or certificate; delivery; rejection of risk; to another insurer;
credit for lower premium
Sec. 6. (a) All credit life insurance and credit accident and health
insurance shall be evidenced by an individual policy, or in the case
of group insurance by a certificate of insurance, which individual
policy of group certificate of insurance shall be delivered to the
debtor.
(b) Each individual policy or group certificate of credit life
insurance or credit accident and health insurance shall, in addition to
other requirements of law, set forth:
(1) the name and home office address of the insurer;
(2) the name or names of the debtor or in the case of a
certificate under a group policy, the identity by name or
otherwise of the debtor;
(3) the premium or amount of payment, if any, by the debtor
separately for credit life insurance and credit accident and
health insurance;
(4) a description of the coverage including the amount and term
thereof;
(5) any exceptions, limitations, and restrictions; and
(6) 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 such
excess shall be payable to a beneficiary, other than the creditor,
named by the debtor or to his estate.
(c) Said individual policy or group certificate of insurance shall
be delivered to the insured debtor at the time the indebtedness is
incurred except as provided in this chapter.
(d) If said individual policy or group certificate of insurance is not
delivered to the debtor at the time the indebtedness is incurred, a
copy of the application for such policy or a notice of proposed
insurance, signed by the debtor and setting forth:
(1) the name and home office address of the insurer;
(2) the name or names of the debtor;
(3) the premium or amount of payment by the debtor, if any,
separately for credit life insurance and credit accident and
health insurance; and
(4) the amount, term, and a brief description of the coverage
provided;
shall be delivered to the debtor at the time such indebtedness is
incurred. 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 indebtedness is incurred,
the insurer shall cause the individual policy or group certificate of
insurance to be delivered to the debtor. Said application or notice of
proposed insurance shall state that upon acceptance by the insurer,
the insurance shall become effective as provided in section 5 of this
chapter.
(e) If the named insurer does not accept the risk, then and in such
event the debtor shall receive a policy or certificate of insurance, if
one can be obtained from another insurer, 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.
(Formerly: Acts 1961, c.47, s.6.) As amended by P.L.252-1985,
SEC.298; P.L.255-1995, SEC.8.
IC 27-8-4-7
Filing of documents; disapproval of form of policy; effect;
withdrawal of approval; review
Sec. 7. (a) All policies, certificates of insurance, notices of
proposed insurance, 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.
(b) The commissioner shall, within thirty (30) days after the filing
of any such policies, certificates of insurance, notices of proposed
insurance, applications for insurance, endorsements, and riders,
disapprove any such form if the benefits provided therein are not
reasonable in relation to the premium charge, 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 this title or of a rule promulgated under
this title.
(c) If the commissioner notifies the insurer that the form is
disapproved, it shall be unlawful thereafter for such insurer to issue
or use such form. In such notice, the commissioner shall specify the
reason for his 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,
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 his prior written approval thereto.
(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 approval of any such form on any ground set forth in
subsection (b). The written notice of such hearing shall state the
reason for the proposed withdrawal.
(e) It shall be unlawful for the insurer to issue such forms or use
them after the effective date of such withdrawal.
(f) If a group policy of credit life insurance or credit accident and
health insurance:
(1) has been delivered by an insurer in this state before July 6,
1961; or
(2) has been or is delivered by an insurer in another state before
or after July 6, 1961;
such 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 sections 6(b) and 6(d) of this chapter, and such
forms shall be approved by the commissioner if they conform with
the requirements specified in sections 6(b) and 6(d) 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 on file with the commissioner; provided, however,
that the premium rate in effect on group policies existing on July 6,
1961, may be continued until the first policy anniversary date
following the date this section becomes operative as provided in
section 12 of this chapter.
(g) Any order or final determination of the commissioner under
the provisions of this section shall be subject to judicial review.
(Formerly: Acts 1961, c.47, s.7.) As amended by P.L.252-1985,
SEC.299.
IC 27-8-4-8
Revision of rate schedules; credit or refund of premiums
Sec. 8. A. Any insurer may revise its schedules of premium rates
from time to time, and shall file such revised schedules with the
commissioner. No insurer shall issue any credit life insurance policy
or credit accident and health insurance policy for which the premium
rate exceeds that determined by the schedules of such insurer as then
on file with the commissioner.
B. Each individual policy, or group certificate 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 thereto; Provided, however, That the commissioner
shall prescribe a minimum refund and no refund which would be less
than such minimum need be made. The formula to be used in
computing such refund shall be filed with and approved by the
commissioner.
C. If a creditor requires a debtor to make any payment for credit
life insurance or 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 such debtor and
shall promptly make an appropriate credit to the account.
D. The amount charged to a debtor for any credit life or credit
health and accident insurance shall not exceed the premiums charged
by the insurer, as computed at the time the charge to the debtor is
determined.
(Formerly: Acts 1961, c.47, s.8.)
IC 27-8-4-9
Persons authorized to issue or deliver policies
Sec. 9. All policies of credit life insurance and 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 therein,
and shall be issued only through holders of licenses issued by the
commissioner.
(Formerly: Acts 1961, c.47, s.9.)
IC 27-8-4-9.5
Debtor's right to cancel policy; required provisions in application
form; time limit
Sec. 9.5. (a) An individual or group policy of credit life insurance
or credit accident and health insurance may not be delivered or
issued for delivery in Indiana unless the application or authorized
form:
(1) provides the debtor with a right to cancel the policy not
more than fourteen (14) days after the policy is issued; and
(2) informs the debtor of the right to cancel in plain and
conspicuous language.
(b) The language informing the debtor of the right to cancel under
subsection (a)(2) must explain the way in which the debtor may
cancel the policy and, if applicable, the address to which the debtor
may mail the notice of cancellation.
(c) After the debtor cancels a policy under a provision required by
subsection (a), the insurer or creditor shall return to the debtor the
premium paid by the debtor.
As added by P.L.226-1993, SEC.1.
IC 27-8-4-10
Report, adjustment, and settlement of claims
Sec. 10. 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
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 such claimant to one specified.
C. No plan or arrangement shall be used whereby 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.
(Formerly: Acts 1961, c.47, s.10.)
IC 27-8-4-11
Debtor's choice of insurer; use of existing policies
Sec. 11. When life insurance or accident and health insurance is
required as additional security for any indebtedness, the debtor shall
have the option of furnishing the required amount of insurance
through existing policies of insurance owned or controlled by him or
of procuring and furnishing the required coverage through any
insurer authorized to transact an insurance business within this state.
As used in this section, "life insurance" and "accident and health
insurance" includes any form and any amount of life insurance or
accident and health insurance that affords security to the creditor for
the indebtedness involved.
(Formerly: Acts 1961, c.47, s.11.)
IC 27-8-4-12
Rules; order for compliance
Sec. 12. The commissioner may, after notice and hearing, issue
such rules as he deems appropriate for the supervision of this
chapter. Whenever the commissioner finds that there has been a
violation of this chapter or any rules issued pursuant to this chapter
and after written notice thereof and hearing given to the insurer or
other person authorized or licensed by the commissioner, he shall set
forth the details of his findings together with an order for compliance
by a specified date. Such order shall be binding on the insurer and
other person authorized or licensed by the commissioner on the date
specified unless sooner withdrawn by the commissioner or a stay
thereof has been ordered by a court of competent jurisdiction. The
provisions of sections 5, 6, 7, and 8 of this chapter shall not be
operative until October 4, 1961, and the commissioner in his
discretion may extend until not later than January 2, 1962, the initial
period within which the provisions of sections 5, 6, 7, and 8 shall not
be operative.
(Formerly: Acts 1961, c.47, s.12.) As amended by P.L.252-1985,
SEC.300.
IC 27-8-4-13
Judicial review
Sec. 13. Any party to the proceeding affected by an order of the
commissioner shall be entitled to judicial review under IC 4-21.5-5.
(Formerly: Acts 1961, c.47, s.13.) As amended by P.L.252-1985,
SEC.301; P.L.7-1987, SEC.153.
IC 27-8-4-14
Violations; civil penalty; revocation or suspension of license or
certificate of authority
Sec. 14. In addition to any other penalty provided by law, any
person, firm, or corporation which violates an order of the
commissioner after it has become final, and while such order is in
effect, shall, upon proof thereof to the satisfaction of the court,
forfeit and pay to the state of Indiana a sum not to exceed two
hundred fifty dollars ($250), which may be recovered in a civil
action, except that if such violation is found to be willful, the amount
of such penalty shall be a sum not to exceed one thousand dollars
($1000). The commissioner, in his discretion, may revoke or suspend
the license or certificate of authority of the person, firm, or
corporation guilty of such violation. Such order for suspension or
revocation shall be upon notice and hearing, and shall be subject to
judicial review as provided in section 13 of this chapter.
(Formerly: Acts 1961, c.47, s.14.) As amended by P.L.252-1985,
SEC.302.