385.070. Rates presumed reasonable, when--criteria to be met--policy may be canceled, when--compensation to creditor for sale of coverage, maximum allowed.
Rates presumed reasonable, when--criteria to be met--policy may becanceled, when--compensation to creditor for sale of coverage,maximum allowed.
385.070. 1. It shall be presumed in any review of rates filed with thedirector that the benefits are reasonable in relation to the premium chargedif the premium rates do not exceed the following standard rates:
(1) Credit life insurance:
(a) The credit life insurance rates filed with the director shall beconsidered reasonable by the director if the single premium rate for singlelife decreasing term credit life insurance does not exceed fifty-five centsper annum per one hundred dollars of initial outstanding amount of insuredindebtedness, and the single premium rate for single level term credit lifeinsurance does not exceed a single premium rate of one dollar and ten centsper annum per one hundred dollars of initial outstanding amount of insuredindebtedness. If premiums or identifiable charges are paid monthly onoutstanding balances, the monthly premiums shall be ninety-two cents per onethousand dollars of outstanding indebtedness;
(b) A single premium rate of ninety cents per annum per one hundreddollars of initial outstanding amount of insured indebtedness for joint life(two lives) decreasing term credit life insurance or a premium payable monthlyat the rate of one dollar and thirty-eight cents per one thousand dollars ofoutstanding indebtedness insured on joint (two lives) level term credit lifebasis;
(c) A minimum premium of seventy-five cents shall be consideredreasonable on any policy of credit life insurance. In the event any premiumis unearned and to be returned to the insured, no returned premium calculatedat less than one dollar need be refunded;
(d) The foregoing life insurance rates are presumed reasonable inrelation to benefits only if the credit life insurance contract contains anincontestable clause which provides that an amount of insurance shall becontestable only for a period which shall not be in excess of two years andcoverage is provided or offered to all debtors regardless of age, or to alldebtors not older than the applicable age limit, which shall not be less thanattained age seventy if the limit applies to the age when the insuranceattaches, or not less than attained age seventy-one years if the limit appliesto the age on the scheduled maturity date of the debt. Age limits, if used,must be clearly shown on the individual policies or group certificates;
(2) Credit accident and sickness insurance, per one hundred dollars ofoutstanding indebtedness:
(a) No. of months in which NONRETROACTIVERETROACTIVE indebt- BENEFITS BENEFITS edness 7-day 14-day 30-day 7-day 14-day 30-day is repay- non- non- non- retro- retro- retro- able retro retro retro active active active 1 $ .25 $ .12 $ .07 $ .42 $ .18 $ .14 6 1.50 .70 .40 2.50 1.10 .85 12 2.00 1.40 .80 3.00 2.20 1.70 18 2.50 1.80 1.20 3.50 2.60 2.10 24 3.00 2.20 1.60 4.00 3.00 2.50 36 4.00 3.00 2.40 5.00 3.80 3.30 48 5.00 3.50 2.90 6.00 4.30 3.80 60 6.00 3.90 3.30 7.00 4.70 4.20 72 7.00 4.30 3.70 8.00 5.10 4.60 84 8.00 4.70 4.10 9.00 5.50 5.00 96 9.00 5.10 4.50 10.00 5.90 5.40 108 10.00 5.50 4.90 11.00 6.30 5.80 120 11.00 5.90 5.30 12.00 6.70 6.20;
(b) Any rate not specified in this schedule shall be consistent withthis schedule and shall be computed for the actual number of months in whichthe indebtedness is repayable. Premiums payable other than on a singlepremium basis or for benefits on a basis different than illustrated aboveshall be actuarially consistent with the above rates;
(c) No certificate fee, policy issue charge, or any charge other thanthe premium herein provided shall be made;
(d) The foregoing accident and sickness rates are presumed to producereasonable benefits in relation to premiums only if all of the followingexist:
a. Coverage is provided or offered to all debtors regardless of age orto all debtors not older than the applicable age limit, which shall not beless than the attained age of sixty-five if the limit applies to the age whenthe insurance attaches, or not less than the attained age of sixty-six if thelimit applies to the age on the scheduled maturity date of the debt. Agelimits, if used, must be clearly shown on the individual policies or groupcertificates;
b. Coverage does not contain any exclusions except disabilitiesresulting from intentional self-inflicted injury, pregnancy, foreignresidence, flights in nonscheduled aircraft and preexisting illness, diseaseor physical condition for which the debtor received or was professionallyadvised to obtain medical advice, consultations, or treatment during thesix-month period preceding the effective date of the debtor's coverage andwhich caused covered disability commencing within six months following theeffective date of coverage;
c. The credit insurance policy contains a definition of "disability"which provides coverage during the initial twelve months of disability eventhough the insured is able to perform an occupation other than the one he heldat the time disability occurred. After the initial twelve-month period,coverage must be provided if the insured is unable to perform the duties ofany occupation for which he is suited by education, training or experience,except this paragraph shall not apply to lump sum disability coverage;
(3) Credit casualty insurance: a premium rate or schedule of premiumrates shall be presumed to be reasonable if the rate or schedule of ratesproduces or may reasonably be expected to produce a prospective ratio of atleast seventy-five percent derived by dividing the earned premium into the sumof the claims incurred plus the maximum allowable creditor compensation.Maximum allowable creditor compensation refers to creditor compensationauthorized by subsection 2 of this section;
(4) Credit involuntary unemployment insurance:
(a) If the single premium rate does not exceed one dollar and thirtycents per annum per one hundred dollars of indebtedness;
(b) If the monthly outstanding balance rate does not exceed two dollarsper month per thousand dollars of outstanding indebtedness;
(c) The foregoing involuntary unemployment insurance rates are presumedreasonable in relation to benefits only if all of the following exist:
a. Coverage is provided or offered to all debtors regardless of age whoare working for salary, wages or other employment income for at least thirtyhours per week and have done so for twelve consecutive months;
b. Coverage sets forth a definition of involuntary unemployment as aloss of employment income that may include, but is not limited to, loss causedby layoff, general strike, termination by employer, unionized labor dispute,or lockout;
c. Coverage does not contain any exclusions except: debts withirregular monthly payments; voluntary forfeiture of salary, wages or otheremployment income; resignation; retirement; loss of income due to disabilitycaused by accident, sickness, disease, or pregnancy, or loss of income due totermination as the result of willful misconduct, which is a transgression ofsome established and definite rule of conduct, a forbidden act, or a willfuldereliction of duty, or criminal misconduct, which is unlawful behavior asdetermined by local, state or federal law;
(d) The debtor shall be provided with a copy of the credit involuntaryunemployment insurance policy or certificate of insurance, describing thedebtor's rights, within thirty days of the extension of credit;
(e) Credit involuntary unemployment insurance shall be canceled upon thesatisfaction or termination of the underlying indebtedness and, upon suchcancellation, the debtor shall be entitled to a refund of the unearned premiumby a formula approved by the director;
(f) Involuntary unemployment insurance may not exceed in amount thetotal amount of the indebtedness or exceed in duration the scheduled term ofthe underlying contract; however, the involuntary unemployment insurance planof benefits may be for the full term of the underlying contract or for alimited number of months;
(5) Credit property insurance:
(a) If the monthly outstanding balance rate does not exceed one dollarand eighty-five cents per month per thousand dollars of outstandingindebtedness, or the single premium actuarial equivalent;
(b) The foregoing credit property insurance rates are presumedreasonable in relation to benefits only if the credit property insurancecontract includes standard fire coverage, extended coverage endorsement andreplacement cost provision endorsement, calculates benefits from the date ofloss and provides primary coverage;
(c) The debtor shall be provided with a copy of the credit propertyinsurance policy or certificate of insurance describing the debtor's rightswithin thirty days of the extension of credit;
(d) Whenever credit property insurance is sold by a creditor, thecreditor shall retain a list of the personal property included in theinstrument securing the credit transaction;
(e) If the debtor has or obtains additional personal property coverage,the debtor may retain such additional coverage or may substitute coverage atany time and, upon such substitution, shall be entitled to a refund of theunearned premium on the policy sold under sections 367.100 to 367.200, RSMo,by a formula approved by the director; where such insurance was not initiallyrequired by the creditor, the debtor may cancel at any time, withoutsubstituting and shall be entitled to a refund of any premium paid by aformula approved by the director. If such substitution or cancellation occurswithin thirty days of the making of the loan or other credit transaction, theentire premium shall be refunded;
(f) Credit property insurance shall be canceled upon the satisfaction,or termination, of the underlying indebtedness and, upon such cancellation,the debtor shall be entitled to a refund of the unearned premium by a formulaapproved by the director;
(g) If the creditor requires insurance coverage on the personal propertysecuring the loan and other credit transaction, a homeowner's or renter'spolicy with replacement cost endorsement shall be considered as fulfillingthis requirement;
(h) Credit property insurance may not exceed in amount the total amountof the indebtedness nor exceed in duration the scheduled term of theunderlying contract;
(i) If credit property insurance is sold by a creditor, the loanagreement or a separate written disclosure shall contain a written notice, inten point type and reasonably designed to notify the debtor, in substantiallythe following form: YOU MAY NOT NEED TO PURCHASE CREDIT PROPERTY INSURANCE,AND YOU MAY HAVE OTHER INSURANCE WHICH THIS CREDITOR WILL ACCEPT WHICH COVERSTHE PROPERTY SECURING THIS LOAN. YOU SHOULD EXAMINE ANY OTHER INSURANCE WHICHYOU HAVE IN ORDER TO DETERMINE IF THIS COVERAGE IS NECESSARY;
(6) An insurer may receive approval of a different premium rate orschedule of premium rates to be used in connection with a particular policyform, or a class or classes of the debtors of a creditor, or under broadenedcoverage, if the insurer demonstrates to the satisfaction of the director thatthe loss experience which may reasonably be anticipated will develop aprospective ratio of at least seventy-five percent derived by dividing thestandard rate basis earned premium into the sum of the claims incurred plusthe maximum allowable creditor compensation. For individual deviations, theletter "P" in the formula in this subdivision shall mean premium earnedadjusted to standard rates for the segment of business for which a deviationis requested. Maximum allowable creditor compensation refers to creditorcompensation authorized by subsection 2 of this section. Such approval willbe deemed to have been given by the director if he does not disapprove therates or policy forms within thirty days from the date of filing. This may beaccomplished as follows:
(a) Development of a life insurance rate based on the actual ages andamounts of insurance of those insured and based on the mortality and interestassumptions used for valuation, with evidence that the age distribution isrepresentative of the composition of the group and can reasonably be expectedto remain at the level so determined. If this method is used, the lifeinsurance rate must be redetermined and refiled at the discretion of thedirector or at any time the policy provisions are changed in such manner as toaffect the rate;
(b) When experience is available, the following method may be used inthe development of credit life insurance rates, credit accident and sicknessinsurance rates, credit casualty insurance rates, credit involuntaryunemployment insurance rates or credit property insurance rates under thefollowing formula:
Let P = Premiums earned (at least three years)
D = Claims incurred (at least three years)
r = premium rate to be determined
s = standard premium for coverage
s D+.4P Then r = .... X ......
.75 P If this method is used, approval will not be given fora period longer than the credibility period utilized in the filing;
(c) The premiums described in subdivisions (1), (2), (3), (4) and (5) ofthis subsection may be revised by regulation by the director, based on thetotal Missouri credit insurance experience of all insurers not sooner thanDecember 31, 1992, and for any three-year period thereafter, but not morefrequently than once every three years; except that any such revision is basedon the above formula; however, once the director elects to revise premiums, heshall recalculate the premiums by use of the formula without discretion;
(d) If a company proposes to write any type of coverage other than thosedescribed herein, it may request a public hearing to determine, throughcredible statistics, the initial rate to be employed, except that no hearingwill be required to establish the need for lump sum disability benefits;
(e) If, after study and hearing, the director determines that thepremiums described in subdivisions (1), (2), (3), (4) and (5) of thissubsection do not accomplish the purposes of this section, he may prescribe byregulation that all rates be calculated in conformity with the methodsdescribed in this subdivision, except that the director shall not so prescribesooner than December 31, 1992; however, once the director elects to revisepremiums, he shall recalculate the premiums by use of the formula withoutdiscretion;
(f) Any debtor may cancel credit insurance within fifteen days of itspurchase and shall receive a complete refund or credit of premium. This rightshall be set forth in the policy or the certificate, or by separate writtendisclosure. This right shall be disclosed at the time the debt is incurred inten-point type and in a manner reasonably calculated to inform the debtor ofthis right. This right is in addition to, and separate from, the right tocancel credit property insurance.
2. No insurer shall pay any compensation to any creditor for the sale ofany policy, certificate, or other contract of credit insurance which exceedsforty percent of the rates specified in this section or subsequentlyestablished by the director. This schedule of maximum authorized compensationshall apply regardless of any deviation in rates filed or approved by thedirector. "Compensation" as used herein includes but is not limited to:
(1) Commissions, retrospective rate credits, service fees, expenseallowances or reimbursements, gifts, furnishing equipment, facilities, goodsor services, or any other form of remuneration resulting directly from thesale of credit insurance;
(2) All commissions paid or allowed to any agent directly or indirectlyconnected with the creditor; notwithstanding, an insurer may compensateindependent general agents, not affiliated directly or indirectly with thecreditor, by paying commissions or compensation, but no such commissions orcompensation shall exceed ten percent of the rates specified in this sectionin addition to the agent's commission or compensation. Such independentgeneral agent may not pass on any portion of such compensation to creditors orother agents or brokers;
(3) All compensation of any kind, direct or indirect, paid or allowed tothe creditor;
(4) All benefits such as items of merchandise, travel, conventions,vacations, rewards, bonuses, trading stamps, scrip, or other rewards of anykind given, paid or allowed to the creditor as an inducement or payment forsales made or volume of sales obtained;
(5) Allowing the creditor to have the use of premiums collected by thecreditor by leaving said funds on deposit with the creditor for undue periodsof time at low or no interest rate. An insurance company may invest incertificates of deposit with financial institutions which are the purveyors ofits credit insurance if the interest paid on such certificates of deposit isat least equal to that being paid by the financial institution on certificatesof deposit to other investors on the open market; provided further, that thetotal amount of such certificates of deposit shall not exceed the annual grosspremium written. Premiums received by a creditor or an agent must be actuallyremitted to and received by the insurance company within forty-five days afterthe sale of the insurance. In no event shall compensation be deemed toinclude reinsurance premiums paid to, or underwriting profits generated by, aninsurer or reinsurer whether or not such insurer or reinsurer is affiliatedwith the creditor or agent.
(L. 1977 H.B. 610 § 13, A.L. 1983 S.B. 107, A.L. 1991 H.B. 385, et al. merged with H.B. 575, A.L. 1992 S.B. 519)