Effective - 28 Aug 1992
385.070. Rates presumed reasonable, when — criteria to be met — policy may be cancelled, when — compensation to creditor for sale of coverage, maximum allowed. — 1. It shall be presumed in any review of rates filed with the director that the benefits are reasonable in relation to the premium charged if 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 be considered reasonable by the director if the single premium rate for single life decreasing term credit life insurance does not exceed fifty-five cents per annum per one hundred dollars of initial outstanding amount of insured indebtedness, and the single premium rate for single level term credit life insurance does not exceed a single premium rate of one dollar and ten cents per annum per one hundred dollars of initial outstanding amount of insured indebtedness. If premiums or identifiable charges are paid monthly on outstanding balances, the monthly premiums shall be ninety-two cents per one thousand dollars of outstanding indebtedness;
(b) A single premium rate of ninety cents per annum per one hundred dollars of initial outstanding amount of insured indebtedness for joint life (two lives) decreasing term credit life insurance or a premium payable monthly at the rate of one dollar and thirty-eight cents per one thousand dollars of outstanding indebtedness insured on joint (two lives) level term credit life basis;
(c) A minimum premium of seventy-five cents shall be considered reasonable on any policy of credit life insurance. In the event any premium is unearned and to be returned to the insured, no returned premium calculated at less than one dollar need be refunded;
(d) The foregoing life insurance rates are presumed reasonable in relation to benefits only if the credit life insurance contract contains an incontestable clause which provides that an amount of insurance shall be contestable only for a period which shall not be in excess of two years and coverage is provided or offered to all debtors regardless of age, or to all debtors not older than the applicable age limit, which shall not be less than attained age seventy if the limit applies to the age when the insurance attaches, or not less than attained age seventy-one years if the limit applies to 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 of outstanding indebtedness:
(a)
| No. of months | NONRETROACTIVE | RETROACTIVE | |||||
| in which | BENEFITS | BENEFITS | |||||
| indebtedness | 7-day | 14-day | 30-day | 7-day | 14-day | 30-day | |
| is repayable | non- | non- | non- | retro- | retro- | retro- | |
| 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 with this schedule and shall be computed for the actual number of months in which the indebtedness is repayable. Premiums payable other than on a single premium basis or for benefits on a basis different than illustrated above shall be actuarially consistent with the above rates;
(c) No certificate fee, policy issue charge, or any charge other than the premium herein provided shall be made;
(d) The foregoing accident and sickness rates are presumed to produce reasonable benefits in relation to premiums only if all of the following exist:
a. Coverage is provided or offered to all debtors regardless of age or to all debtors not older than the applicable age limit, which shall not be less than the attained age of sixty-five if the limit applies to the age when the insurance attaches, or not less than the attained age of sixty-six if the limit applies to 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;
b. Coverage does not contain any exclusions except disabilities resulting from intentional self-inflicted injury, pregnancy, foreign residence, flights in nonscheduled aircraft and preexisting illness, disease or physical condition for which the debtor received or was professionally advised to obtain medical advice, consultations, or treatment during the six-month period preceding the effective date of the debtor's coverage and which caused covered disability commencing within six months following the effective date of coverage;
c. The credit insurance policy contains a definition of "disability" which provides coverage during the initial twelve months of disability even though the insured is able to perform an occupation other than the one he held at the time disability occurred. After the initial twelve-month period, coverage must be provided if the insured is unable to perform the duties of any 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 premium rates shall be presumed to be reasonable if the rate or schedule of rates produces or may reasonably be expected to produce a prospective ratio of at least seventy-five percent derived by dividing the earned premium into the sum of the claims incurred plus the maximum allowable creditor compensation. Maximum allowable creditor compensation refers to creditor compensation authorized by subsection 2 of this section;
(4) Credit involuntary unemployment insurance:
(a) If the single premium rate does not exceed one dollar and thirty cents per annum per one hundred dollars of indebtedness;
(b) If the monthly outstanding balance rate does not exceed two dollars per month per thousand dollars of outstanding indebtedness;
(c) The foregoing involuntary unemployment insurance rates are presumed reasonable in relation to benefits only if all of the following exist:
a. Coverage is provided or offered to all debtors regardless of age who are working for salary, wages or other employment income for at least thirty hours per week and have done so for twelve consecutive months;
b. Coverage sets forth a definition of involuntary unemployment as a loss of employment income that may include, but is not limited to, loss caused by layoff, general strike, termination by employer, unionized labor dispute, or lockout;
c. Coverage does not contain any exclusions except: debts with irregular monthly payments; voluntary forfeiture of salary, wages or other employment income; resignation; retirement; loss of income due to disability caused by accident, sickness, disease, or pregnancy, or loss of income due to termination as the result of willful misconduct, which is a transgression of some established and definite rule of conduct, a forbidden act, or a willful dereliction of duty, or criminal misconduct, which is unlawful behavior as determined by local, state or federal law;
(d) The debtor shall be provided with a copy of the credit involuntary unemployment insurance policy or certificate of insurance, describing the debtor's rights, within thirty days of the extension of credit;
(e) Credit involuntary unemployment insurance shall be cancelled 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 formula approved by the director;
(f) Involuntary unemployment insurance may not exceed in amount the total amount of the indebtedness or exceed in duration the scheduled term of the underlying contract; however, the involuntary unemployment insurance plan of benefits may be for the full term of the underlying contract or for a limited number of months;
(5) Credit property insurance:
(a) If the monthly outstanding balance rate does not exceed one dollar and eighty-five cents per month per thousand dollars of outstanding indebtedness, or the single premium actuarial equivalent;
(b) The foregoing credit property insurance rates are presumed reasonable in relation to benefits only if the credit property insurance contract includes standard fire coverage, extended coverage endorsement and replacement cost provision endorsement, calculates benefits from the date of loss and provides primary coverage;
(c) The debtor shall be provided with a copy of the credit property insurance policy or certificate of insurance describing the debtor's rights within thirty days of the extension of credit;
(d) Whenever credit property insurance is sold by a creditor, the creditor shall retain a list of the personal property included in the instrument 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 at any time and, upon such substitution, shall be entitled to a refund of the unearned premium on the policy sold under sections 367.100 to 367.200 by a formula approved by the director; where such insurance was not initially required by the creditor, the debtor may cancel at any time, without substituting and shall be entitled to a refund of any premium paid by a formula approved by the director. If such substitution or cancellation occurs within thirty days of the making of the loan or other credit transaction, the entire premium shall be refunded;
(f) Credit property insurance shall be cancelled 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 formula approved by the director;
(g) If the creditor requires insurance coverage on the personal property securing the loan and other credit transaction, a homeowner's or renter's policy with replacement cost endorsement shall be considered as fulfilling this requirement;
(h) Credit property insurance may not exceed in amount the total amount of the indebtedness nor exceed in duration the scheduled term of the underlying contract;
(i) If credit property insurance is sold by a creditor, the loan agreement or a separate written disclosure shall contain a written notice, in ten point type and reasonably designed to notify the debtor, in substantially the following form:
YOU MAY NOT NEED TO PURCHASE CREDIT PROPERTY INSURANCE, AND YOU MAY HAVE OTHER INSURANCE WHICH THIS CREDITOR WILL ACCEPT WHICH COVERS THE PROPERTY SECURING THIS LOAN. YOU SHOULD EXAMINE ANY OTHER INSURANCE WHICH YOU HAVE IN ORDER TO DETERMINE IF THIS COVERAGE IS NECESSARY
(6) An insurer may receive approval of a different premium rate or schedule of premium rates to be used in connection with a particular policy form, or a class or classes of the debtors of a creditor, or under broadened coverage, if the insurer demonstrates to the satisfaction of the director that the loss experience which may reasonably be anticipated will develop a prospective ratio of at least seventy-five percent derived by dividing the standard rate basis earned premium into the sum of the claims incurred plus the maximum allowable creditor compensation. For individual deviations, the letter "P" in the formula in this subdivision shall mean premium earned adjusted to standard rates for the segment of business for which a deviation is requested. Maximum allowable creditor compensation refers to creditor compensation authorized by subsection 2 of this section. Such approval will be deemed to have been given by the director if he does not disapprove the rates or policy forms within thirty days from the date of filing. This may be accomplished as follows:
(a) Development of a life insurance rate based on the actual ages and amounts of insurance of those insured and based on the mortality and interest assumptions used for valuation, with evidence that the age distribution is representative of the composition of the group and can reasonably be expected to remain at the level so determined. If this method is used, the life insurance rate must be redetermined and refiled at the discretion of the director or at any time the policy provisions are changed in such manner as to affect the rate;
(b) When experience is available, the following method may be used in the development of credit life insurance rates, credit accident and sickness insurance rates, credit casualty insurance rates, credit involuntary unemployment insurance rates or credit property insurance rates under the following 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 for a period longer than the credibility period utilized in the filing;
(c) The premiums described in subdivisions (1), (2), (3), (4) and (5) of this subsection may be revised by regulation by the director, based on the total Missouri credit insurance experience of all insurers not sooner than December 31, 1992, and for any three-year period thereafter, but not more frequently than once every three years; except that any such revision is based on the above formula; however, once the director elects to revise premiums, he shall recalculate the premiums by use of the formula without discretion;
(d) If a company proposes to write any type of coverage other than those described herein, it may request a public hearing to determine, through credible statistics, the initial rate to be employed, except that no hearing will be required to establish the need for lump sum disability benefits;
(e) If, after study and hearing, the director determines that the premiums described in subdivisions (1), (2), (3), (4) and (5) of this subsection do not accomplish the purposes of this section, he may prescribe by regulation that all rates be calculated in conformity with the methods described in this subdivision, except that the director shall not so prescribe sooner than December 31, 1992; however, once the director elects to revise premiums, he shall recalculate the premiums by use of the formula without discretion;
(f) Any debtor may cancel credit insurance within fifteen days of its purchase and shall receive a complete refund or credit of premium. This right shall be set forth in the policy or the certificate, or by separate written disclosure. This right shall be disclosed at the time the debt is incurred in ten-point type and in a manner reasonably calculated to inform the debtor of this right. This right is in addition to, and separate from, the right to cancel credit property insurance.
2. No insurer shall pay any compensation to any creditor for the sale of any policy, certificate, or other contract of credit insurance which exceeds forty percent of the rates specified in this section or subsequently established by the director. This schedule of maximum authorized compensation shall apply regardless of any deviation in rates filed or approved by the director. "Compensation" as used herein includes but is not limited to:
(1) Commissions, retrospective rate credits, service fees, expense allowances or reimbursements, gifts, furnishing equipment, facilities, goods or services, or any other form of remuneration resulting directly from the sale of credit insurance;
(2) All commissions paid or allowed to any agent directly or indirectly connected with the creditor; notwithstanding, an insurer may compensate independent general agents, not affiliated directly or indirectly with the creditor, by paying commissions or compensation, but no such commissions or compensation shall exceed ten percent of the rates specified in this section in addition to the agent's commission or compensation. Such independent general agent may not pass on any portion of such compensation to creditors or other agents or brokers;
(3) All compensation of any kind, direct or indirect, paid or allowed to the creditor;
(4) All benefits such as items of merchandise, travel, conventions, vacations, rewards, bonuses, trading stamps, scrip, or other rewards of any kind given, paid or allowed to the creditor as an inducement or payment for sales made or volume of sales obtained;
(5) Allowing the creditor to have the use of premiums collected by the creditor by leaving said funds on deposit with the creditor for undue periods of time at low or no interest rate. An insurance company may invest in certificates of deposit with financial institutions which are the purveyors of its credit insurance if the interest paid on such certificates of deposit is at least equal to that being paid by the financial institution on certificates of deposit to other investors on the open market; provided further, that the total amount of such certificates of deposit shall not exceed the annual gross premium written. Premiums received by a creditor or an agent must be actually remitted to and received by the insurance company within forty-five days after the sale of the insurance. In no event shall compensation be deemed to include reinsurance premiums paid to, or underwriting profits generated by, an insurer or reinsurer whether or not such insurer or reinsurer is affiliated with the creditor or agent.
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(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)