PURPOSE: This regulation prevents consumers being subjected to duress and charged excessive premiums for relatively insignificant coverage on articles used as collateral for loans. It is designed to stimulate competition for the benefit of the public and the insurance industry. This regulation was adopted pursuant to section 374.045, RSMo and implements sections 303.200, 365.080, 367.170, 375.936, 379.318, 379.351, 379.470 and 408.280, RSMo .

1. (1) Scope. This regulation covers the stated insurance aspects of goods and of physical damage to motor vehicles subjected to liens under Chapter 365 (Motor Vehicle Time Sales), section 408.100 (Small Loans) and sections 408.250—408.280 (Retail Credit Sales), RSMo. It does not include mobile homes as defined in 20 CSR 500-2.500 nor does it include lenders’/ vendors’ single interest subject to 20 CSR 500-2.500 except where incorporated by reference. Payment of premium by the lender without charge to the consumer shall exempt any such insurance from this regulation.

2. (2) Definitions.

   1. (A) Consumer shall include the purchaser in a credit transaction, the mortgagor of newly acquired or previously owned property and the equitable owner of any property subject to a lien within the scope of this regulation.
   2. (B) Goods, as used, shall mean all tangible chattels, personal and merchandise certificates or coupons exchangeable for this tangible personal property, but shall not include motor vehicles, nonprocessed farm products, livestock, money, things in action or intangible personal property. This term includes personal property which can be or is attached to realty so as to become a fixture whether or not severed or severable.
   3. (C) Loss payable clause shall mean any clause duly filed by the insurer with the Missouri Department of Insurance (MDI) as added to a policy affording substantial protection.
   4. (D) Motor vehicle shall include any new or used automobile, motorcycle, truck, trailer, semi-trailer, truck tractor or bus.
   5. (E) Substantial protection as used is afforded a consumer when the goods are covered by a standard fire policy with extended coverage endorsement or when the motor vehicle is covered by a policy providing collision and comprehensive insurance and both are duly filed with the MDI. In these policies, the owner of the property must be protected from his/her risk of casualty loss for the causes covered by these policies and must be sole loss payee absent a loss payable clause. The amount payable to the consumer shall be no less than the actual cash value of the goods or motor vehicle insured.

3. (3) Substantial Protection Required.

   1. (A) Lienholders’, sellers’, interests of both, may be protected only by a standard 20 CSR 500-1

loss payable clause attached to a policy which substantially protects the consumer’s interest in the motor vehicle or goods. No additional premium may be charged for a loss payable clause. Lienholders, sellers of motor vehicles or goods, or both, may not be listed as additional insureds or appear in any other manner as insureds on an automobile or fire insurance policy where the policy is purchased by the owner of the property insured. These policies may not be written in Missouri.

1. (B) A motor vehicle is substantially protected only when it is insured for at least its actual cash value and not when it is insured only for a lesser loan amount outstanding upon it or the payoff value of that loan. If both the actual cash value and the payoff amount of the loan are to be used as measures of the benefits payable under a policy, then that policy must pay the greater of these two

1. (2) amounts in case of a total loss. The use of any policy provision which limits the benefits payable under motor vehicle insurance to the declining loan balance payable only is prohibited except as provided in 20 CSR 500- 2.400.

   1. (C) No insurance carrier shall write the following coverages upon vehicles insured by coverage subject to this regulation unless included as part of an insurance policy substantially protecting the interests of the consumer, subject to the provisions of the Department of Economic Development, Missouri Division of Finance insurance regulations: fire, theft and collision and comprehensive (except on vehicles ten (10) years old); towing and labor; and medical payments.

2. (4) Consumers’ Rights.

   1. (A) The consumer shall not be required to obtain insurance from any particular insurer nor through any particular agent or representative of a company as a condition precedent to the granting of a loan. No insurer shall participate or knowingly allow its agents to participate in a scheme of requirements.
   2. (B) If the consumer does voluntarily elect to obtain insurance through the lienholder or seller and files no claim against this coverage, s/he shall have thirty (30) days after the date of the loan an unconditioned right to substitute a valid and collectible policy with a loss payable clause in favor of the lienholder or seller for this coverage, if the substitute was in effect on the date of the loan. If s/he elects to make this substitution, the consumer shall receive a full refund of all premiums paid on the policy purchased from the creditor. A consumer shall not be enticed, induced or compelled to cancel a valid existing policy insurance s/he has previously purchased on any motor vehicle or goods later included as collateral in a loan.
   3. (C) The consumer shall have the unconditional right to cancel the insurance at any time upon prepayment of the indebtedness or submission of a valid and collectible loss payable endorsement in favor of the lienholder or seller. The insurer shall then refund the premium to the consumer on a pro rata basis, except when coverage is substituted under subsection (4)(B) of this regulation.

3. (5) Rates.

   1. (A) No insurance carrier writing insurance in connection with consumer loans shall charge a rate in excess of the standard rate for this coverage. The standard rate means the rate(s) on file with the MDI.
   2. (B) No rate charged for any policy written within the scope of this regulation shall be discriminatory against credit insureds as members of a class compared with insureds having the same hazard who may purchase equivalent coverage independent of the credit transaction. These rates shall not be excessive when viewed in conjunction with any restrictions upon effective competition imposed by any creditor and agent.
   3. (C) No insurance carrier shall write coverage in connection with consumer loans when the premium to be charged for physical damage or property coverage plus the deductible amount set out in the policy exceeds fifty percent (50%) of the value of the collateral so insured.
   4. (D) All premium rates and all schedules of premium rates pertaining to policies of insurance delivered or issued for delivery in this state shall be filed with the director prior to their use in this state. The director shall approve any rate or schedules of premium rates if s/he finds that the rates or schedule of premium rates are reasonable in relation to the benefits provided under the policies of insurance. A premium rate or schedule of premium rates shall be presumed to be reasonable for purposes of this section if the rate or schedule of rates produces or may reasonably be expected to produce a loss ratio of sixty percent (60%) or greater.
4. (6) Statement Required. No insurer shall write credit-connected insurance within the scope of this regulation unless the consumer executes as part of his/her application for coverage the following statement or similar statement approved by the director of the Department of Insurance: “I understand that I am free to insure my __________________ (auto, motorcycle or furniture) with whatever licensed company, agent or broker I may choose; that I may do so at any time after the date of this loan; that I have not cancelled existing insurance on my ______________if I owned it before this loan; and that this loan cannot be denied me simply because I did not purchase my insurance through the lender or seller.”
5. (7) Training Required. Any insurance company engaging in coverage subject to this regulation shall be responsible for the education and training of its agents operating in connection with credit institutions to insure that they are fully knowledgeable of the contents of this regulation and any other pertinent insurance laws and regulations. Each company shall be responsible for the continuing training and supervision of the activities of its agents placing that business.
6. (8) Severability Clause. If any section or portion of a section of these regulations or their applicability to any person or circumstances is held invalid by a court, the remainder of the regulations and the applicability of the provision to other persons or circumstances shall not be affected by it.

AUTHORITY: sections 303.200, 365.080, 367.170, 374.045, 375.936, 379.318, 379.351, 379.470 and 408.280, RSMo (1994).* This rule was previously filed as 4 CSR 190-16.140. Original rule filed Aug. 12, 1974, effective Aug. 22, 1974 as Regulation 10.9. Amended: Filed Aug. 4, 1989, effective Dec. 1, 1989. *Original authority: Please consult the Revised Statutes of Missouri. Op. Atty. Gen. No. 285, Manford, 10- 17-67. Insurance upon the lives of installment credit account holders must be made pursuant to section 408.260, RSMo (Supp. 1965). Companies issuing this insurance must be authorized to do business in Missouri.