PURPOSE: This regulation provides for the regulation of credit life insurance and credit accident and health insurance with penalty provisions. This regulation was adopted pursuant to the provisions of section 374.045, RSMo and to implement sections 365.080, 375.014, 375.936, 376.405, 376.500 and 408.280, RSMo and Chapter 385, RSMo.

1. (1) Scope. This regulation shall apply to all credit life insurance and all credit accident and health insurance as defined as follows, except:

   1. (A) Insurance for which no identifiable charge is made to the debtor;
   2. (B) Insurance written in connection with a loan or other credit transaction of more than ten (10) years’ duration; and
   3. (C) Insurance issued as an isolated transaction on the part of the insurer not related to an agreement or a plan for insuring debtors of the creditor.

2. (2) Definitions. For the purposes of this regulation the following words shall mean:

   1. (A) Credit life insurance means insurance on the life of a debtor written pursuant to or in connection with a specific loan or other credit transaction. This definition shall not be construed as the establishment of credit life as a class of insurance;
   2. (B) Credit accident and sickness 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. This definition shall not be construed as the establishment of credit accident and sickness as a class of insurance;
   3. (C) 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 an affiliate, associate or subsidiary of any of them or any officer or employee of any of them or any other person in any way associated with any of them, including a holding company;

   4. (D) 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;

      Rebecca McDowell Cook (4/30/98)*

   5. (E) Indebtedness means the total amount payable by a debtor to a creditor in connection with a loan or other credit transaction;
   6. (F) Director means the director of the Department of Insurance; and
   7. (G) Agent means agent, agency or broker as defined in section 375.012, RSMo.

3. (3) Limit of Amount.

   1. (A) The initial amount of credit life insurance shall not exceed the total amount repayable under the contract of indebtedness and, where the indebtedness is repayable in substantially equal installments, the amount of insurance at no time shall exceed the scheduled or actual amount of the unpaid indebtedness, whichever is greater.
   2. (B) Notwithstanding the provisions of section (3) of this rule, insurance on agricultural credit transaction commitments not exceeding thirty-six (36) months in duration may be written in an amount equal to but not exceeding the loan commitment on a nondecreasing or level-term basis.
   3. (C) Notwithstanding the provisions of section (3), insurance on educational credit transaction commitments may be written to include the amount of that portion, if any, of the commitment not advanced by the creditor. In the case of an educational loan commitment insured in accordance with this subsection, the amount of each periodic indemnity payment shall not exceed the amount of the commitment divided by the number of months in its term.
   4. (D) The total amount of periodic indemnity payable by credit accident and sickness 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 or divided by the number of months of its term in the case of an agricultural loan commitment insured under subsection (3)(B).
   5. (E) The amount charged to a debtor for any credit life or credit accident and sickness insurance shall not exceed the premiums charged by the insurer, as computed at the time the charge to the debtor is determined.

4. (4) Term of Policy.

   1. (A) The term of any credit life insurance or credit accident and sickness insurance, subject to acceptance by the insurer, shall commence on the date when the debtor becomes obligated to the creditor, except, where a group policy provides coverage with respect to existing obligations, the insurance on a debtor with respect to the indebtedness shall 20 CSR 600-2

commence on the effective date of the policy. Where evidence of insurability is required and the 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 this insurance shall not extend more than thirty (30) 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 loan termination prior to the scheduled maturity, all credit life and credit accident and sickness insurance shall be terminated and a refund shall be paid or credited as provided in section (5).

1. (B) Credit life and credit accident and sickness insurance, if so provided in the policy, shall be terminated by reason of repossession of the mortgaged or pledged collateral, the same being security for a specific indebtedness. As used in this rule, the date of repossession shall be the date the repossessed collateral is sold by the creditor beneficiary.

1. (5) Refunds and Credit.

   1. (A) Each individual policy or group certificate shall provide that in the event of termination 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; provided, however, that no refund of less than one dollar ($1) need be made. The formula to be used in computing the refund shall be the sum of the digits formula with respect to decreasing term credit life insurance and credit accident and sickness insurance and the pro rata unearned gross premium with respect to level term credit life insurance.
   2. (B) If a creditor requires a debtor to make any payment for credit life insurance or credit accident and sickness insurance and an individual policy or group certificate of insurance is not issued, the creditor immediately shall give written notice to the debtor and promptly shall make an appropriate credit to the account.
2. (6) Remittance of Premiums. If charges to a debtor are made on a single-premium basis, the proportionate share of the premium collected by a creditor or agent and due the insurer shall be remitted to the insurer at the time of the collection of premium from the debtor or as soon thereafter as possible. Premiums must be remitted to and received by the insurer not later than thirty (30) days after the end of the month in which the insurance was sold. Retention of any portion of the premium amount due the insurer by a creditor or agent beyond this period shall be considered to be retention for undue periods of time by the creditor or agent.

3. (7) Substitution.

   1. (A) When a creditor requires or requests credit life insurance or credit accident and sickness insurance as additional security for an indebtedness, the debtor shall be given the option of furnishing the required amount of insurance through existing policies of insurance owned or controlled by him/her or procuring and furnishing the required coverage through any insurer authorized to transact insurance business in this state. The debtor shall be informed in writing of his/her right to provide alternative coverage by the creditor before the transaction is completed.
   2. (B) The right to cancel insurance purchased through the creditor and to substitute coverage obtained elsewhere shall continue for the life of the loan with any unused premium returned according to the basis prescribed in subsection (5)(A).
   3. (C) Failure by an agent or company to allow proper substitution of policies obtained elsewhere may be considered in determining whether or not the company has conducted its business fraudulently within the meaning of section 375.445, RSMo. It may also constitute a violation of sections 365.080 and 408.280, RSMo, or both.

4. (8) Policy Requirements.

   1. (A) All credit life insurance and credit accident and sickness insurance 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.
   2. (B) Each individual policy or group certificate of credit life insurance or credit accident and sickness insurance or any policy, or certificate evidencing any combination of credit life and credit accident and sickness insurance, in addition to other requirements of law, shall set forth the name and home office address of the insurer, the names of the debtors, the amount paid, if any, by the debtor for credit life insurance and credit accident and sickness insurance, the amount for each type of insurance to be stated separately, a description of the coverage including the amount and term and 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 that whenever the proceeds of insurance may exceed the unpaid indebtedness, that any excess shall be payable to the debtor or to a beneficiary designated by the debtor or in the absence of a designation, to the debtor’s estate.

   3. (C) The individual policy or group certificate of insurance shall be delivered to the insured debtor at the time the indebtedness is incurred, except as provided.

      1. 1. If the individual policy or group cer-

tificate of insurance is not delivered to the debtor at the time the indebtedness is incurred, 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(s) of the debtor, the amount paid, if any, by the debtor for credit life insurance and credit accident and sickness insurance, the amount for each type of insurance to be stated separately, the amount, term and a brief description of the coverage provided, shall be delivered to the debtor at the time the indebtedness is incurred. 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 in the notice. 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. The application for or notice of proposed insurance shall state that, upon acceptance by the insurer, the insurance shall become effective as provided in section (4) of this regulation.

1. (9) Prefiling of Forms. 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 premium rate or the schedule of pertaining premium rates, shall be filed with and approved by the director prior to use.

2. (10) Required Filings.

   1. (A) Experience Reports. Any insurer doing the business of credit life or credit accident and sickness insurance or both in Missouri, annually, on or prior to April 1, shall file with the director a report of its credit life insurance claims’ experience and its credit accident and sickness insurance claims’ experience for the immediately preceding calendar year on the credit insurance experience exhibit of its annual statement. The report required by this section will not be used in any manner to determine the financial condition of the company; however, this report shall reconcile to the page of the annual statement on which credit insurance business in the state of Missouri is recorded. Any discrepancies between the report required by this section and the page of the annual statement on which credit insurance business in the state of Missouri is recorded shall be explained by a signed statement attached to the report required by this section.
   2. (B) Compensation report. An affidavit signed by a company officer, must be filed annually by each, company writing credit insurance in Missouri, on or prior to April 1, stating the amount of compensation paid to all creditor agents collectively during the immediately preceding calendar year and stating that compensation was not paid to any creditor agent for the sale of any policy, certificate or other contract of credit insurance which exceeded forty percent (40%) of the rates specified in section 385.070, RSMo or of the rates subsequently established by the director. This affidavit shall be filed with the Statistics Section of the Missouri Department of Insurance. A list of names, addresses, premiums collected by, and amounts of compensation paid to each agent shall be submitted to the director upon his/her request.

3. (11) Licensing.

   1. (A) The following requirements shall apply specifically to insurance subject to this regulation:

      1. 1. Where individual (as contrasted to

group) credit insurance is utilized, the person in contact with the proposed insured, who offers, solicits or sells the policy must be licensed as an agent for the company which issues the insurance policy; and

1. 2. Where group credit insurance is uti-

lized, the person who sells the group master contract to the creditor must be a licensed agent. Any person who solicits, negotiates or otherwise procures a policy(ies) of credit life insurance or credit accident and sickness insurance or any combination of credit life and credit accident and sickness insurance, including any person who enrolls debtors under a group contract where an identifiable charge is made to the debtor, in connection with a loan or other credit transaction shall be licensed as an agent prior.

1. (12) Severability. If any provisions of any section of this regulation or the application of

   (4/30/98)* Rebecca McDowell Cook

this regulation to any person or circumstance is held invalid, this invalidity shall not affect other provisions of that section or application of the regulation which can be given effect without the invalid provision or application, and to this end the provisions of this regulation are declared to be severable.

AUTHORITY: sections 365.080, 374.190, 374.210, 375.041, 375.936, 376.170, 376.405, 376.500, 376.675, 376.777 and 408.280, RSMo 1994 and 374.045, RSMo Supp. 1997.* This rule was previously filed as 4 CSR 190-13.160. Original rule filed Sept. 11, 1975, effective Nov. 15, 1975. Amended: Filed Aug. 16, 1977, effective Jan. 13, 1978. Amended: Filed Jan. 15, 1980, effective Sept. 1, 1980. Amended: Filed Aug. 13, 1981, effective Jan. 1, 1982. Amended: Filed Dec. 1, 1997, effective May 30, 1998.

*Original authority: see Missouri Revised Statutes, 1994 and Cumulative Supplement to the Revised Statutes of the State of Missouri, 1997. Survivors Gen. Ins. Co. v. Farmer, 514 SW2d 565 (Mo. 1974). Superintendent of insurance has the duty to approve or disapprove life insurance contracts and forms and no contract or form may be used in Missouri without the approval of the superintendent. Op. Atty. Gen. No. 385, Manford, (10-17- 67). Insurance upon the lives of installment credit accountholders must be made pursuant to section 408.250, RSMo 1965. Companies issuing such insurance must be authorized to do business in Missouri.