1.1 Purpose and Authority

1. The purpose of this Part is to protect the interests of debtors and the public in this state by providing a system of rate, policy form, and operating standards for the transaction of credit life and credit accident and health, and credit unemployment insurance. This Part interprets and implements R.I. Gen. Laws Chapter 27-30.

1.2 Definitions

1. A. As used in this Part:

   1. 1. “Affiliate” has the same meaning as defined in R.I. Gen. Laws § 27-35-1.
   2. 2. “Closed-end credit” means a credit transaction that does not meet the definition of open-end credit.
   3. 3. “Control” has the same meaning as defined in R.I. Gen. Laws § 27-35-1.
   4. 4. “Evidence of individual insurability” means a statement furnished by the debtor, as a condition of insurance becoming effective that relates specifically to the health status or to the health or medical history of the debtor.
   5. 5. “Loss ratio” means incurred claims divided by the sum of earned premiums and imputed interest earned on unearned premiums.

   6. 6. “Open-end credit” means credit extended by a creditor under an agreement in which:

      1. a. The creditor reasonably contemplates repeated transactions;
      2. b. The creditor imposes a finance charge from time to time on an outstanding unpaid balance; and
      3. c. The amount of credit that may be extended to the debtor during the term of the agreement (up to any limit set by the creditor) is generally made available to the extent that any outstanding balance is repaid.
   7. 7. “Person” has the same meaning as defined in R.I. Gen. Laws § 27-35-1.
   8. 8. “Preexisting condition” means any condition for which the insured debtor received medical advice, consultation or treatment within six (6) months before the effective date of the coverage and from which the insured debtor becomes disabled within six (6) months after the effective date of this coverage.

1.3 Rights and Treatment of Debtors

1. A. Multiple Plans of Insurance. If a creditor makes available to the debtors more than one plan of consumer credit life insurance every debtor must be informed of each plan for which the debtor is eligible and of the premium or insurance charge for each.
2. B. Substitution. When a creditor requires insurance as additional security for a debt, the debtor shall be given the option of furnishing the required amount of insurance through existing policies of insurance owned or controlled by the debtor or of procuring and furnishing the required coverage through any insurer authorized to transact insurance business in this state. If this subsection is applicable, the debtor shall be informed by the creditor of the right to provide alternative coverage before the transaction is completed.

3. C. Termination of group consumer credit insurance policy.

   1. 1. If a debtor is covered by a group consumer credit insurance policy providing for the payment of single premiums to the insurer, or any other premium payment method which prepays coverage beyond one month, then provision shall be made by the insurer that in the event of termination of the policy for any reason, insurance coverage with respect to any debtor insured under such policy shall be continued for the entire period for which the single premium has been paid.
   2. 2. If a debtor is covered by a group consumer credit insurance policy providing for the payment of premiums to the insurer on a monthly basis, then the policy shall provide that, in the event of termination of such policy, termination notice shall be given to the insured debtor at least thirty (30) days prior to the effective date of termination except where replacement of the coverage by the same or another insurer in the same or greater amount takes place without lapse of coverage. The insurer shall provide or cause to be provided this required information to the debtor.
   3. 3. Remittance on Premiums. If the creditor adds identifiable insurance charges or premiums for consumer credit insurance to the debt, and any direct or indirect finance, carrying, credit, or service charge is made to the debtor on such insurance charges or premiums, the creditor must remit and the insurer shall collect the premium within sixty (60) days after it is added to the debt.
   4. 4. Refinancing of the Debt. If the debt is discharged due to refinancing prior to scheduled maturity, the insurance in force shall be terminated before any new insurance may be issued in connection with the refinanced debt. In all cases of termination prior to scheduled maturity, a refund of all unearned premium or unearned insurance charges paid by the debtor shall be paid or credited to the debtor as provided in § 1.9 of this Part. In any refinancing of the debt, the effective date of coverage as respects any policy provision shall be deemed to be the first date on which the debtor became insured under the policy with respect to the debt which was refinanced, at least to the extent of the amount and term of the debt outstanding at the time of refinancing of the debt.
   5. 5. Maximum Aggregate Provisions. A provision in an individual policy or group certificate that sets a maximum limit on total claim payments must apply only to that individual policy or group certificate.
   6. 6. Prepayment of Debt. If a debtor prepays the debt in full then any consumer credit insurance covering the debt shall be terminated and an appropriate refund of the consumer credit insurance premium shall be paid or credited to the debtor in accordance with § 1.9 of this Part. However, if the prepayment is a result of death or any other lump sum consumer credit insurance payment, no refund shall be required for the coverage under which the lump sum was paid. If a claim under credit accident and health coverage or credit unemployment coverage is in progress at the time of prepayment, the amount of refund may be determined as if the prepayment did not occur until the payment of benefits terminates. No refund need be paid during any period of disability for which credit accident and health benefits are payable or during any period of unemployment for which credit unemployment benefits are payable. A refund shall be computed as if prepayment occurred at the end of the disability period or at the end of the unemployment period.
   7. 7. If a creditor has opened a line of credit for a debtor and, under R.I. Gen. Laws §§ 27-30-4(a)(5) or (6), is charging for this line of credit rather than the amount of debt in the event of the death of the debtor, the insured amount due is the amount of the established amount of credit against which premium was last charged.

1.4 Determination of Reasonableness of Benefits in Relation to Premium Charge

1. A. Benefits provided by consumer credit insurance policies must be reasonable in relation to the premiums charged. This requirement is satisfied if the premium rate charged develops or may reasonably be expected to develop a loss ratio, of not less than sixty percent (60%). With the exception of deviations approved under § 1.11 of this Part, the rates shown in §§ 1.6 and 1.7 of this Part, as adjusted pursuant to § 1.10 of this Part, shall be presumed to satisfy this standard. Anticipated losses that develop or are expected to develop a loss ratio of not less than sixty percent (60%) shall be presumed reasonable. Any insurer filing a deviation in accordance with § 1.11 of this Part must satisfy the sixty percent (60%) loss ratio standard on their total consumer credit insurance business, including that of affiliated insurers, for each type of insurance defined in R.I. Gen. Laws Chapter 27-30 for which the deviation is being filed.

2. B. Nonstandard Coverage. If any insurer files for approval of any form providing coverage different than that described in §§ 1.6 through 1.8 of this Part, the insurer shall demonstrate to the satisfaction of the Commissioner that the premium rates to be charged for such coverage are

   1. 1. reasonably expected to develop a loss ratio not less than sixty percent (60%), or
   2. 2. actuarially consistent with the rates used for standard coverages.

1.5 Limitation on Compensation

1. A. An insurer shall not pay compensation in excess of thirty percent (30%) of the net written prima facie premium of which not more than twenty-five percent (25%) of net written prima facie premium may be paid to a creditor.
2. B For the purpose of § 1.5(A) of this Part, prima facie premium means premium using the premium rates set out in §§ 1.6 and 1.7 of this Part, or actuarially consistent premium rates for plans not described in §§ 1.6 and 1.7 of this Part, without any adjustment pursuant to § 1.10 of this Part.

1.6 Credit Life Insurance Rates

1. A. Premium Rate. Subject to the conditions and requirements in §§ 1.6(B) and 1.11 of this Part, the prima facie rates shown below are considered to meet the requirements of § 1.4 of this Part, and may be used without filing additional actuarial support.

   1. 1. Monthly outstanding balance basis: Sixty six cents ($.66) per month per one thousand ($1,000) of outstanding insured debt on single life and one dollar and five cents ($1.05) per month per $1,000 of outstanding insured debt on joint life if premiums are payable on a monthly outstanding balance basis.

   2. 2. Single premium basis: If the premium is charged on a single premium basis, the rate shall be computed according to the following formula or according to a formula approved by the commissioner which produces rates substantially the same as those produced by the following formula:

      nOp  It

      Sp = ? ( _____ x _____ x (vt - 1 ))

      t = 1 10  Ii

      1

      v = -----------

      1 + (dis)

      Sp = Single Premium per $100 of initial consumer credit life insurance coverage.

      Op = $0.66 or $1.05, the prima facie consumer credit life insurance premium rate for monthly outstanding balance coverage from § 1.6(A)(1) of this Part.

      It = The scheduled amount of insurance for month t.

      Ii = Initial amount of insurance. For a net insurance policy, Ii equals the initial principal balance of the loan.

      dis = .0020, representing an annual discount rate of 1.924 percent for interest plus 0.4 percent for mortality.

      n = The number of months in the term of the insurance.

   3. 3. If the benefits provided are other than those described in the introduction to this subsection, premium rates for such benefits shall be actuarially consistent with the rates provided in §§ 1.6(A)(1) and (2) of this Part.

2. B. The premium rate in § 1.6(A) of this Part shall apply to contracts providing credit life insurance that are offered to all eligible debtors, that do not require evidence of individual insurability, from any eligible debtor electing to purchase coverage within thirty (30) days of the date the debtor becomes eligible and that contain the provisions below:

   1. 1. Coverage for death by whatever means caused, except that coverage may exclude death resulting from:

      1. a. War or any act of war;
      2. b. Suicide within six (6) months after the effective date of the coverage; or,
      3. c. Subject to the provisions of § 1.6(B)(1) of this Part, a preexisting condition or conditions.

   2. 2. For the purpose of § 1.6(B)(1)(c) of this Part:

      1. a. Preexisting condition means any condition for which the debtor received medical advice or treatment within six (6) months preceding the effective date of coverage;
      2. b. No preexisting condition exclusion shall apply unless death is caused by or substantially contributed to by the preexisting condition and unless death occurs within six (6) months following the effective date of coverage; and,
      3. c. A preexisting condition exclusion shall apply only if and to the extent that the amount of coverage to which it would otherwise apply (in the absence of this limitation) exceeds $1,000.
   3. 3. For the exclusions listed in §§ 1.6(B)(1) and (2) of this Part, the effective date of coverage for each part of the insurance attributable to a different advance or a charge to the plan account is the date on which the advance or charge occurs.
   4. 4. At the option of the insurer and in lieu of a preexisting condition exclusion on insurance written in connection with open-ended consumer credit, a provision may be included to limit the amount of insurance payable on death due to natural causes to the balance as it existed six (6) months prior to the date of death if there has been one or more increases in the outstanding balance during the six-month period and if evidence of individual insurability has not been required in the six-month period prior to the date of death. This provision applies only if and to the extent that the amount of coverage to which it would otherwise apply (in the absence of this limitation) exceeds $1,000.
   5. 5. An age restriction providing that no insurance will become effective on debtors on or after the attainment of age sixty-six (66) and that all insurance will terminate upon attainment by the debtor of age sixty-six (66).

3. C. Application of Rates:

   1. 1. If the insurer, its agent, or the application form for credit life insurance does not request or require that the debtor provide evidence of insurability, then the premium rates deemed reasonable will be the prima facie rates in § 1.6(A) of this Part.
   2. 2. Except as provided in § 1.6(C)(3) of this Part, if the insurer, its agent, or the application form for credit life insurance requests or requires that the debtor provide evidence of insurability and the initial amount of insurance is $15,000 or less, then the premium rates deemed reasonable will be the rates in § 1.6(A) of this Part multiplied by 90 percent (.90).
   3. 3. If the insurer, its agent, or the application form for credit life insurance requests or requires that the debtor provide evidence of insurability and the initial amount of insurance is above $15,000 or the applicant elects to purchase coverage more than thirty (30) days after the date the debtor became eligible under a group plan of insurance, then the premium rates deemed reasonable will be the prima facie rates in § 1.6(A) of this Part. For policies insuring open lines of credit, the insurer may require evidence of insurability for advances which increase the outstanding debt above $15,000.
4. D. Insurers may use the same application forms for credit life insurance whether or not underwriting questions are asked pursuant to § 1.6(C) of this Part. The commissioner will presume that any application form for which all relevant underwriting questions have been left unanswered represents a policy which has not been underwritten and for which prima facie rates are permissible. A form for which any relevant underwriting questions have been answered or filled in represents a policy for which premium decreases pursuant to § 1.6(C) of this Part are required. Insurers should maintain in their files their rules for those circumstances where underwriting questions shall be asked. Those rules shall be communicated to and followed by the insurer’s agents or other producers.

1.7 Credit Accident and Health Insurance

1. A. Premium Rate. Subject to the conditions and requirements in §§ 1.6(B) and 1.11 of this Part, the prima facie rates shown below are considered to meet the requirements of § 1.4 of this Part, and may be used without filing additional actuarial support.

   1. 1. If premiums are payable on a single-premium basis for the duration of the coverage the prima facie rate per $100 of initial insured debt for single accident and health is as set forth in the table below (rates for monthly periods other than those listed shall be interpolated or extrapolated):

      Original Numberof EqualMonthlyInstallments	14 DayNon-RetroactivePolicies	14 DayRetroactivePolicies	30 DayNonRetroactivePolicies	30 Day RetroactivePolicies
      6	0.90	1.32	1.02	1.02
      12	1.50	2.19	1.70	1.70
      24	1.90	2.61	2.14	2.14
      36	2.21	2.91	2.46	2.46
      48	2.50	3.22	2.76	2.76
      60	2.78	3.50	3.05	3.05
      72	*	*	1.02	*
      84	*	*	1.70	*
      96	*	*	2.14	*
      108	*	*	2.46	*
      120	*	*	2.76	*
      * There are no prima facie rates for these categories nor for loans in excess of one hundred twenty (120) months. Subject to approval by the Commissioner, such loans may be insured on any monthly premium basis that can be actuarially demonstrated to produce an anticipated loss ratio of at least sixty percent (60%).

   2. 2. If premiums are paid on the basis of a premium rate per month per thousand of outstanding insured gross debt, these premiums shall be computed according to the following formula or according to a formula approved by the Commissioner which produces rates actuarially consistent with the single premium rates in § 1.7(A)(1) of this Part:

      10 SPn

      OPn = ___________________________

      n

      {? (vt - 1 x ( n-t+1 ))}

      t = 1 n

      1

      where v =

      1 + (dis)

      Where SPn = Single Premium Rate per $100 of initial insured debt repayable in n equal monthly installments as shown in § 1.7(A)(1) of this Part.

      OPn = Monthly Outstanding Balance Premium Rate per $1,000.

      n = The number of months in the term of the insurance.

      dis = .0016, representing an annual discount rate of 1.924 percent for interest.

   3. 3. If the coverage provided is a constant maximum indemnity for a given period of time, the actuarial equivalent of §§ 1.7(A)(1) and (2) of this Part shall be used.
   4. 4. If the coverage provided is a combination of a constant maximum indemnity for a given period of time after which the maximum indemnity begins to decrease in even amounts per month, an appropriate combination of the premium rate for a constant maximum indemnity for a given period of time and the premium rate for a maximum indemnity which decreases in even amounts per month shall be used.
   5. 5. The outstanding balance rate for credit accident and health insurance may be either a term specified rate or may be a single composite term outstanding balance rate.

2. B. Subject to the conditions and requirements in §§ 1.7(A) and 1.11 of this Part, the prima facie rates for credit accident and health insurance shown below are considered to meet the requirements of § 1.4 of this Part in the situation where the insurance is written on an open-end loan. These prima facie rates and the formulae used to calculate them may be used without filing additional actuarial support. Other formulae to convert from a closed-end credit rate to an open-end credit rate may be used if approved by the commissioner.

   1. 1. If the maximum benefit of the insurance equals the net debt on the date of disability, the term of the loan is calculated according to the formula: 1/(minimum payment percent). The prima facie rate is determined by applying the calculated term to the rates shown in § 1.7(A) of this Part. A composite minimum payment percentage may be used in place of the minimum payment percentage for a specific credit transaction.

   2. 2. If the maximum benefit of the insurance equals the outstanding balance of the loan on the date of disability plus any interest accruing on that amount during disability, the term of the insurance (n) is estimated by using the following formula:

      n = ln{1-(1000i/x)}/ln(v)

      where:

      i = interest rate on the account or a composite interest rate used for the type of policy;

      x = monthly payment per $1000 of coverage consistent with the term calculated above; and,

      v = 1/(1 + i).

      The calculated value of the term is used to look up an initial rate in § 1.7(1) of this Part. The final prima facie rate is calculated by multiplying the initial rate by:

      the adjustment n/an

      where:

      n is the term calculated above; and

      n

      an = ( 1 - v )/i.

3. C. If the accident and health coverage is sold on a joint basis (involving two people), the rate for the joint coverage shall be filed with the commissioner prior to use.
4. D. If the benefits provided are other than those described in §§ 1.7(A) or 1.7(B) of this Part above, rates for those benefits shall be actuarially consistent with rates provided in §§ 1.7(A) and 1.7(B) of this Part.

5. E. The premium rates in § 1.7(A) of this Part shall apply to contracts providing credit accident and health insurance that are offered to all eligible debtors, that do not require evidence of individual insurability from any eligible debtor electing to purchase coverage within thirty (30) days of the date the debtor becomes eligible and that contain the provisions below:

   1. 1. Coverage for disability by whatever means caused, except that coverage may be excluded for disabilities resulting from:

      1. a. normal pregnancy;
      2. b. war or any act of war;
      3. c. elective surgery;
      4. d. intentionally self-inflicted injury;
      5. e. sickness or injury caused by or resulting from the use of alcoholic beverages or narcotics (including hallucinogens) unless they are administered on the advice of and taken as directed, by a licensed physician other than the insured;
      6. f. flight in any aircraft other than a commercial scheduled aircraft;
      7. g. a preexisting condition.
   2. 2. For the exclusion listed in § 1.7(F)(3) of this Part, the effective date of coverage for each part of the insurance attributable to a different advance or a charge to the plan account is the date on which the advance or charge occurs.
   3. 3. A definition of disability providing that for the first twelve (12) months of disability, total disability shall be defined as the inability to perform the essential functions of the insured’s own occupation. Thereafter, it shall mean the inability of the insured to perform the essential functions of any occupation for which he or she is reasonably suited by virtue of education, training or experience.
   4. 4. No employment requirement more restrictive than one requiring that the debtor be employed full-time on the effective date of coverage and for at least twelve (12) consecutive months prior to the effective date of coverage. “Full time” means a regular work week of not less than thirty (30) hours.
   5. 5. An age restriction providing that no insurance will become effective on debtors on or after the attainment of age sixty-six (66) and that all insurance will terminate upon attainment by the debtor of age sixty-six (66).
   6. 6. A daily benefit equal in amount to one-thirtieth (1/30th) of the monthly benefit payable under the policy.

6. F. Application of Rates:

   1. 1. If the insurer, its agent, or the application form for credit life insurance does not request or require that the debtor provide evidence of insurability, then the premium rates deemed reasonable will be the prima facie rates in § 1.7(A) of this Part.
   2. 2. Except as provided in § 1.7(B) of this Part, if the insurer, its agent, or the application form for credit life insurance requests or requires that the debtor provide evidence of insurability and the initial amount of insurance is $15,000 or less, then the premium rates deemed reasonable will be the rates in § 1.7(A) of this Part multiplied by 90 percent (.90).
   3. 3. If the insurer, its agent, or the application form for credit life insurance requests or requires that the debtor provide evidence of insurability and the initial amount of insurance is above $15,000 or the applicant elects to purchase coverage more than thirty (30) days after the date the debtor became eligible under a group plan of insurance, then the premium rates deemed reasonable will be the prima facie rates in § 1.7(A) of this Part. For policies insuring open lines of credit, the insurer may require evidence of insurability for advances which increase the outstanding debt above $15,000.
7. G. Insurers may use the same application forms for credit accident and health insurance whether or not underwriting questions are asked pursuant to § 1.7(F) of this Part. The commissioner will presume that any application form for which all relevant underwriting questions have been left unanswered represents a policy which has not been underwritten and for which prima facie rates are permissible. A form for which any relevant underwriting questions have been answered or filled in represents a policy for which premium decreases pursuant to § 1.7(F) of this Part are required. Insurers should maintain in their files their rules for those circumstances where underwriting questions shall be asked. Those rules shall be communicated to and followed by the insurer’s agents or other producers.

1.8 Credit Unemployment Insurance Rates

1. A. Each insurer filing rates for credit unemployment insurance shall include in its rate filing with the commissioner the appropriate rate formula upon which its rates are based, including a provision for anticipated losses. Anticipated losses that develop or are expected to develop a loss ratio of not less than sixty percent (60%) shall be presumed reasonable. Anticipated losses may include an amount for fluctuation in loss due to catastrophe based on the experience of at least the latest nine (9) policy years or as long as the company has been writing this line of business.

2. B. Credit unemployment insurance policies must contain benefits at least as favorable to insureds as the provisions below:

   1. 1. Coverage for unemployment for any reason, except that coverage may be excluded for:

      1. a. voluntary forfeiture of salary, wage or other employment income;
      2. b. resignation;
      3. c. retirement;
      4. d. general strike;
      5. e. illegal walk out;
      6. f. war;
      7. g. separation from the military;
      8. h. willful misconduct or criminal misconduct or unlawful behavior; and
      9. i. disability caused by injury, sickness or pregnancy.
   2. 2. For credit unemployment insurance which provides for a monthly benefit in the event of unemployment, benefits must start after a waiting period of not longer than thirty (30) days but need not be retroactive to the first day of unemployment and must have a maximum benefit period that is no shorter than six (6) months.

3. C. Credit unemployment insurance policies may not contain eligibility requirements more restrictive than the restrictions below:

   1. 1. Exclusion from qualification for coverage:

      1. a. self employed individuals;
      2. b. workers in seasonal or temporary jobs, defined as jobs designed to last six (6) consecutive months or less; and,
      3. c. debtors who have been notified either orally or in writing of any layoff or of employment termination either now or within the next sixty (60) days. This exclusion must be disclosed to all prospective insureds.
   2. 2. No employment requirement more restrictive than one requiring that the debtor be employed full-time on the effective date of coverage for at least twelve (12) consecutive months prior to the effective date of coverage. “Full time” means a regular work week of not less than thirty (30) hours.
   3. 3. An age restriction providing that no insurance will become effective on debtors on or after the attainment of age sixty-six (66) and that all insurance will terminate upon attainment by the debtor of age sixty-six (66).

1.9 Refund Formulas

1. A. In the event of termination, no charge for credit insurance may be made for the first fifteen (15) days of a month and full month may be charged for sixteen (16) days or more of a month.
2. B. The requirements of the Consumer Credit Insurance Law that refund formulas be filed with the Commissioner shall be considered fulfilled if the refund formulas are set forth in the individual policy or group certificate filed with the Commissioner.
3. C. No refund of five dollars ($5) or less need be made.

1.10 Experience Reports and Adjustment of Prima Facie Rates

1. A. Each insurer doing insurance business in this state shall annually file with the commissioner and the National Association of Insurance Commissioners (NAIC) Support and Services Office a report of consumer credit insurance written on a calendar year basis. The report shall utilize the Credit Insurance Supplement—Annual Statement Blank as approved by the NAIC, and shall contain data separately for each state, rather than an allocation of the company’s countrywide experience. The filing shall be made in accordance with and no later than the due date in the Instructions to the Annual Statement.

2. B. The commissioner will, on a triennial basis, review the loss ratio standards set forth in § 1.4 of this Part and the prima facie rates set forth in §§ 1.6 and 1.7 of this Part and determine therefrom the rate of expected claims on a statewide basis, compare such rate of expected claims with the rate of actual claims for the preceding three (3) years determined from the incurred claims and earned premiums at prima facie rates reported in the Annual Statement Supplement or other available source, and publish the adjusted actual statewide prima facie rates to be used by insurers during the next triennium. The rates will reflect the difference between:

   1. 1. actual claims based on experience; and
   2. 2. expected claims based on the loss ratio standards set forth in § 1.4 of this Part applied to the prima facie rates set forth in §§ 1.6 and 1.7 of this Part.
3. C. The commissioner will, on a triennial basis, review the discount rates for interest included in the formulae in § 1.7(A)(2) of this Part, and adjust those discount rates to equal the average of the rates being paid at that time on three-year United States Treasury Notes as reported in the Wall Street Journal on the last day of sale in the most recent three (3) calendar years.

1.11 Use of Rates -- Direct Business Only

1. A. Use of Prima Facie Rates. An insurer that files rates or has rates on file that are equivalent to the prima facie rates shown in §§ 1.6 and 1.7 of this Part, to the extent adjusted pursuant to § 1.10 of this Part, may use those rates without further proof of their reasonableness.
2. B. Use of Rates Higher Than Prima Facie Rates. An insurer may file for approval of and use rates that are higher than the prima facie rates shown in §§ 1.6 and 1.7 of this Part, to the extent adjusted pursuant to § 1.10 of this Part, as long as the filed rates are consistent with the provisions of § 1.4 of this Part.

3. C. If rates higher than the prima facie rates shown in §§ 1.6 and 1.7 of this Part, to the extent adjusted pursuant to § 1.10 of this Part, are filed for approval, the filing shall specify the account or accounts to which the rates apply. The rates may be:

   1. 1. Applied uniformly to all accounts of the insurer; or
   2. 2. Applied on an equitable basis approved by the commissioner to only one or more accounts of the insurer for which the experience has been less favorable than expected; or
   3. 3. Applied according to a case-rating procedure on file with the commissioner.

4. D. Approval Period of Deviated Rates

   1. 1. A deviated rate will be in effect for a period of time not longer than the experience period used to establish the rate (i.e. one year, two years or three years). An insurer may file for a new rate before the end of a rate period, but not more often than once during any twelve-month period.
   2. 2. Notwithstanding the provision of § 1.11(A) of this Part, if an account changes insurers, the rate approved to be used for the account by the prior insurer is the maximum rate that may be used by the succeeding insurer for the remainder of the rate approval period approved for the prior insurer or until a new rate is approved for use on the account, if sooner.
5. E. Use of Rates Lower Than Filed Rates. An insurer may at any time use a rate for an account that is lower than its filed rate without notice to the commissioner.

6. F. Glossary of Terms and Definitions as Used in § 1.11 of this Part:

   1. 1. “Experience” means “earned premiums” and “incurred losses during the experience period.
   2. 2. “Experience period” means the most recent period of time for which earned premiums and incurred losses are reported, but not for a period longer than three (3) full years.
   3. 3. “Incurred losses” means total claims paid during the experience period, adjusted for the change in claim reserve.

1.12 Supervision of Consumer Credit Insurance Operations

1. A. Each insurer transacting credit insurance in this state shall be responsible for conducting a thorough periodic review of creditors with respect to their credit insurance business with such creditors to assure compliance with the insurance laws of this state and the Part promulgated by the Commissioner.
2. B. Written records of such reviews shall be maintained by the insurer for review by the Insurance Commissioner in accordance with Part 4 of this Subchapter.

1.13 Prohibited Transactions

1. A. The following practices, when engaged in by insurers in connection with the sale or placement of credit insurance, or as an inducement thereto, shall constitute unfair methods of competition and shall be subject to the Unfair Trade Practices Act of this State.

   1. 1. The offer or grant by an insurer to a creditor of any special advantage or any service not set out in either the group insurance contract or in the agency contract, other than the payment of agent’s commissions;
   2. 2. Agreement by an insurer to deposit with a bank or financial institution money or securities of the insurer with the design or intent that the same shall affect or take the place of a deposit of money or securities which otherwise would be required of the creditor by the bank or financial institution as a compensating balance or offsetting deposit for a loan or other advancement; and
   3. 3. Deposit by an insurer of money or securities without interest or at a lesser rate of interest than is currently being paid by the creditor, bank or financial institution to other depositors of like amounts for similar durations. This subsection shall not be construed to prohibit the maintenance by an insurer of such demand deposits or premium deposit accounts as are reasonably necessary for use in the ordinary course of the insurer’s business.

1.14 Readability

1. A. The commissioner shall not approve any form unless the policy or certificate is written in non-technical, readily understandable language, using words of common everyday usage:

   1. 1. Each insurer is required to test the readability of its policies or certificates by use of the Flesch Readability Formula, as set forth in Rudolf Flesch, The Art of Readable Writing, (1949, as revised 1974);
   2. 2. A total readability score of forty (40) or more on the Flesch scale is required;
   3. 3. All policies or certificates within the scope of this section shall be filed with the commissioner, accompanied by a certification setting forth the Flesch score and certifying the compliance with the guidelines set forth in this Section.

1.15 Severability

1. If any provision or clause of this Part or the application thereof to any person or situation is held invalid, such invalidity shall not affect any other provision or application of the Part which can be given effect without the invalid provision or application, and to this end the provisions of this Part are declared severable.

1.16 Effective Date

1. A. This regulation shall take effect November 1, 2010 as to premium rates.
2. B. Approval of all forms not in compliance with this Regulation is hereby withdrawn as of November 1, 2010. No such form may be issued after said date unless it has been submitted to and approved by the Commissioner subsequent to June 1, 2010 or unless a rider approved subsequent to such date has been attached bringing such form into compliance with this Regulation.
3. C. Any deviations thought to be appropriate by an insurer as a result of promulgation of this regulation shall be filed in accordance with the provisions of § 1.11 of this Part no later than July 1, 2010.
4. D. Certificates, notices of proposed insurance and premium rates in connection with existing group policies shall conform to the requirements of this regulation not later than the anniversary date of the group policy next following the effective date of this regulation.
5. E. Any group policy issued to replace an existing group policy of consumer credit insurance or an amendment to an existing group policy of consumer credit insurance shall be ignored for the purposes of determining the anniversary date if the change is made on or after May 1, 2010.