Ala. Admin. Code r. 482-1-117-.10 - Premiums

(1) All schedules of rates, premiums or identifiable charges on all consumer credit insurance issued and sold in this State shall be filed for informational purposes with the Commissioner by the concerned insurer. An insurer may revise its schedules of rates or premiums from time to time, and shall file the revised schedules with the Commissioner. No insurer shall issue any consumer credit insurance policy for which the rate or premium exceeds that determined by the schedules of the insurer as then on file with the Commissioner.

(2) The Superintendent promulgates maximum rates for credit life insurance for consumer loans and consumer credit sales. The rates for credit life insurance for lease transactions shall be the rates filed with the Commissioner pursuant to Rule 482-1-117-.09 unless disapproved by the Commissioner. The maximum rates shall apply to a plan of credit life insurance offered to all eligible debtors, with or without evidence of individual insurability, which provides the following:

(a) No exclusions or limitations other than the following:

1. An exclusion for death due to suicide within one year after the effective date of coverage.

2. In a group policy, an exclusion for death due to a condition for which the insured debtor received consultation, diagnosis or treatment from a doctor within six months before the effective date of coverage and from which death occurs within six months after the effective date of coverage, but only if and to the extent that the amount of coverage to which it would otherwise apply in the absence of this limitation exceeds $1,000.00; provided, however, that no such exclusion shall apply to any insurance that becomes effective within six (6) months following the debtor's having furnished evidence of individual insurability to the insurer.

3. For the purposes of the exclusions, the effective date of coverage for each part of the insurance attributable to a different advance under an open-end credit plan is the date on which the advance occurs.

(b) An age restriction or restrictions not less favorable to debtors than any of the following:

1. A restriction making debtors who have attained 65 years of age at the time the indebtedness is incurred ineligible for coverage.

2. A restriction making debtors who will have attained 66 years of age on the scheduled maturity date of the indebtedness ineligible for coverage.

3. A provision for coverage to terminate when the debtor attains a specified age not less than 66 years.

(c)

1. In an individual policy, a provision that the policy shall not be contested, except for nonpayment of premiums, after the policy has been in force during the lifetime of the insured for a period of one year from its date of issue; provided, however, that if the balance owing on the account to which the insurance relates, exclusive of interest and other charges, is less than $1,000.00, the time period during which such a contest may be commenced is ninety (90) days instead of one year.

3. In a group policy, a provision that the validity of the policy shall not be contested, except for nonpayment of premiums, after it has been in force for two years from its date of issue and that no statement made by any person insured under the policy relating to insurability shall be used in contesting the validity of the insurance with respect to which the statement was made after the insurance has been in force prior to the contest for a period of one year during the person's lifetime; provided, however, that if the balance owing on the account to which the insurance relates, exclusive of interest and other charges, is $1,000 or less, the time period during which such a contest may be commenced is ninety (90) days instead of one year. Any such statement must be contained in a written instrument signed by person insured.

(3) The Superintendent promulgates maximum rates for credit disability insurance for consumer loans and consumer credit sales and may, upon request of an insurer, approve rates that are higher than the maximum rates as indicated in Paragraph (2) of Rule 482-1-117-.18. The rates for credit disability insurance for lease transactions shall be the rates filed with the Commissioner pursuant to Rule 482-1-117-.09 unless disapproved by the Commissioner. The maximum rates shall apply to plans of credit disability benefits offered to all eligible debtors, with or without evidence of individual insurability, which provide the following:

(a) A waiting period of either 7 days, 14 days or 30 days following the onset of disability, with benefits becoming payable on either a retroactive or non-retroactive basis.

(b) A definition of disability providing that, during the first twelve months of disability, the debtor is unable to perform the important or significant duties of his occupation at the time disability commences and that, thereafter, the debtor is unable to perform the duties of any gainful occupation for which the debtor is reasonably suited by education, training or experience.

(c) An exclusion not less favorable to debtors than one for disability that commences no later than six months following the effective date of coverage and is the result of an illness, disease or physical condition for which the debtor received consultation, diagnosis or treatment from a doctor within six months immediately preceding the effective date of coverage. The effective date of coverage for each part of the insurance attributable to a different advance under an open-end credit plan is the date on which the advance occurs.

(d) No other provision which excludes or restricts liability in the event of disability caused in a specified manner, except for provisions excluding or restricting benefits for disabilities due to war or act of war, normal pregnancy, intentionally self-inflicted injury, or flight in non-scheduled aircraft. Benefits shall not be excluded or restricted for disability due to complications of pregnancy.

(e)

1. In an individual policy, a provision that after one year from the date of issuance of the policy, no misstatements, except fraudulent misstatements, made by the applicant in the application for the policy shall be used to void the policy or to deny a claim for disability (as defined in the policy) commencing after the expiration of such one year period; and that no claim for disability (as defined in the policy) commencing after one year from the date of issuance of the policy shall be reduced or denied on the ground that a disease or physical condition not excluded from coverage by name or specific description effective on the date of loss had existed prior to the effective date of coverage of the policy.

2. In a group policy, a provision that, in the absence of fraud, all statements made by applicants, or the policyholders or by an insured person shall be deemed representations and not warranties and that, after the group certificate or individual policy has been in force during the lifetime of the debtor for one year from the date of issue thereof, no statement made for the purpose of effecting insurance on a person eligible for insurance shall void such insurance or reduce benefits unless contained in a written instrument signed by the policyholder or insured person, a copy of which has been furnished to such policyholder or to such person or to his beneficiary.

3. If the balance owing on the account to which the insurance relates, exclusive of interest and other charges, is less than $1,000.00, the time periods referred to in this subdivision are ninety (90) days instead of one year.

(f) A requirement not less favorable to debtors than one requiring that the debtor be gainfully employed and actively at work in the full performance of all duties of the debtor's employment for at least a minimum of thirty (30) hours per week for the four (4) weeks prior to and on the effective date of coverage. An insurer may place reasonable restrictions on what constitutes employment for purposes of this provision. A creditor and an insurer may rely on the debtor's written certification of the number of hours the debtor is employed per week at the time the insurance is sold and actively at work in the full performance of all duties of the debtor's employment for at least a minimum of thirty (30) hours per week for the four (4) weeks prior to and on the effective date of coverage.

(g) An age restriction or restrictions not less favorable to debtors than any of the following:

1. A restriction making debtors who have attained 65 years of age at the time the indebtedness is incurred ineligible for coverage.

2. A restriction making debtors who will have attained 66 years of age on the scheduled maturity date of the indebtedness ineligible for coverage.

3. A provision for coverage to terminate when the debtor attains 66 years of age.

(4) Insurers may offer benefit plans which differ from those described in Paragraphs (2) and (3). Premium rates for use with benefits that are substantially different in any material respect from those described in Paragraphs (2) and (3) shall be actuarially consistent with the maximum rates promulgated or approved by the Superintendent.

(5) Each insurer doing insurance business in the state shall annually file with the Commissioner and the National Association of Insurance Commissioners (NAIC) a report of consumer credit insurance written in the state. The report shall utilize the Credit Insurance Experience Exhibit approved by the NAIC and shall be made in accordance with and no later than the due date in the Instructions to the Annual Statement. For the purposes of completing this form, maximum rates promulgated by the Superintendent shall be considered prima facie rates for consumer loans and consumer credit sale transactions, and the rates filed pursuant to Rule 482-1-117-.09 shall be considered prima facie rates for leases.

(6) Consumer Credit Insurance on Open-End Credit Plans.

(a) Consumer credit insurance may be provided in connection with open-end credit plans. Subject to any maximum dollar amount of coverage specified in the group certificate or individual policy, uniformly applied, the insurance is provided on the approximate outstanding balance of the indebtedness. If no indebtedness exists, the insurance amount is zero and remains so until an advance occurs under the plan.

(b) The death benefit shall equal the lesser of:

1. The amount of the actual unpaid indebtedness at the time of death.

2. The maximum dollar amount of coverage specified in the group certificate or individual policy.

(c) The monthly disability benefit shall equal the lesser of:

1. The monthly amount specified in or determined according to the provisions of the group certificate or individual policy, but not less than the minimum monthly payment required when disability commences pursuant to the open-end credit plan.

2. The maximum dollar amount of monthly benefit specified in the group certificate or individual policy.

(d) For any compensable period of disability, the amount of monthly disability benefit shall remain constant except that the final benefit payment may be such smaller amount necessary for the aggregate benefit payment to equal the maximum aggregate amount of disability benefit provided according to Subparagraph (e) below.

(e) The maximum aggregate amount of disability benefit payable for one continuous period of compensable disability shall equal the least of the following:

1. The amount of the actual unpaid indebtedness on the date from which disability benefits initially become payable in connection with such disability plus the amount of any charges thereafter accruing on such actual unpaid indebtedness during the continuance of such disability.

2. The amount of the monthly disability benefit times the maximum number of monthly benefits specified in the group certificate or individual policy, if any is so specified.

3. The maximum dollar amount of aggregate benefit specified in the group certificate or individual policy.

4. The amount required to pay the monthly disability benefit from the date from which the monthly benefit initially becomes payable until the date specified in the group certificate or individual policy for benefits to terminate (e.g., when disability no longer exists).

5. The amount required to pay the monthly disability benefit from the date from which the monthly benefit becomes payable until the date on which coverage terminates as specified in the group certificate or individual policy.

(f) A lump-sum disability benefit shall not exceed the amount of outstanding indebtedness at the time the disability commences, less any periodic or monthly disability benefits paid under the policy for the same instance of disability.

(g) Any form or forms (e.g., group certificate, individual policy, notice of proposed insurance) required to be furnished to a debtor as evidence of coverage need be furnished only once for each open-end credit transaction and may remain in force until terminated according to its provisions.

(7) The premium charged to a debtor for any consumer credit insurance shall not exceed the premiums charged by the insurer (inclusive of commissions), as computed at the time the charge to the debtor is determined.

(8) The insurance premium for credit life or credit disability insurance may be collected from the insured debtor or included in the amount financed of any credit transaction at the time the credit transaction is effected or charged to the debtor's account on a monthly or periodic basis.

(9) The premium for credit life or credit disability insurance when issued through any creditor shall not be deemed interest or finance charges, or consideration, or an amount in excess of permitted charges in connection with the credit transaction, and any gain or advantage to the creditor arising out of the premium, including any commission received or retained therefrom or any dividend from the issuance of such insurance, is not required to be disclosed as an item separate from the amount of the premium or charge and shall not be deemed a violation of any other law, general or special, civil or criminal of the State.

(10) Insurers may underwrite applications for insurance on credit transactions with a balance of $1,000.00 or more, exclusive of interest or other carrying charges, but this underwriting must be completed within a ninety day period from the date of the application. Underwriting by the insurer on insurance written for credit transactions with a balance of under $1,000.00, exclusive of interest and other charges, is prohibited. This prohibition does not restrict underwriting by the writing agent at the time the application is being prepared.

Author: Reyn Norman, Associate Counsel

Notes

Ala. Admin. Code r. 482-1-117-.10

New Rule: October 14, 1999; effective November 1, 1999. Filed for codification in the Alabama Administrative Code by the Department of Insurance on January 17, 2003, pursuant to the Code of Ala. 1975, § 27-7-43.

Statutory Authority: Code of Ala. 1975, § 27-2-17.