Mich. Admin. Code R. 550.213 - Refund formulas
Rule 13.
(1) Refund
formulas which any insurer desires to use shall be filed with, and approved by,
the commissioner before use. The following methods are deemed appropriate for
the plans described:
(a) The pro rata unearned
gross premium method shall be used for level term credit insurance and for
credit insurance coverages under which premiums are collected from the debtor
on a basis other than the single premium basis.
(b) The "Rule of 78" or "sum of the digits"
unearned premium method shall be used for insurance coverage which reduces in
equal amounts per month and for which the premiums are collected on a single
premium basis.
(c) An appropriate
combination of the pro rata method and the "Rule of 78" method or, at the
option of the insurer, the pro rata method shall be used for credit life
insurance provided as a combination of level and decreasing term coverage and
for credit accident and health insurance wherein the insured is covered for a
constant maximum indemnity for a given period of time, after which the maximum
indemnity begins to decrease in equal amounts per month.
(2) For other modes of premium payment and
for other patterns of insurance, each insurer shall file for approval and
include in the policy appropriate formulas or factors for refund or reference
to such formulas or factors that are on file with the commissioner.
(3) In the event of termination, a charge for
credit insurance shall not be made for the first 15 days of a loan month and a
full month may be charged for 16 days or more of a loan month, unless refunds
are made on a pro rata basis for each day within the loan month.
(4) The requirements 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. If the appropriate refund formula is the "sum of the digits"
formula, commonly known as the "Rule of 78," it shall be sufficient to refer to
such formula by either phrase.
(5)
If the total of all refunds due a debtor or joint debtors is $1.00 or less, no
refund need be made.
(6) Refunds
required to be made shall be paid or credited promptly to the person entitled
thereto.
Notes
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