R590.  Insurance, Administration.
R590-91.  Credit Life Insurance and Credit Accident and Health Insurance.
R590-91-1.  Purpose and Authority.
	The purpose of this rule is to protect the interests of debtors and the public in this State and to ensure a fair and equitable credit insurance market by establishing a system of reasonable rating, policy form, and operating standards for the transaction of credit life insurance and credit accident and health insurance.  This rule is promulgated pursuant to Section 31A-2-201.

R590-91-2.  Definitions.
	As used in this rule:
	A.  "Credit Accident and Health Insurance" means insurance as defined in Section 31A-22-802.
	B.  "Credit Insurance" means both credit life insurance and credit accident and health insurance.
	C.  "Credit Life Insurance" means insurance as defined in Section 31A-22-802.
	D.  "Indebtedness" means indebtedness as defined in Section 31A-22-802.
	E.  "Net Indebtedness" means net indebtedness as defined in Section 31A-22-802.
	F.  "Net Written Premium" means premium as defined in Section 31A-22-802.
	G.  "Open-End Credit" means credit extended by a creditor under an agreement in which the creditor reasonably contemplates repeated transactions; the creditor imposes a finance charge from time to time on an outstanding unpaid balance; and the amount of credit available to the debtor is self-replenishing as the debtor repays amounts previously drawn.

R590-91-3.  Rights and Treatment of Debtors.
	A.  Multiple Plans of Insurance.  If a creditor makes available to the debtor more than one plan of credit life insurance or more than one plan of credit accident and health insurance, the debtor must be informed of the plans applicable to the specific loan transaction.
	B.  Substitution.  If a creditor requires insurance, 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 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.
	C.  Evidence of Coverage.
	(1)  All credit insurance shall be evidenced by an individual policy, or, in the case of group insurance, by a certificate of insurance.
	(a)  The individual policy or certificate of insurance shall be delivered to the debtor in accordance with Section 31A-22-806(3) and 70C-6-104. The insurer shall promptly notify the debtor of any delay in providing the insurance.
	(b) If the named insurer does not accept the risk, the insurer, if any, shall notify the debtor of the failure to provide the insurance.  A substituted insurer, if any, shall deliver the policy or certificate in accordance with Section 31A-22-806(5).
	(c)  Subsequent certificates are not needed on open-end credit arrangements after the initial indebtedness.
	(2)  Each individual policy or certificate of insurance shall provide the information required by Section 31A-22-806.
	(3)  Each policy application must provide the information required by Section 31A-22-806(4)(b) and identify the agent, if any.
	D.  Claims Processing.  All credit insurance claims shall be processed in accordance with Section 31A-26-302.
	E.  Termination of Group Credit Insurance Policy.
	(1)  If a debtor is covered by a group credit insurance policy providing for the payment of single premiums to the insurer, then provisions 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 the policy shall be continued for the entire period for which the single premium has been paid.
	(2)  If a debtor is covered by a group credit insurance policy providing for the payment of premiums to the insurer on a monthly outstanding balance basis, then the policy shall provide that, in the event of termination of such policy, for whatever reason, termination notice shall be given to the insured debtor at least 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 notice required in this paragraph shall be given by the insurer or, at the option of the insurer, by the creditor.
	F.  Interest on Premium.  If the creditor adds identifiable insurance charges or premiums for credit insurance to the indebtedness, and any direct or indirect finance, carrying, credit, or service charge is made to the debtor on the insurance charges or premiums, the creditor must remit and the insurer shall collect the premium within 60 days after it is added to the indebtedness.
	G.  Renewal or Refinancing of Indebtedness.  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 termination prior to scheduled maturity, a refund shall be paid or credited promptly to the debtor as provided in Section 8.
	H.  Maximum Aggregate Provisions.  A provision in an individual policy or certificate that sets a maximum limit on total payments must apply only to that individual policy or certificate.
	I.  Voluntary Prepayment of Indebtedness.  If a debtor prepays his indebtedness other than as a result of his death or through a lump sum accident and health payment:
	(1)  Any credit life insurance covering indebtedness shall be terminated and an appropriate refund of the credit life insurance premium shall be paid to the debtor in accordance with Section 8; and
	(2)  Any credit accident and health insurance covering indebtedness shall be terminated and an appropriate refund of the credit accident and health insurance premium shall be paid to the debtor in accordance with Section 8.  If a claim under this 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 disability benefits are payable.  A refund shall be computed as if prepayment occurred at the end of the disability period.
	J.  Involuntary Prepayment of Indebtedness.  If an indebtedness is prepaid by the proceeds of a credit life insurance policy covering the debtor or by a lump sum payment of a disability claim under a credit insurance policy covering the debtor, then it shall be the responsibility of the insurer to see that the following are paid to the insured debtor if living or to the beneficiary, other than the creditor, named by the debtor or to the debtor's estate:
	(1)  In the case of prepayment by the proceeds of a credit life insurance policy, or by the proceeds of a lump sum total and permanent disability benefit under credit life coverage, an appropriate refund of the credit accident and health insurance premium in accordance with Section 8;
	(2)  In the case of prepayment by a lump sum disability claim, an appropriate refund of the credit life insurance premium in accordance with Section 8;
	(3)  In either case, the amount of the benefits in excess of the amount required to repay the indebtedness after crediting any unearned interest or finance charges.
	K.  Amounts to be Insured:
	(1)  Credit life insurance benefits shall be consistent with the premium charge.
	The initial amount of credit life insurance may not exceed the total amount payable under the contract of indebtedness.  Credit life insurance may provide benefits in amounts which do not exceed, but may be less than, the scheduled amount of indebtedness, including unearned interest or finance charges, or the actual amount of unpaid indebtedness, whichever is greater.  Credit life insurance on preauthorized lines of credit not exceeding the commitment period may be written for the preauthorized amount on a nondecreasing or level term plan.  The death benefit amount shall be that amount for which premiums are paid.  Whenever the amount of insurance exceeds the unpaid indebtedness, that excess is payable to a beneficiary, other than the creditor, named by the debtor or to the debtor's estate.
	(2)  The total amount of indemnity payable by credit accident and health insurance in the event of disability, as defined in the policy, may not exceed, but may be less than the aggregate of the periodic scheduled unpaid installments of the indebtedness.  The amount of each periodic indemnity payment may not exceed the total amount payable under the contract of indebtedness divided by the number of periodic installments.
	L.  Dividends on participating individual policies of credit insurance shall be payable to the individual insureds.

R590-91-4.  Policy Forms, Filing and Reserves.
	A.  Permissible Forms.  Credit life insurance and credit accident and health insurance shall be issued only in the forms defined in Section 31A-22-803.
	B.  Filing Requirements.
	(1)  All policy forms, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders to be delivered or issued for delivery in this State shall be filed with the commissioner as required by Sections 31A-21-201, 31A-22-807, and 31A-22-808.
	(2)  An actuarial memorandum, signed and dated, must be included in each rate and form filing.  The memorandum must identify the following:
	(a)  types of coverage: gross, net, decreasing, level, single life, joint life, full term or truncated;
	(b)  types of loans to be insured: open-end, closed end;
	(c)  durations of the loans and durations of the coverage.  Refer to Section 31A-22-801(2)(a);
	(d)  methods of premium charge: single premium or monthly outstanding balance;
	(e)  schedules of premium rates and formulas for each type of coverage;
	(f)  methods of refund calculation and formulas for each type of coverage; and
	(g)  reserve bases.
	(3)  All filings are subject to the general filing requirements of the Utah Submission of Credit Life and Credit Accident and Health Insurance Form and Rate Filings, Rule R590-228.  The commissioner may prohibit a form if the benefits provided are not reasonable in relation to the premium charged.
	C.  The minimum reserve basis for credit life insurance issued to be effective prior to January 1, 2008 shall be the 1980 Commissioner's Standard Ordinary Table (1980 CSO) with interest at 5-1/2% per annum.
	D.  The minimum reserve basis for active lives on credit accident and health insurance issued to be effective prior to January 1, 2008 shall be the amount of the premium refund available to the insured.
	E.  The minimum reserve basis for disabled lives on credit accident and health insurance issued to be effective prior to January 1, 2008 shall be the 1987 Commissioner's Group Disability Table (1987 CGDT) with interest at 5-1/2% per annum.

R590-91-5.  Reasonableness of Benefits in Relation to Premium.
	A.  General Standard.  Under Section 31A-22-807, benefits provided by credit insurance policies must be reasonable in relation to the premium charged.  This requirement is deemed to be satisfied if the premium rate charged develops or may be reasonably expected to develop a loss ratio of not less than 50% for credit life insurance and not less than 55% for credit accident and health insurance.
	B.  Nonstandard Coverage.  If any insurer files for approval of any form providing coverage different from that described in Sections 6 and 7, the insurer shall demonstrate to the satisfaction of the commissioner that the premium rates to be charged for the coverage will develop or may be reasonably expected to develop a loss ratio not less than that contemplated for standard coverage at the premium rates described in these sections.
	C.  Coverage Without Separate Charge.  If no specific charge is made to the debtor for credit insurance, the standards of Subsection A above and the deviation standards of Section 11 are not required to be used. For purposes of this subsection, it will be considered that the debtor is charged a specific amount for insurance if an identifiable charge for insurance is disclosed in the credit or other instrument furnished the debtor which sets out the financial elements of the credit transactions, or if there is a differential in finance, interest, service or other similar charge made to debtors who are in like circumstances, except for their insured or noninsured status.  Any such charge which exceeds the premium rate standards set out in Sections 6 and 7 as adjusted pursuant to Section 9 must be filed with the commissioner.

R590-91-6.  Credit Life Insurance Prima Facie Rates.
	A.  Premium Rate.  Credit life insurance prima facie premium rates for the insured portion of an indebtedness payable in equal monthly installments, where the insured portion of the indebtedness decreases uniformly by the amount of the monthly installment paid, shall be as set forth in paragraphs (1) and (2).  Paragraphs (3), (4), and (5) refer to prima facie premium rates for other types of benefits either alone or in combination with the type of benefits applicable to (1) and (2).
	(1)  Outstanding balance:  $0.65 per month per $1,000 of outstanding insured indebtedness if premiums are payable on a monthly outstanding balance basis;
	(2)  Single Premium Decreasing Term:  If premiums are payable on a single premium basis, the following formula shall be used to develop single premium rates from the outstanding balance rate:
	Sp = (N + 1)/20 (Op) where Sp is the single term premium per $100 of initial insured indebtedness, N is the credit term in months, and Op is the monthly outstanding balance rate per $1,000 of outstanding insured indebtedness.
	(3)  Single Premium - Level Term:  If premiums are payable on a single premium basis when the benefit provided is level term, the following formula shall be used to develop single premium rates from the outstanding balance rate:
	Sp = N/10 (Op) where Sp is the single term premium per $100 of initial insured indebtedness, N is the credit term in months, and Op is the monthly outstanding balance rate per $1,000 of outstanding insured indebtedness.
	(4)  Joint coverage rate on basis (1), (2), or (3) of Subsection A may be no greater than one hundred and seventy percent (170%) of the specific rate for that type of coverage.
	(5)  A combination of the appropriate rate for level term and the appropriate rate for decreasing term, with equal decrements, shall be used, if coverage provided is a combination of level term and decreasing term, with equal decrements.
	(6)  If the benefits provided are other than those described in Subsection A above, rates for these benefits shall be actuarially consistent with the rates provided in Paragraphs (1), (2), and (3).
	B.  The premium rates in Subsection A shall apply to all policies providing credit life insurance, to be issued either with or without evidence of insurability, to be offered to all eligible debtors, and containing:
	(1)  No exclusions other than suicide within one year of the incurred indebtedness;
	(2)  Either no age restrictions or age restrictions making ineligible for coverage debtors 65 or over at the time the indebtedness is incurred or debtors having attained age 66 or over on the maturity date of the indebtedness; and
	(3)  Insurance written in connection with an open-end credit plan may exclude from the classes eligible for insurance classes of debtors determined by age, and provide for the cessation of insurance or reduction in the amount of insurance upon attainment of not less than age 65.
	(4)  On insurance written in connection with open-end credit plans where the amount of insurance is based on or limited to the outstanding unpaid balance, no provision excluding or denying a claim for death resulting from a preexisting condition except for those conditions for which the insured debtor received medical diagnosis or treatment within six months preceding the effective date of coverage and which caused or substantially contributed to the death of the insured debtor within six months following the effective date of coverage.  The effective date of coverage for each part of the insurance attributable to a subsequent advance or increase to the outstanding balance is the date on which the advance or increase is posted to the plan account.  Such preexisting condition exclusion shall apply to the initial indebtedness and all subsequent advances on an individual basis, only where evidence of individual insurability has not been required.

R590-91-7.  Credit Accident and Health Insurance Prima Facie Rates.
	A.  Premium Rate.  Credit accident and health insurance prima facie premium rates for the insured portion of an indebtedness repayable in equal monthly installments, where the insured portion of the indebtedness decreases uniformly by the amount of the monthly installment paid, shall be as set forth in paragraphs (1) and (2).  Paragraphs (3), (4), (5), and (7) refer to prima facie premium rates for other types of benefits either alone or in combination with the type of benefits applicable to (1) and (2).
	(1)  If premiums are payable on a single-premium basis for the duration of the coverage, the premiums shall be as indicated on the attached chart which is available from the Insurance Department.
	(2)  If premiums are paid on the basis of a premium rate per month per thousand of outstanding insured indebtedness, these premiums shall be computed according to the following formula, or according to a formula approved by the commissioner which produces rates actuarially equivalent to the single premium rates in Table I:
	OPn = 20/n+1 (SPn)
	where SPn = Single Premium Rate per $100 of initial insured indebtedness repayable in n equal monthly installments;
	OPn = Monthly Outstanding Balance Premium Rate per $1,000;
	n = Original payment period, in months.
	(3)  The actuarial equivalent of paragraphs (1) and (2) shall be used if the coverage provided is a constant maximum indemnity for a given period of time.
	(4)  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 equal amounts per month shall be used 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 equal amounts per month.
	(5)  If the benefits provided are other than those described above, rates for the benefits shall be actuarially consistent with rates provided in Paragraphs (1), (2), (3), and (4).
	(6)  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 applicable to all loans made under an open-end credit plan.
	(7)(a)  For an open-end credit plan, the monthly rate per $1,000 of outstanding principal balance shall be the rate calculated using the formula in paragraph (2) where n is the number of monthly indemnity payments required to completely extinguish the debt.  The rate shall be further reduced to appropriately account for critical period if applicable.
	(b)  The critical period factors shall be filed with the department and shall not exceed the factors based on the 1968 Credit A and H Two Composite Tables published by the NAIC (Proceedings - 1968 Vol. II).
	B.  The premium rates in Subsection A shall apply to all policies providing credit accident and health insurance, to be issued with or without evidence of insurability, to be offered to all eligible debtors, and containing:
	(1)  No provision excluding or denying a claim for disability resulting from preexisting conditions except for those conditions for which the insured debtor received medical advice, diagnosis, or treatment within six months preceding the effective date of the debtor's coverage and which caused loss within the six months following the effective date of coverage.
	(2)  No other provision which excludes or restricts liability in the event of disability caused in a specified manner except that it may contain provisions excluding or restricting coverage in the event of normal pregnancy and intentionally self-inflicted injuries.
	(3)  No actively at work test may require that the debtor be employed more than 30 hours per week.
	(4)  No age restrictions or only age restrictions making ineligible for coverage debtors 65 or over at the time the indebtedness is incurred or debtors who will have attained age 66 or over on the maturity date of the indebtedness.
	(5)  A daily benefit equal in amount to one-thirtieth of the monthly benefit payable under the policy for the indebtedness.
	(6)  A definition of disability, which is no more restrictive than one requiring that during the first 12 months of disability the insured shall be unable to perform the principal duties of his occupation at the time the disability occurred, and thereafter unable to perform the principal duties of any occupation for which the insured is reasonably fitted by education, training, or experience.  This paragraph may not apply to lump sum disability coverage.
	(7)  Insurance written in connection with an open-end credit plan may exclude from the classes eligible for insurance classes of debtors determined by age, and provide for the cessation of insurance or reduction in the amount of insurance upon attainment of not less than age 65.

R590-91-8.  Refund Formulas.
	A.  Refund formulas which any insurer desires to use must be filed with and approved by the commissioner prior to use.  Refund formulas used must develop refunds which are at least as favorable to the debtor as the following methods which are deemed the minimum requirements for the plans described.
	(1)  Pro Rata Method.  The pro rata unearned gross premium method shall be deemed to produce the minimum refund amount to 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.
	Refund = t/n (original gross single premium) where t = the number of remaining months;
	n = the original loan term in months.
	(2)  Rule of 78 method.  The Rule of 78 or sum of the digits unearned premium method shall be deemed to produce the minimum refund amount to be used for insurance coverage which reduces in equal amounts per month and for which the premiums are collected on a single premium basis.
	Refund = (t(t+1)/n(n+1)) (original gross single premium)
	where t = the number of remaining months; n = the original loan term in months.
	(3)  Combination Methods.  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.
	B.  For net indebtedness insurance and for other types of insurance and other modes of premium payment, each insurer shall file for approval and include in the policy appropriate formulas and/or factors for refunds, or reference to such formulas and factors that are on file with the commissioner. For net indebtedness, either the actuarial method also known as the U.S. Rule or pure premium method, or an arithmetic average of refunds due under Pro-Rata and Rule of 78 Methods will be acceptable.
	C.  In the event of termination, no charge for credit insurance may 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.
	D.  If the total of all refunds due a debtor (or joint debtors) is less than $5.00, no refund need be made.

R590-91-9.  Experience Reports and Adjustment of Prima Facie Rates.
	A.  Each insurer doing Credit Insurance business in this state shall annually file with the commissioner and the NAIC Support and Services Office a report of credit life insurance and credit accident and health business written on a calendar year basis.  Each insurer shall utilize the Credit Insurance Experience Exhibit as approved by the National Association of Insurance Commissioners.  The report shall contain data separately for this state.  The filing shall be made in accordance with and no later than the due date in the Instructions to the Annual Statement.
	B.  Whenever deemed necessary, the commissioner will publish by order, after a hearing, Prima Facie Rates before September 1.  The new prima facie rates shall be effective January 1 of the following year.

R590-91-10.  Rating Standards - Filing Requirements.
	A.  Requirement to File the Four Year Loss Ratio Test.
	(1)  Insurers with more than $250,000 of credit insurance premium earned in Utah in the most recent four year period shall annually file an experience report to determine whether benefits are reasonable in relation to premiums based on the loss ratio test in Section 31A-22-807(4).  The loss ratio shall be calculated at the rates actually used in each year.  The insurer may also file an adjusted loss ratio report that adjusts premium to the most recent premium rates.  The Four Year Loss Ratio Report is due one month after the due date of the experience exhibit required by Section 9.
	(2)  Insurers whose loss ratios are less than the minimum loss ratio by ten percentage points or more shall file a rating and benefits plan that meets the requirements of Subsection B.  Insurers who would be required to decrease rates by more than 10% may phase in decreases in annual 10% increments.
	B.  Filing Standards.
	(1)  Insurers filing for a rate deviation, including those required to file under Subsection 1 above, shall submit an actuarial memorandum that shows that the premium rate does not exceed the sum of:
	(a)  50% of the prima facie rate or its actuarial equivalent; and
	(b)  the expected losses.
	(2)  The calculation of expected losses shall take into account the following:
	(a)  the actual loss experience to the extent credible;
	(b)  the degree of underwriting used in marketing the product; and
	(c)  the relative mortality and morbidity of Utah experience when using national experience or actuarial tables.

R590-91-11.  Rating Procedures - Direct Business Only.
	A.  Use of Rates Higher Than Prima Facie Rates.
	An insurer may file for approval and use rates that are higher than prima facie rates if it can be expected that the use of those higher rates will produce a minimum loss ratio that is required by Section 31A-22-807.
	B.  Use of Rates Lower Than Filed Rates.
	An insurer may use a rate that is lower than its filed rate without notice to the commissioner.

R590-91-12.  Disclosure to Debtor.
	A.  When a premium or identifiable charge is payable by a debtor for credit insurance coverage, certain information must be disclosed to the debtor at the time the debtor applies for the insurance.  The disclosures shall be made to the principal debtor and copies given to the debtor and retained in accordance with State and Federal law. These disclosures shall be made prominently and in close proximity to the space for the signature indicating the election to obtain the coverage.  These disclosures may be made in conjunction with the Federal Truth-in-Lending disclosure, a Notice of Proposed Insurance, the application for insurance, or in the individual insurance policy or certificate.  The following items must be included in the disclosure:
	(1) the optional nature of the coverage;
	(2) the premium or identifiable charge separately listed by type of coverage;
	(3) eligibility requirements including health restrictions and at work requirements; and
	(4) any age restrictions in regard to eligibility for insurance coverage at the time the indebtedness is incurred or in regard to cessation of coverage due to attainment of age.
	B.  If at any time during the term of the loan, the insurance is insufficient to pay off the scheduled outstanding balance of the loan, this fact must be clearly and prominently disclosed to the prospective insured on the policy or certificate.
	C.  All credit insurance policies and certificates shall clearly describe the amount of the benefit and the term of coverage.  Whenever the amount of credit life insurance exceeds the unpaid indebtedness, such fact shall be clearly disclosed in the policy or group certificate; and such excess shall be payable to a beneficiary, other than the creditor, named by the debtor or to the debtor's estate.
	D.  If any policy or certificate has a preexisting condition exclusion, such exclusion shall be clearly and prominently disclosed.

R590-91-13.  Unfair Marketing Practices.
	The commissioner finds that violations of this rule when engaged in by licensees of the department in connection with the sale or placement of credit insurance, or as an inducement, are misleading, deceptive, or unfairly induce the purchase of credit insurance and constitute unfair methods of competition and shall be in violation of Unfair marketing practices under Section 31A-23a-402.

R590-91-14.  Severability.
	If any provision of this rule or its application to any person or circumstance is for any reason held to be invalid, the remainder of the rule and the application of the provision to other persons or circumstances may not be affected.

R590-91-15.  Enforcement Date.
	The commissioner will begin enforcing the revised provisions of this rule on the effective date.

KEY:  insurance law
Date of Enactment or Last Substantive Amendment:  May 29, 2008
Notice of Continuation:  November 17, 2016
Authorizing, and Implemented or Interpreted Law:  31A-2-201