Current through Register Vol. 54, No. 44, November 2, 2024
(a)
Refund
provision. If insurance terminates prior to the scheduled maturity
date of the indebtedness, a refund of any unearned premium shall be made as
follows:
(1) If the indebtedness is
discharged due to prepayment, renewal or refinancing prior to the scheduled
maturity date, credit insurance shall be terminated and a refund of the
unearned premium shall be made.
(2)
A refund of any unearned credit A and H insurance premium, credit involuntary
unemployment insurance premium or credit voluntary unemployment insurance
premium shall be made if the indebtedness is prepaid by the proceeds of credit
life insurance or credit life insurance with TPD benefit. The refund of the
unearned credit insurance premium shall be in addition to any credit life
insurance or TPD benefit proceeds.
(3) A refund of the total premium charged for
credit insurance coverage shall be made if coverage is voided ab initio for any
reason other than termination of the indebtedness.
(4) If joint coverage on one of the debtors
is voided ab initio, a refund of the difference between the premium actually
charged for the joint coverage, and the premium that would have been charged if
only single coverage had been provided shall be made.
(b)
Refund time frame.
Refunds of premiums paid by or charged to the debtor shall be remitted to the
debtor or credited to the debtor's outstanding indebtedness within 10 working
days after the agent or group policyholder receives the refund from the
insurer.
(c)
Refund
notice. A refund payment shall be accompanied by an explanation that
the payment is a refund of premium. If the refund amount has been deducted from
the debtor's outstanding indebtedness, the debtor shall be notified in writing
that the refund was applied toward the outstanding indebtedness.
(d)
Refund formulas.
Insurers shall file for approval all refund formulas intended for use. A
reference to the Rule of 78 shall be acceptable, in lieu of filing the actual
formula.
(1) The refund of premiums on a
single premium basis shall be calculated by multiplying the original single
premium charged, by the appropriate refund factor.
(i) In determining the refund, if fewer than
15 days of insurance coverage has been provided during the loan month, no
charge shall be made for that month. If 15 or more days of coverage have been
provided during the loan month, a full month may be charged.
(ii) For gross decreasing credit life
insurance with or without TPD benefits, the refund shall be computed based on
the Rule of 78.
(iii) For level
term credit life insurance with or without TPD benefits, the refund shall be
computed based on a pro rata basis.
(iv) For full benefit period credit A and H
insurance and full benefit period credit involuntary unemployment insurance,
the refund shall be computed based on the Rule of 78.
(v) For any coverage not listed in
subparagraphs (ii)-(iv), the refund factor shall equal the sum of remaining
insured balances divided by the sum of the original insured balances.
(2) Except as provided in §
73.139(j)
(relating to credit insurance on open end loans), the refund of any unearned
premiums calculated and remitted to the insured on a monthly outstanding
balance basis shall be equal to the monthly premium charged if fewer than 15
days of insurance coverage has been provided during that loan month. If
coverage has been provided for 15 or more days of the loan month, no refund of
premium is required.
(e)
Minimum refund. Insurers need not issue refunds for less than
$10.
(f)
Termination and
refund disclosures. The group policy and group certificate or
individual policy issued to provide insurance coverage shall disclose the
conditions under which the coverage will terminate and under which a premium
refund is required. This refund disclosure shall also describe the method used
to calculate the premium refund.
This section cited in 31 Pa. Code §
73.139 (relating to credit
insurance on open end loans); and 31 Pa. Code §
73.140 (relating to credit
insurance on closed end variable interest
loans).
