Current through Register Vol. 54, No. 44, November 2, 2024
(a)
General requirements.
Credit insurance may be provided in connection with open end loans. This
insurance is provided on the outstanding balance of the indebtedness, subject
to any maximum dollar amount of coverage or limited benefit period specified in
the group certificate or individual policy. If no indebtedness exists, the
insurance amount shall be zero and shall remain so until an advance or charge
occurs under the plan. This section supersedes other provisions of this chapter
to the extent that the provisions would otherwise relate to credit insurance on
open end loans.
(b)
Identification. A credit insurance program designed for use
with open end loans shall be identified as such when filed with the Department
in accordance with §
73.136 (relating to filing of
forms and rates).
(c)
Symbols. The symbols used in this section shall have the
following meaning:
(1) i = actual monthly
interest rate (APR/12).
(2) i' = (i
+ .0025).
(3) n =
log(z/(z-i))/log(1+i) rounded up to an integer.
(4) NFC = gross/net conversion rate for an
open end loan with the monthly benefit equal to a minimum monthly payment that
is based on a percentage of the current month's balance.
(5) z = minimum monthly payment expressed as
a decimal fraction.
(d)
Life benefit. The credit life insurance benefit shall be equal
to the lesser of:
(1) The amount of the
outstanding balance of the indebtedness at the time of death.
(2) The maximum dollar amount of coverage
specified in the group certificate or individual policy.
(e)
TPD benefit. The TPD
benefit shall be equal to the lesser of:
(1)
The amount of the outstanding balance of the indebtedness at the commencement
of the TPD plus the amount any monthly interest accruing on the net unpaid
indebtedness from the date TPD commences until the date the TPD benefit is
paid.
(2) The maximum dollar amount
of coverage specified in the group certificate or individual policy.
(f)
A and H and
involuntary unemployment benefit. The minimum monthly insurance
benefit for A and H insurance and involuntary unemployment insurance shall be
equal to the lesser of:
(1) The minimum loan
payment for the month in which disability or unemployment commences, excluding
indebtedness incurred after the disability or unemployment commences and
repayments made during the month in which disability or unemployment
commences.
(2) The maximum monthly
dollar amount of coverage specified in the group certificate or individual
policy.
(g)
A and
H and involuntary unemployment premium rates. If the A and H and
involuntary unemployment premium rates are based on the net outstanding
balance, the premium rates shall be determined as follows:
(1) If the benefit amount is based on a
percentage of the current month's balance and the benefit is paid until the
indebtedness existing at the time of disability or involuntary unemployment,
including accrued interest, is repaid, the following adjustment shall be made:
(i) The monthly outstanding balance prima
facie rates published in the
Pennsylvania Bulletin shall be
converted from rates to be applied to gross monthly outstanding balance, to
rates to be applied to the net monthly outstanding balance. The following
formula may be used:
NFC = (n/ani')
(Opn)
(ii) Each creditor shall have its A and H and
involuntary unemployment rate based on the creditor's minimum repayment
schedule and current annual percentage rate. The insurer shall review the
minimum monthly installment and annual percentage rate of each creditor at
least annually. If there is a change in the minimum repayment percentage or the
annual percentage rate, and the resulting premium rate is greater than the
current premium rate, the insurer may adjust the rate. If the resulting rate is
lower than the current premium rate, the insurer shall adjust the rate if the
change results in a rate reduction of greater than 5%.
(iii) Either the actual interest rate used in
calculating the loan or interest rate intervals may be used when converting the
gross premium prima facie rates published in the Pennsylvania
Bulletin in accordance with subparagraphs (i) and (ii). When interest
intervals are used, the monthly interest rate "i" shall be set equal to the
midpoint of the range. The interest rate intervals shall be set so as to
include all interest rates that produce the same loan duration for a specified
playback percentage. The insurer shall include with the premium rate filing,
required by § 73.136, a complete description of the method and formulas
used to determine the interest rate intervals.
(2) For a benefit plan that is different than
the plan described in paragraph (1), the insurer shall include with the premium
rate filing, a description of the method and formulas used to determine the
coverage period and benefit period, and a description of the method and
formulas used to adjust the gross outstanding balance rates for a full coverage
period and a full benefit period to net outstanding balance rates for the
appropriate coverage period and benefit period. The insurer shall include the
actuarial justification of the method.
(h)
Furnishing of forms.
Forms required to be furnished to a debtor as evidence of coverage need be
furnished only once for each open end loan and may remain in force until
terminated.
(i)
Assumption
of coverage. If an existing group policy providing insurance coverage
in connection with open end loans is assumed by another insurer, the assuming
insurer shall issue a replacement certificate to each existing certificate
holder.
(j)
Premium
refund. Refund of premiums is not required in the event of termination
of the coverage, except with respect to the termination of credit A and H,
credit involuntary unemployment or credit voluntary unemployment insurance as
provided in §
73.127(a)(2)
(relating to refunds).
This section cited in 31 Pa. Code §
73.107 (relating to accident and
health insurance benefits); 31 Pa. Code §
73.110 (relating to involuntary
unemployment insurance benefits); and 31 Pa. Code §
73.127 (relating to
refunds).
