69O-163.0075: Term and Evidence of Insurance
69O-163.009: Determination of Reasonableness of Benefits in Relation to Premium Charge
69O-163.011: Credit Disability Insurance Rates
PURPOSE AND EFFECT: Credit Life and Credit Disability Insurance is being amended to address the statutory changes contained in House Bill 343, which the Governor approved on May 28, 2008. The bill removes the fifty thousand dollars ($50,000) for credit life, but did not remove the ten (10) year limit that is still contained in Section 627.681, Florida Statutes. Similarly, the bill removed the ten (10) year limit for credit disability, but did not remove the fifty thousand dollar limit ($50,000) that is still contained in Section 627.679, Florida Statutes.
SUBJECT AREA TO BE ADDRESSED: The stipulation that a term of insurance shall not exceed ten years subject to certain restrictions under the term and evidence of credit life insurance is now gone. The revised rule effectuates a ten year cap for credit life insurance uniformly from the date of issue.
Also, the rule extinguishes the requirement of providing the lesser of 60 monthly payments or the number of monthly payments for the full term of the loan.
SPECIFIC AUTHORITY: 627.678, 627.6785 FS.
LAW IMPLEMENTED: 627.681, 627.682 FS.
IF REQUESTED IN WRITING AND NOT DEEMED UNNECESSARY BY THE AGENCY HEAD, A RULE DEVELOPMENT WORKSHOP WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW:
TIME AND DATE: September 30, 2008, 1:30 p.m.
PLACE: 142 Larson Building, 200 East Gaines Street, Tallahassee, Florida
Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Gerry Smith, Division of Life and Health, Office of Insurance Regulation, E-mail gerry.smith@fldfs.com. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE DEVELOPMENT AND A COPY OF THE PRELIMINARY DRAFT, IF AVAILABLE, IS: Gerry Smith, Division of Life and Health, Office of Insurance Regulation, E-mail gerry.smith@fldfs.com
THE PRELIMINARY TEXT OF THE PROPOSED RULE DEVELOPMENT IS:
69O-163.0075 Term and Evidence of Insurance.
The term of insurance and evidence of insurance shall not exceed ten years subject to the following limitations:
(1) Credit life insurance shall not exceed ten years from the date of issue and provide coverage for at least 5 years or the term of the loan if the loan is for less than 5 years;
(2) Credit disability insurance shall provide for monthly payments which are the lesser of 60 monthly payments or the number of monthly payments for the full term of the loan.
Specific Authority 624.308(1), 627.678 FS. Law Implemented 624.307(1), 627.681, 627.6785(3), 627.681(3) FS. History–New 2-11-03, Formerly 4-163.0075, Amended_________.
69O-163.009 Determination of Reasonableness of Benefits in Relation to Premium Charge.
(1) Section 627.682, Florida Statutes, requires that benefits provided by credit insurance policies must be reasonable in relation to the premium charged. This requirement is satisfied if the premium rate charged develops or may be reasonably expected to develop a loss ratio of claims incurred to premiums earned of not less than:
(a) 55% for credit life insurance, and
(b) 50% for credit disability insurance.
(2) Use of rates not greater than those contained in Rules 69O-163.010 and 69O-163.011, F.A.C., (“prima facie rates”) shall be deemed premium rates reasonably expected to develop the required loss ratio. An insurer may only file and use rates with such forms which are greater than prima facie rates upon a satisfactory filing with the Office showing to the Director that the use of such rates will not result on a statewide basis for that insurer of a ratio of claims incurred to premiums earned of less than the required loss ratio.
(3) If an actual rate is greater than the prima facie rates, the actual rate may not exceed the prima facie rates plus the difference between:
(a) Claims which may be reasonably expected, and
(b) The product of the required loss ratio and the prima facie rate set forth for the coverage being provided.
(4) When some rates are based on subsection (1) above and others on the prima facie rate, the expected loss ratios of statewide business must meet the minimum loss ratio standard in subsection (1) above.
(5) Nonstandard Coverage. If any insurer files for approval of any form providing coverage more restrictive than that described in Rules 69O-163.010 and 69O-163.011, F.A.C., the insurer shall make a filing to demonstrate to the satisfaction of the Office Director that the premium rates to be charged for such restricted coverage comply with subsection (1) above or, are less than or equal to rates which are actuarially equivalent to the prima facie rates.
Specific Authority 624.308(1), 627.678 FS. Law Implemented 624.307(1), 627.678, 627.682 FS. History–New 5-9-82, Formerly 4-7.09, Amended 6-11-91, Formerly 4-7.009, Amended 3-15-94, 2-11-03, Formerly 4-163.009, Amended________.
69O-163.011 Credit Disability Insurance Rates.
(1) Credit disability insurance 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 not be greater than in paragraphs (a) and (b). Paragraphs (c), (d) and (e) refer to premium rates for other types of coverages either alone or in combination with the type of coverages applicable to paragraphs (a) and (b).
(a) If premiums are payable on a single-premium basis for the duration of the coverage:
|
|
|
TABLE I |
|
|
|
|
No. of months in which |
14-Day |
30-Day |
7-Day |
14-Day |
30-Day |
|
indebtedness is repayable |
Non-Retroactive |
Non-Retroactive |
Retroactive |
Retroactive |
Retroactive |
|
6 or less |
$0.81 |
$0.36 |
$1.47 |
$1.30 |
$1.05 |
|
7-12 |
1.13 |
0.72 |
1.76 |
1.58 |
1.36 |
|
13-18 |
1.46 |
1.08 |
2.05 |
1.87 |
1.67 |
|
19-24 |
1.78 |
1.44 |
2.34 |
2.16 |
1.97 |
|
25-30 |
2.11 |
1.80 |
2.64 |
2.45 |
2.28 |
|
31-36 |
2.43 |
2.16 |
2.93 |
2.74 |
2.58 |
|
37-48 |
2.84 |
2.70 |
3.34 |
3.10 |
2.97 |
|
49-60 |
3.16 |
2.97 |
3.69 |
3.38 |
3.28 |
|
61-72 |
3.43 |
3.27 |
3.97 |
3.62 |
3.53 |
|
73-84 |
3.61 |
3.47 |
4.18 |
3.79 |
3.70 |
|
85-96 |
3.76 |
3.64 |
4.34 |
3.92 |
3.84 |
|
97-108 |
3.86 |
3.75 |
4.46 |
4.01 |
3.94 |
|
109-120 |
3.95 |
3.85 |
4.55 |
4.09 |
4.02 |
|
Per month for terms exceeding 120 months |
.0303 |
.0296 |
.0348 |
.0313 |
.0308 |
*Maximum benefit is 60 monthly payments.
(b) 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 formula: OPn=(20XSPn) / (n + 1) using a rate no less than the 24 month rate in Table I above. A company may submit a different formula for approval which produces rates actuarially equivalent to the single premium rates in Table I:
Where
|
|
SPn |
= |
Single Premium Rate per $100 of initial insured indebtedness repayable in equal monthly installments (Table I). The Single Premium Rate shall not be less than the 19-24 month rate for the appropriate coverage. |
|
|
OPn |
= |
Monthly Outstanding Balance Premium Rate per $1,000. |
|
|
n |
= |
Original repayment period, in months. |
(c) Coverage which provides a constant maximum indemnity for a given period of time shall use rates no greater than those rates which are actuarially equivalent to the rates in paragraph (a) or (b).
(d) If the coverages provided are other than those described in this subsection (1), rates for such coverages shall be actuarially equivalent to the rates provided in paragraph (a), (b) or (c).
(e) Joint coverage rates shall be no greater than 175% of the specific rate for that type of coverage.
(f) The monthly outstanding balance rate for credit disability insurance may be either a term specified rate or may be a single composite term rate applicable to all insured loans.
(2) The premium rates in subsection (1) shall apply to policies providing credit disability insurance to be issued with or without evidence of insurability, to be offered to all eligible debtors, and containing:
(a)1. No provision excluding or denying a claim for disability resulting from pre-existing 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 6 months following the effective date of coverage;
2. Disability commencing after 6 months following the effective date of coverage resulting from the condition shall be covered.
3. Coverage with no pre-existing provision limitation shall result in an additional premium of 10% of the amounts shown in subsection (1), above.
(b) No other provision which excludes or restricts liability in the event of disability caused in a specific manner, except that it may contain provisions excluding or restricting coverage for intentionally self-inflicted injuries and normal pregnancy.
(c) No provision which requires that the debtor be employed more than thirty (30) hours per week in order to be eligible for insurance coverage.
(d) No age restrictions, or only age restrictions making ineligible for coverage debtors 66 or over at the time the indebtedness is incurred.
(e) However, coverage shall be provided, at a minimum, until the earlier of the maturity date of the loan or the loan anniversary at age 66. Where loans are in the form of revolving credit arrangements, an insurer may terminate coverage when the debtor attains the age 66.
(f) A daily benefit equal in amount to one-thirtieth of the monthly benefit payable under the policy for the indebtedness.
(g)1. A definition of “disability” which provides that during the first 12 months of disability the insured shall be unable to perform the duties of his occupation at the time the disability occurred, and thereafter the duties of any occupation for which the insured is reasonably fitted by education, training or experience.
2. This paragraph shall not apply to lump sum disability coverage.
Specific Authority 624.308(1), 627.678 FS. Law Implemented 624.307(1), 627.678, 627.6785, 627.682 FS. History–New 5-9-82, Formerly 4-7.11, Amended 6-11-91, Formerly 4-7.011, Amended 2-11-03, Formerly 4-163.011, Amended________.