Chapter 01. Standards for Credit Life and Credit Health Insurance

“Account” means the coverage for a single plan of benefits for either credit life insurance or credit health insurance under one premium payment method offered to a single class of business in Maryland by one creditor whether written on a group or individual basis, or both.

“Advance loan payment” means the payment of a scheduled loan installment before the installment's scheduled due date on a loan repayable in substantially equal installments.

“Agent” means a person who sells a group or individual policy of credit life or credit health insurance, or who receives any form of commission compensation, remuneration, or other benefit based on his enrolling individuals or issuing certificates under group credit life or credit health insurance.

“Balloon loan” means an indebtedness, the initial amount of which includes both:

“Case” means an account, or, at the option of the insurer, a combination of some or all of the insurer's accounts written under an identical plan of benefits where the gross premiums before refunds and at prima facie rates, whether consisting of one or more accounts, exceed or may reasonably be expected to exceed $50,000 in a policy year.

“Class of business” means every one of the following:

“Commission” means all forms of compensation or remuneration including dividends, retrospective rating credits, or any other form of benefit, including but not limited to:

“Commissioner” means the Maryland Insurance Commissioner.

“Consumer loans” means loans issued by lenders licensed under the provisions of Financial Institutions Article, Title 11, Subtitle 2, Annotated Code of Maryland, and made pursuant to Commercial Law Article, Title 12, Subtitle 3, Annotated Code of Maryland.

“Creditor-paid insurance” means insurance in which the creditor pays the insurance premium without separate charge to the debtor. A transaction will not be regarded as creditor-paid insurance if the debtor is required to pay an identifiable charge or premium for credit life or credit health insurance or if there is a differential in finance, interest, carrying, service, or other similar charge made to debtors who are in similar circumstances except for their insured or non-insured status.

“Critical period disability insurance” means insurance on a debtor that provides indemnity for payments that are due on a specific loan or other credit transactions:

“Decreasing term insurance” means insurance sold in connection with loans repayable in substantially equal installments and for which a single premium is paid in advance.

“Earned premiums at prima facie” means the premiums that would have been earned if all earned premiums had been written at prima facie rates.

“Enroller” means a person who enrolls individuals or issues certificates under group credit life or credit health insurance and who does not receive any form of commission, compensation, remuneration, or other benefit based on this activity and whose salary scale is not dependent on the volume of insurance.

“Experience period” means 2 consecutive calendar years or, at the option of the insurer, 2 consecutive policy years under a group policy issued to one creditor, or under one case.

“Joint health insurance” means health insurance issued to two co-debtors when both are jointly and severally liable for the debt.

“Joint life insurance” means insurance issued to two co-debtors with an insurable interest, as defined in Insurance Article, §12-201(b), Annotated Code of Maryland, when both are jointly and severally liable for the debt.

“Level term insurance” means insurance sold in connection with loans repayable in a single sum. Insurance covering a balloon loan is considered a combination of level term insurance and decreasing term insurance.

“Loss ratio” means the ratio of incurred claims to premiums earned during a specified period.

“Lump sum disability insurance” means insurance on a debtor that pays the insured outstanding debt that is due on a specific loan or other credit transaction after the debtor has been disabled as defined in the policy for a period specified in the policy.

“Net payoff balance method” means decreasing term insurance sold to cover the unpaid insured principal amount of a loan plus current interest and charges as they fall due.

“New case” means an account where the gross premiums before refunds and at prima facie premium rates exceed or may reasonably be expected to exceed $50,000 in the most recent policy year, but did not exceed $50,000 in the prior policy year.

“Outstanding balance insurance” means insurance for which a separate identifiable insurance premium is paid each month based on the insured indebtedness then outstanding.

Policy Year.

“Prima facie loss ratio” means the ratio of incurred claims to earned premiums at prima facie during a specified period.

“Prima facie premium rates” means maximum applicable premium rates as authorized and promulgated by the Commissioner from time to time in accordance with and listed in Regulations .10—.12 and .14—.16 of this chapter.

“Single premium insurance” means insurance in which the debtor pays or finances the entire required premium in advance. If the creditor adds identifiable insurance charges or premiums for credit insurance to the indebtedness and a direct or indirect finance, carrying, credit, or service charge is made to the debtor on the insurance charges or premiums, the insurance shall be considered single premium.

“Total-of-payments method” means decreasing term insurance sold to cover the entire schedule of payments under a loan, subject to policy limitations.

To permit the Commissioner to review the basis of prima facie premium rates and the basis of premium rates being charged on the case method, each insurer writing credit life or credit health insurance shall:

An insurer shall file the statistics for each:

Each insurer writing credit life or credit health insurance also shall file with the Commissioner:

An insurer shall file the information on a new case with the Commissioner not later than the June 30 following the close of the calendar year in which the account became a new case.

Use of Code Numbers.

Gross premiums written;

Refunds of premiums on terminated insurance;

Net premiums written;

Unearned premium reserve at beginning of period;

Unearned premium reserve at end of period;

Earned premiums (1-2) minus (5-4);

Earned premiums at prima facie;

Claims paid;

Claim reserve at beginning of period;

Claim reserve at end of period;

Claims incurred (7) plus (9-8);

Loss ratio (10) divided by (6);

Prima facie loss ratio (rounded to two decimal places);

Dividends and experience rating refunds;

All other commissions, compensation, and remuneration to creditors or agents;

Total of items (12) and (13);

Ratio (14) divided by (3);

Combined ratio, sum of (11) and (15);

Year-end amount of insurance in force;

Year-end number of individual policies and certificates in force; and

Minimum and maximum rates charged.

If an insurer has combined two or more accounts to establish a case, it may not add additional accounts or remove accounts from that case except with the permission of the Commissioner and under conditions which the Commissioner may specify.

When submitting an experience report for a case comprised of two or more accounts, the insurer shall include a list of the names of each account included in the case.

If a plan of benefits for credit health insurance qualifies as a case, whether consisting of accounts of one or more creditors, the case experience submitted by the insurer at the end of the experience period shall include the experience of all plans of benefits for credit health insurance written by creditors comprising the case.

If the experience of the case results in a downward rate adjustment, the insurer shall apply the rate adjustment factor to all plans of benefits for credit health insurance written by the creditors comprising the case.

If the experience of the case results in an upward rate adjustment, the insurer may apply the rate adjustment factor to all plans of benefits for credit health insurance written by the creditors comprising the case.

For single premium decreasing term policies insuring one life, issued on the total-of-payments method, $0.43 per annum per $100 of initial amount of insured indebtedness;

For outstanding balance term policies insuring one life, $0.66 per month per $1,000 of the amount of insured outstanding indebtedness; or

For single premium level term policies insuring one life, $0.71 per annum per $100 of the amount of insured indebtedness.

For single premium decreasing term policies insuring one life, a premium based on $0.66 per $1,000 of the sum of the scheduled insured outstanding principal indebtedness each month over the term of insurance coverage; or

For joint life policies, the premium determined in accordance with Regulation .10D of this chapter.

Individual policies of credit life insurance issued through the same creditor, regardless of whether the initial amount of credit life insurance or the insurable maximum revolving credit account limit exceeds $15,000; or

Certificates of credit life insurance issued under the group policy through the same credit or creditor, regardless of whether the initial amount of credit life insurance or the insurable maximum revolving credit account limit exceeds $15,000.

Insurer requires evidence of insurability only from debtors whose initial amount of insurance or insurable maximum revolving credit account limit exceeds $15,000; or

Debtor elects to purchase coverage more than 30 days after the date the debtor became eligible.

Advances which increase the outstanding indebtedness over $15,000; or

Increases in the insured debtor's insurable maximum revolving credit account limit that increase the limit over $15,000.

Regardless of policy or certificate amounts, the underwriting limitations specified in this section apply.

The policy contains no provision which excludes or restricts liability for death caused in a certain specific manner or occurring while the insured has a specified status, except that the policy may exclude death resulting from suicide within 6 months after the effective date of coverage.

There are no age restrictions, or the only age restrictions are those which comply with this regulation and the insured acknowledges on the application that he is aware of the age restriction.

The insurer, at its option, may adopt any one of the following provisions with regard to age limitations:

In the case of a policy providing joint life coverage:

When the age of the debtor has been misstated and the debtor's true age on the effective date of the insurance is beyond the limiting age or if premium charges continue to be made beyond the termination age in the case of outstanding balance insurance due to misstatement of age of the debtor, instead of the adjustments for payment of benefits provided in §E(4) of this regulation, the insurer, at its option, may void the insurance within 2 years from the effective date (or at any time after that date if the debtor dies within the 2-year period) and refund the premium paid if at the time of the debtor's application the insurer has obtained a separate statement signed by the debtor that the debtor is aware that no insurance will be provided beyond the stated limiting age. This separate statement shall be printed in 18-point boldface capital letters. A copy of the statement shall be given to the applicant at the time of the application and the original shall be kept on file by the insurer until at least 1 year beyond the date the indebtedness is satisfied in the case of single premium insurance, or until at least 1 year beyond the date that the debtor's insurance is cancelled in the case of outstanding balance insurance.

With respect to critical period disability insurance and lump sum disability insurance, the premium rate charged by an insurer may not exceed a rate that is determined by adjusting the applicable prima facie premium rate set by §A of this regulation to an actuarially equivalent rate approved by the Commissioner.

For all other types of credit health insurance, the prima facie premium rates shall be subject to approval by the Commissioner and may not exceed rates which are actuarially consistent with those specified in §§A and B of this regulation.

For credit health insurance issued to cover two debtors jointly, the monthly benefit payable upon the total disability of the first to be totally disabled during the term of the coverage, the premium for the health insurance benefits may not exceed 1.80 times the premium that would be charged if one debtor alone were insured.

To determine a unit rate for joint health coverage, the insurer may use the unit rates specified in this chapter for single health coverage, with the product of the single unit rate times 1.80 being rounded to the nearest cent.

Individual policies of credit health insurance issued through the same creditor; or

Certificates of credit health insurance issued under the group policy through the same creditor.

The insurer requires evidence of insurability only from debtors whose total amount of insured periodic indemnity payable in the event of disability or insurable maximum revolving credit account limit exceeds $15,000; or

The debtor elects to purchase coverage more than 30 days after the date the debtor became eligible:

The policy contains no exclusions for preexisting conditions except conditions which, within 6 months before the effective date of the coverage, manifested themselves to the insured debtor by requiring medical consultation, diagnosis, or treatment, provided the preexisting conditions cause loss commencing within 6 months following the effective date of the coverage, and provided further that the preexisting conditions would ordinarily be expected to affect materially the health of the debtor during that period. Loss due to total disability shall include loss of time from work, and, in the case of persons not employed, the inability of the insured to engage in the insured's usual and customary activities. In the case of disability by reason of loss of time from work, total disability for which benefits may become due and payable shall be defined as “inability by reason of injury or sickness to substantially perform the duties pertaining to the insured's occupation” for at least the first 12 months for which a claim may be made, and after that may be defined as “inability to substantially perform the duties of any business or occupation for which the insured is reasonably fitted by education, training, and experience.” Disability commencing 6 months or more after the effective date of the coverage may not be excluded regardless of whether the disability results from any preexisting condition. The policy shall provide that if the indebtedness covered by the policy results from the refinancing in whole or in part of a prior debt with the same creditor, the period of exclusion for preexisting conditions shall be reduced by the period that creditor-debtor disability coverage was in force in connection with the prior indebtedness. However, if the resulting period of exclusion for preexisting conditions is less than the period that would normally be applicable, and if, as a result, a claim for disability benefits which would not otherwise be allowed is payable, the benefits for the claim need not be greater than those which would have been paid under the prior coverage if it had not terminated.

The policy contains no other exclusions except for disability resulting from pregnancy.

There are no age restrictions, or, at the option of the insurer, the only age restrictions are those which make ineligible for coverage debtors who have reached age 65 at the time the indebtedness is incurred, or, alternately, debtors who will have reached age 69 on the scheduled maturity date of the indebtedness. On policies issued on the outstanding balance insurance basis in connection with open-end or revolving credit transactions, the policy may exclude from the classes eligible for insurance, debtors who have reached age 65, and provide for the termination of insurance or reduction in the amount of insurance upon the debtor's attaining a stated age not less than 65.

Except as provided in this chapter, the policy contains no provision which excludes or restricts liability for disability caused in a certain specific manner or occurring while the insured debtor has a specified status.

If an insurer acquires an existing account providing disability benefits on an outstanding balance basis or on another basis for which the debtor is charged monthly, the new insurer shall honor all claims for periods of disability commencing on or after the date of takeover and all claims after that which would have been paid under the former policy. The original insurer shall honor all claims for periods of disability commencing before the date of takeover.

Two decimal places per hundred dollars of initial amount of single premium insurance; and

Three decimal places per thousand dollars of monthly outstanding balance insurance.

On all loans originating in Maryland, an insurer may not directly or indirectly pay, allow, or offer to pay any form of commission, as defined in Regulation .04B(6) of this chapter, in excess of the limits stated in these regulations on a form of credit life or credit health insurance regardless of whether the payment is made to a licensed agent, a creditor, or an affiliate, corporate parent, subsidiary, associate, director, officer, active or retired employee, or other representative of the creditor or the licensed insurance agent.

The maximum commission payable to all payees on each policy of credit life or credit health insurance may not exceed a total of 36 percent of prima facie premium rates.

Commission paid to a creditor, or an affiliate, corporate parent, subsidiary, associate, director, officer, active or retired employee, or other representative of the creditor, regardless of whether the payee is a licensed agent, may not exceed 32 percent of prima facie premium rates.

Payment as described in §A(3) of this regulation will not preclude payment of commission to a licensed agent not listed in §A(3) of this regulation, provided the total commission paid under §A(3) of this regulation and under this subsection does not exceed the maximum rate stated in §A(2) of this regulation.

A licensed agent proposing to pay commission to any payee listed in §A(3) of this regulation shall first inquire of the insurer whether any commission is being paid by the insurer to that payee on the same business. The agent may not pay that payee an amount which, when added to the amount paid by the insurer for the same business, would cause the payment to exceed the maximum rate stated in §A(3) of this regulation. The insurer shall cooperate with the agent in providing the information called for by this subsection.

The cost to the insurer of conducting a review performed in accordance with Regulation .26 of this chapter.

Services performed by account executives or liaison personnel of the insurer who visit the offices of the creditor at occasional intervals and who are regular salaried officers or employees of the insurer and who receive no commission or other compensation directly dependent upon the amount of business obtained.

An enroller may not receive any form of commission, compensation, remuneration, or other benefit based on the enrollee's activity in enrolling persons in group policies of credit life or credit health insurance.

An enroller who is not also licensed as an agent may not engage in solicitation or selling or assist in solicitation or selling of an individual policy of credit life or credit health insurance.

Written in combination with decreasing term credit life insurance in connection with balloon loans; and

Limited to the balloon payment portion of balloon loans.

If credit health insurance is provided, disability benefits of the types stated in Regulation .14 of this chapter may not be issued to insure the same loan.

This section does not prohibit the disability benefits coverage from being included in a policy or certificate of insurance covering a loan that is insured for credit health coverage as long as both coverages are not in force at the same time.

The offer or grant by an insurer or by any insurance agent to a creditor or to any person connected or affiliated with the creditor of any special advantage or any service not specified in the insurance contract.

Agreement by an insurer or by an insurance agent to deposit with a bank or financial institution money or securities of the insurer or the agent with the design or intent that the deposit shall reduce or take the place of a deposit of money or securities which otherwise would be required of the creditor or an affiliate of the creditor by the bank or financial institution as a compensating balance or offsetting deposit for a loan or other advance.

Allowing the creditor to retain premiums on credit life and credit health insurance on policies issued to the creditor or on policies sold or collected by the creditor for more than 60 days beyond the due date of the premiums. Premiums shall be remitted to the insurer within 60 days of their due dates and for purposes of these regulations, the deposit of premiums to any demand deposit account with the creditor or affiliate and the continued retention of the premiums in the deposit account for more than 60 days may not be deemed remittance to the insurer.

Deposit with the creditor or an affiliate of the creditor by an insurer or by an insurance agent of money or securities without interest or at a lesser rate of interest than is generally being paid by the creditor bank or financial institution to other depositors of like amounts. This subsection may not be construed to prohibit the maintenance by an insurer or agent of demand deposits or premium deposit accounts which are reasonably necessary for use in the ordinary course of the insurer's or the agent's business.

If credit life insurance is provided, accidental death benefit coverage may not be issued to insure the same loan.

This section does not prohibit accidental death benefit coverage from being included in a policy or certificate of insurance covering a loan that is insured for credit life coverage as long as both coverages as not in force at the same time.

If an individual policy of credit life insurance or a certificate of group credit life insurance is used to provide more than one type of coverage, the policy or certificate shall include, for each type of coverage, a box that is:

Before an insurer issues an individual policy of credit life insurance or a certificate of group credit life insurance that is used to provide more than one type of coverage, the insurer shall check the appropriate box to indicate the type of coverage that is being provided.

The proper premium charges to debtors are made by the creditor and remitted in a timely manner to the insurer;

The proper refunds are being accurately calculated and promptly made by the creditor;

All claims are being filed promptly and properly handled;

Amounts of insurance payable on death in excess of the amounts necessary to extinguish the indebtedness are properly calculated and reported to the insurer in proofs of loss;

The creditor is promptly and fairly processing complaints concerning its credit insurance operations and is maintaining proper procedures for and records of the complaints processed.

If a policy of credit life or credit health insurance limits the life or health insurance benefits to stated policy maximums, the policy and certificates of insurance issued under a group policy shall provide that if the insured has been charged premiums for insurance in excess of the stated maximums the insurer may terminate the excess insurance and refund all premiums paid by the debtor for the excess insurance.

The notice of termination of the excess insurance shall state that the premium paid by the debtor for the excess coverage shall be refunded to the person entitled to it.

A single premium credit life or credit health insurance policy and certificate shall further provide that excess insurance shall remain in force if the insurer does not terminate the excess insurance within 60 days after the effective date of coverage or if the debtor suffers a covered loss within the 60-day period but before notification by the insurer of termination of the excess coverage.

An outstanding balance credit life or credit health insurance policy and certificate shall further provide that the excess insurance shall be in force for the period for which a premium was charged unless the excess insurance is cancelled before the occurrence of a loss.

Misstatement of Age.

If a debtor's eligibility for credit life or credit health insurance is subject to restrictions based on health, employment, age, or other factors, the policy and certificates of insurance issued under a group policy shall provide that if insurance is issued to an ineligible debtor, including a debtor who has correctly stated the debtor's age as exceeding the stated maximum eligibility age, the insurer may terminate the insurance and refund all premiums paid by the debtor.

The notice of termination of the insurance shall state that the premium paid by the debtor shall be refunded to the person entitled to it.

A single premium credit life or credit health insurance policy and certificate shall further provide that the insurance shall remain in force if the insurer does not terminate the coverage within 60 days after the effective date of coverage or if the debtor suffers a covered loss within the 60-day period but before notification by the insurer of termination of the insurance.

An outstanding balance credit life or credit health insurance policy and certificate shall provide that the insurance shall be in force for the period for which a premium was charged unless the insurance is cancelled with no less than 31 days notice before the occurrence of a loss.

The name of the creditor;

Each coverage no longer offered;

he date on which the coverage ceased to be offered; and

The current approved premium rate applicable to each coverage no longer offered.

At the end of a calendar year in which an insurer has begun to offer credit insurance for which premium rates have not yet been established by the case method but for which a prior insurer submitted notification of a new case required by Regulation .06A(3) and (4) of this chapter, the insurer shall:

An insurer that is required to submit its experience and the experience of a prior insurer under §B(1) of this regulation shall submit the experience of each insurer:

The Commissioner shall notify an insurer if a report for a case is required to be filed under §B(2) of this regulation.

If an insurer begins to offer credit insurance through a case during an experience period for which premium rates were established for a prior insurer by the case method, the insurer shall certify to the Commissioner that the insurer will not charge premium rates that exceed the rates permitted under Regulation .08E of this chapter.

If an insurer begins to offer credit insurance for a case after the end of a previously established experience period but before the effective date of new premium rates approved by the Commissioner based on that experience period, the:

An insurer that is required to submit its experience and the experience of a former insurer under §B(5)(b)(ii) of this regulation shall submit the experience of each insurer:

On the request of a succeeding insurer, a prior insurer shall provide the succeeding insurer with any experience information of the prior insurer that the succeeding insurer needs to meet the requirements of this section.