Current Status Bill Number:1015 Type of Legislation:General Bill GB Introducing Body:Senate Introduced Date:19980211 Primary Sponsor:Short All Sponsors:Short, Gregory and Jackson Drafted Document Number:res1594.lhs Companion Bill Number:4685 Residing Body:Senate Current Committee:Banking and Insurance Committee 02 SBI Subject:Consumer credit insurance, loans, guaranteed motor vehicle protection, Insurance, Consumer Affairs, Banks
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
Senate 19980211 Introduced, read first time, 02 SBI
referred to Committee
View additional legislative information at the LPITS web site.
TO AMEND SECTION 34-29-160, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO CREDIT INSURANCE ON RESTRICTED LOANS SO AS TO PROHIBIT AN INSURER FROM PAYING A COMMISSION OF GREATER THAN TWENTY PERCENT ON ANY CONSUMER CREDIT INSURANCE, TO DELETE THE PROVISION ALLOWING CONSUMER CREDIT INSURANCE FOR A TERM LESS THAN THE DUE DATE OF THE LAST SCHEDULED PAYMENT OF THE DEBT, AND TO INCREASE THE MINIMUM LOSS RATIO FROM FIFTY TO SIXTY PERCENT AND TO DELETE THE SPECIFIC RATES FOR CREDIT INSURANCE CONSIDERED REASONABLE; TO AMEND SECTION 37-4-106 OF THE 1976 CODE, RELATING TO UNCONSCIONABILITY, SO AS TO PROVIDE THAT CONSUMER CREDIT INSURANCE SOLD UPON A PERSON OTHER THAN THE DEBTOR IS IN ITSELF UNCONSCIONABLE; TO AMEND SECTION 37-4-107 OF THE 1976 CODE, RELATING TO MAXIMUM CHARGES BY CREDITORS FOR CREDIT INSURANCE, SO AS TO PROHIBIT AN INSURER FROM PAYING A COMMISSION OF GREATER THAN TWENTY PERCENT ON ANY CONSUMER CREDIT INSURANCE; TO AMEND SECTION 37-4-201 OF THE 1976 CODE, RELATING TO THE TERM OF CONSUMER CREDIT INSURANCE, SO AS TO DELETE THE PROVISION ALLOWING CONSUMER CREDIT INSURANCE FOR A TERM LESS THAN THE DUE DATE OF THE LAST SCHEDULED PAYMENT OF THE DEBT; TO AMEND SECTION 37-4-203 OF THE 1976 CODE, RELATING TO APPROVAL OF RATES AND FORMS BY THE DEPARTMENT OF INSURANCE, SO AS TO INCREASE THE MINIMUM LOSS RATIO FROM FIFTY TO SIXTY PERCENT AND TO DELETE THE SPECIFIC RATES FOR CREDIT INSURANCE CONSIDERED REASONABLE; TO AMEND SECTION 37-4-301 OF THE 1976 CODE, RELATING TO PROPERTY INSURANCE, SO AS TO DELETE THE PROVISION ESTABLISHING A MINIMUM CHARGE; TO AMEND CHAPTER 75, TITLE 38 OF THE 1976 CODE, RELATING TO PROPERTY, CASUALTY, AND TITLE INSURANCE, BY ADDING SECTION 38-75-1100 SO AS TO PROHIBIT AN INSURER FROM PAYING A COMMISSION OF GREATER THAN TWENTY PERCENT ON GUARANTEED AUTO PROTECTION; AND TO REPEAL SECTION 37-4-204 OF THE 1976 CODE, RELATING TO MINIMUM CHARGES AND RETENTIONS ON CREDIT INSURANCE.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 34-29-160 of the 1976 Code is amended to read:
"Section 34-29-160. Subject to the conditions provided in this section and notwithstanding any other provisions of this chapter, reasonable insurance may be sold to and required of the borrower for insuring personal property securing a loan and for insuring the life and earning capacity of not more than two parties obligated on the loan other than accommodation parties.
Property insurance shall be in an amount not to exceed the reasonable value of the property insured and for the customary term approximating the term of the loan contract. It shall be optional with the borrower to obtain such insurance in an amount greater than the amount of the loan or for a longer term.
Life insurance must be in an amount not to exceed the approximate amount of the loan and for a term not exceeding the approximate term of the loan contract. Accident and health insurance and unemployment insurance, or both, must provide periodic benefits which may not exceed an amount which approximately equals the amount of each periodic installment payment to be made under the loan contract. However, when a loan is discharged or a new policy or policies of insurance are issued, the life, property, or accident and health insurance or all three on the prior obligation must be canceled and the unearned portion of the insurance premium or premiums, or identifiable charge, must be refunded to the borrower. However, the method of refunding the premiums on the policies must be pursuant to the Rule of 78 or the Sum of the Digits Method, except that no refund under two dollars must be made; the insurance company shall calculate its reserves on the policies in the same manner or, in the case of credit life insurance, in accordance with a mortality table and interest assumption used for ordinary life policies. Notwithstanding this requirement, if the property insurance policy or policies cover the insurable interest of the borrower as well as the lender, the policy or policies may be continued in force at the request of the borrower.
The originally scheduled term of the insurance shall extend at least until the due date of the last scheduled payment of the debt.
This section does not require a creditor to grant a refund or credit of a life insurance premium to the debtor if any refund or credit due to the debtor under this section is less than two dollars.
If the coverage provides accident and health benefits, the policy or certificate shall contain a provision that if the insured obligor is disabled, as defined in the policy, for a period of more than three days, benefits shall commence as of the first day of disability, provided that accident and health insurance shall not be allowed on loans with a cash advance of less than one hundred dollars.
All insurance sold or provided pursuant to this section shall bear a reasonable and bona fide relation to the existing hazard or risk of loss and shall be written by an agent or agency licensed in this State in an insurance company authorized to conduct such business in this State. A licensee shall not require the purchasing of insurance from the licensee or any employee, affiliate, or associate of the licensee, as a condition precedent to the making of a loan and shall not decline existing insurance where such insurance is provided by an insurance company authorized to conduct such business in this State.
The licensee shall within thirty days after the loan is made, deliver to the borrower, or if more than one, to one of them, a policy or certificate of insurance covering any insurance procured by or through the licensee or any employee, affiliate or associate of the licensee, which shall set forth the amount of any premium or identifiable charge which the borrower has paid or is obligated to pay, the amount of insurance, the term of insurance, and a complete description of the risks insured. Such policy or certificate may contain a mortgage clause or other appropriate provisions to protect the insurable interest of the licensee.
Notwithstanding any other provision of this chapter, any gain or advantages in the form of commission, dividend, identifiable charge or otherwise, to the licensee or to any employee, affiliate or associate of the licensee from such insurance or its sale shall not be deemed to be additional or further interest or charge in connection with such a loan.
An insurer may not pay a commission, directly or indirectly, of greater than twenty percent on any insurance sold pursuant to this chapter.
Any accident and health or property insurance sold in conjunction with this chapter must be written on forms and at rates approved by the South Carolina Department of Insurance, provided that a minimum charge of two dollars may be made, pursuant to reasonable regulations adopted by it and having as their purpose the establishment and maintenance of premium rates which are reasonably commensurate with the coverage afforded and which are adequate, not excessive, and not unfairly discriminatory giving due consideration to past or prospective loss experience within or without this State, to dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to borrowers, to reasonable expense allowances necessary to achieve proper risk distribution and spread, and to all other relevant factors within or without this State. These regulations may include reasonable classification systems or programs based upon identifiable and measurable variations in the hazards or expense requirements and may include statistical plans, systems, or programs, which the insurers may be required to adopt, for the purpose of providing that statistical information and data as may be necessary or reasonably appropriate to the determination of premium rates or rate levels. The Department of Insurance shall annually determine by regulation, order, or bulletin consumer credit insurance premium rates for each one hundred dollars of indebtedness that are considered reasonable, provided that The the premium rates and rate levels must be calculated to produce and maintain a ratio of losses incurred, or reasonably expected to be incurred, to premiums earned, or reasonably expected to be earned, of not less than fifty sixty percent, and rates producing a lesser loss ratio are considered excessive. The premium rate for each one hundred dollars of indebtedness may be multiplied by the number of years, or fraction of a year, that the indebtedness is scheduled to continue. Regulations promulgated pursuant to this subsection shall be exempt from the provisions of the Administrative Procedures Act, Chapter 23, Title 1.
Credit life insurance premiums for each one hundred dollars of indebtedness are considered reasonable and may be charged if they are not greater than the amounts given in the following table times the number of years, or fraction of a year, that the indebtedness is scheduled to continue, subject to a minimum charge of three dollars:
Decreasing Balance Level Balance
Individual $.65 $1.30
Joint Insurance 1.08 $2.16"
SECTION 2. Section 37-4-106 of the 1976 Code is amended to read:
"Section 37-4-106. (1) In applying the provisions of this title on unconscionability (Sections 37-5-108 and 37-6-111) to a separate charge for insurance, consideration shall be given, among other factors, to:
(a) potential benefits to the debtor including the satisfaction of his obligations;
(b) the creditor's need for the protection provided by the insurance; and
(c) the relation between the amount and terms of credit granted and the insurance benefits provided.
(2) If consumer credit insurance otherwise complies with this chapter and other applicable law, neither the amount nor the term of the insurance nor the amount of a charge therefor is in itself unconscionable.
(3) Consumer credit insurance sold upon a person other than the debtor is in itself unconscionable."
SECTION 3. Section 37-4-107 of the 1976 Code is amended to read:
"Section 37-4-107. (1) Except as provided in subsection (2), if a creditor contracts for or receives a separate charge for insurance, the amount charged to the debtor for the insurance may not exceed the premium to be charged by the insurer, as computed at the time the charge to the debtor is determined, conforming to any rate filings required by law and made by the insurer with the Insurance Commissioner.
(2) A creditor who provides consumer credit insurance in relation to a revolving charge account (Section 37-2-108) or revolving loan account (Section 37-3-108) may calculate the charge to the debtor in each billing cycle by applying the current premium rate to:
(a) the average daily unpaid balance of the debt in the cycle;
(b) the unpaid balance of the debt or a median amount within a specified range of unpaid balances of debt on approximately the same day of the cycle. The day of the cycle need not be the day used in calculating the credit service charge (Section 37-2-207) or loan finance charge (Section 37-3-201, Section 37-3-508 and Section 37-3-515), but the specified range shall be the range used for that purpose; or
(c) the unpaid balances of principal calculated according to the actuarial method.
(3) An insurer may not pay a commission, directly or indirectly, of greater than twenty percent on any consumer credit insurance."
SECTION 4. Section 37-4-201(2) of the 1976 Code is amended to read:
"(2)(a) The originally scheduled term of the insurance shall extend at least until the due date of the last scheduled payment of the debt except as follows: provided in item (b) of this subsection.
(a) (b) If the insurance relates to a revolving charge account or revolving loan account the term need extend only until the payment of the debt under the account and may be sooner terminated after at least thirty days' notice to the debtor; or
(b) If the debtor is advised in writing that the insurance will be written for a specified shorter time, the term need extend only until the end of the specified time."
SECTION 5. Section 37-4-203 of the 1976 Code is amended to read:
"Section 37-4-203. (1) A creditor may not use a form or a schedule of premium rates or charges, the filing of which is required by this section, if the Insurance Commissioner has disapproved the form or schedule and has notified the insurer of his disapproval. A creditor may not use a form or schedule unless:
(a) the form or schedule has been on file with the Insurance Commissioner for ninety days, or has earlier been approved by him; and
(b) the insurer has complied with this section with respect to the insurance.
(2) Except as provided in subsection (3), all policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders relating to consumer credit insurance, other than life insurance, delivered or issued for delivery in this State, and the schedule of premium rates or charges pertaining thereto, shall be filed by the insurer with the Insurance Commissioner. Within ninety days after the filing of any form or schedule, he shall disapprove it if the premium rates or charges are unreasonable in relation to the benefits provided under the form, or if the form contains provisions which are unjust, unfair, inequitable or deceptive, or encourage misrepresentation of the coverage, or are contrary to any provision of the Insurance Code or of any rule or regulation promulgated thereunder.
(3) If a group policy has been delivered in another state, the forms to be filed by the insurer with the Insurance Commissioner are the group certificates and notices of proposed insurance. He shall approve them if:
(a) they provide the information that would be required if the group policy were delivered in this State; and
(b) the applicable premium rates or charges do not exceed those established by his rules or regulations.
(4) The Department of Insurance shall annually determine by regulation consumer credit insurance premium rates for each one hundred dollars of indebtedness that are considered reasonable, provided, that premium Premium rates and rate levels shall be calculated to produce and maintain a ratio of losses incurred, or reasonably expected to be incurred, to premiums earned, or reasonably expected to be earned, of approximately fifty sixty percent. The premium rate for each one hundred dollars of indebtedness may be multiplied by the number of years, or fraction of a year, that the indebtedness is scheduled to continue. Regulations promulgated pursuant to this subsection shall be exempt from the provisions of the Administrative Procedures Act, Chapter 23, Title 1.
(5) Credit life insurance premiums for each one hundred dollars of indebtedness are considered reasonable and may be charged if they are not greater than the amounts given in the following table times the number of years, or fraction of a year, that the indebtedness is scheduled to continue, subject to a minimum charge of three dollars:
Decreasing Balance Level Balance
Individual $ .65 $1.30
Joint Insurance $1.08 $2.16 "
SECTION 6. Section 37-4-301 of the 1976 Code is amended to read:
"Section 37-4-301. (1) A creditor may not contract for or receive a separate charge for insurance against loss of or damage to property unless:
(a) the insurance covers a substantial risk of loss or damage to property, all or part of which is related to the credit transaction;
(b) the amount, terms, and conditions of the insurance are reasonable in relation to the character and value of the property insured or to be insured; and
(c) the term of the insurance is reasonable in relation to the terms of credit.
(2) The term of the insurance is reasonable if it is customary and does not extend substantially beyond a scheduled maturity.
(3) Any charge for insurance against loss of or damage to property may be subject to a minimum charge of two dollars."
SECTION 7. Chapter 75, Title 38 of the 1976 Code is amended by adding:
"Section 38-75-1100. An insurer may not pay a commission, directly or indirectly, of greater than twenty percent on any guaranteed auto protection coverage."
SECTION 8. Section 37-4-204 of the 1976 Code is repealed.
SECTION 9. This act takes effect upon approval by the Governor.