S 1015 Session 112 (1997-1998)
S 1015 General Bill, By Short, Gregory and Jackson
Similar(H 4685)
A BILL 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.
02/11/98 Senate Introduced and read first time SJ-5
02/11/98 Senate Referred to Committee on Banking and Insurance SJ-5
A BILL
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.
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