H*3450 Session 107 (1987-1988)
H*3450(Rat #0409, Act #0382 of 1988) General Bill, By J.D. Bradley, Boan and
J.W. McLeod
Similar(S 990)
A Bill to amend Title 38, Code of Laws of South Carolina, 1976, relating to
insurance, by adding Chapter 85 so as to regulate consolidations and mortgage
insurance offered, issued, or delivered in South Carolina, by mail or
otherwise, in connection with consolidations.
01/12/88 House Introduced and read first time HJ-288
01/12/88 House Referred to Committee on Labor, Commerce and
Industry HJ-289
01/27/88 House Committee report: Favorable Labor, Commerce and
Industry HJ-678
02/04/88 House Read second time HJ-950
02/04/88 House Unanimous consent for third reading on next
legislative day HJ-951
02/05/88 House Read third time and sent to Senate HJ-980
02/09/88 Senate Introduced and read first time SJ-11
02/09/88 Senate Referred to Committee on Banking and Insurance SJ-1
02/18/88 Senate Committee report: Favorable Banking and Insurance SJ-14
02/23/88 Senate Read second time SJ-23
02/23/88 Senate Ordered to third reading with notice of
amendments SJ-23
02/24/88 Senate Read third time and enrolled SJ-43
03/08/88 Ratified R 409
03/14/88 Signed By Governor
03/14/88 Effective date 07/12/88
03/14/88 Act No. 382
03/14/88 See act for exception to or explanation of
effective date
03/22/88 Copies available
(A382, R409, H3450)
AN ACT TO AMEND TITLE 38, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO
INSURANCE, BY ADDING CHAPTER 85 SO AS TO REGULATE CONSOLIDATIONS AND MORTGAGE
INSURANCE OFFERED, ISSUED, OR DELIVERED IN SOUTH CAROLINA, BY MAIL OR OTHERWISE,
IN CONNECTION WITH CONSOLIDATIONS.
Be it enacted by the General Assembly of the State of South Carolina:
Purpose of Chapter 85, Title 38
SECTION 1. The purpose of this chapter is to protect the interests of South
Carolina insureds by:
(1) establishing disclosure requirements specific to consolidations and
requiring insurers to make such disclosures on a timely basis;
(2) clarifying the applicability of the unfair rate discrimination statutes
to consolidations so as to prevent premium increases for consumers resulting from
mandatory premium recalculation;
(3) requiring that group mortgage life insurance certificates issued in
connection with consolidations contain conversion rights;
(4) preventing the arbitrary termination of mortgage insurance coverage in
connection with consolidations.
Consolidations; mortgage insurance
SECTION 2. Title 38 of the 1976 Code is amended by adding:
"CHAPTER 85
Consolidations And Mortgage Insurance
Section 38-85-10. This chapter applies to:
(1) all consolidations, whether the old coverage is provided under an
individual or group policy;
(2) all mortgage insurance offered, issued, or delivered in this State, by
mail or otherwise, in connection with consolidations.
Section 38-85-20. In this chapter, unless the context clearly indicates
otherwise:
(1) 'Consolidation' means any transaction in which a financial institution
makes its premium collection services available to its mortgage debtors in
connection with a particular insurer's offer of mortgage insurance, which offer
is made to debtors who, immediately prior to the offer, had mortgage insurance
and were paying premiums for that insurance with their monthly mortgage payments.
(2) 'Financial institution' or 'servicer' means any entity or organization
that services mortgage loans by collecting and accounting for monthly mortgage
payments.
(3) 'Loan transfer' means a transaction in which the servicing of a block of
mortgage loans is transferred from one servicer to another.
(4) 'Loan transfer consolidation' means a consolidation involving debtors
whose mortgage loans have been transferred from one servicer to another.
(5) 'Mortgage' or 'mortgage loan' means an indebtedness which is secured by
real estate and which is not subject to the South Carolina Consumer Protection
Code (Title 37 of the 1976 Code).
(6) 'Mortgage insurance' means life, accidental death, or disability
insurance, or any combination of these, designed to pay off all or a part of the
mortgage loan in the event of the insured's death or disability.
(7) 'New coverage' or 'new plan' means the mortgage insurance coverage or
mortgage insurance plan sponsored by the financial institution in connection with
a consolidation.
(8) 'Old coverage' or 'old plan' means the mortgage insurance coverage or
mortgage insurance plan the insured debtor had or participated in immediately
prior to the consolidation.
Section 38-85-30. (A) No insurer may participate in any consolidation, other
than a loan transfer consolidation, unless it complies with the following
requirements:
(1) The offer of new coverage must be made to the mortgage debtors not less
than thirty days prior to the proposed effective date of the new coverage.
(2) In conjunction with the offer of new coverage, the new insurer shall
disclose in writing to each debtor the following:
(a) that the insured debtor may have the right to continue or convert his
old coverage by paying premiums directly to the old insurer;
(b) that the offer of new coverage is not conditioned upon either the
termination or replacement of the old coverage;
(c) the name and address of the old and the new insurer;
(d) the effective date of the new coverage;
(e) that the financial institution is the primary beneficiary of the new
coverage;
(f) whether premium rates under the new plan are guaranteed;
(g) material differences between the new plan and the old plan;
(h) that payment of the required premium constitutes acceptance of the new
coverage.
(B) An insurer which fails to comply with item (1) of subsection (A) of this
section shall notify the debtor, in writing, that he has the right to an
unconditional refund of all premiums paid for the new coverage as long as he
exercises that right, in writing, within thirty days from the notification.
(C) Disclosures required under this section may be made on behalf of the new
insurer by the financial institution.
Section 38-85-40. The following provisions apply to loan transfer
consolidations:
(1) An offer of new coverage must be made as soon as reasonably possible
after the loan transfer. If an offer of new coverage is not made within thirty
days after the loan transfer, or at least thirty days prior to the proposed
effective date of the new coverage, the insurer shall notify the debtor, in
writing, that he has the right to an unconditional refund of all premiums paid
for the new coverage as long as he exercises that right, in writing, within
thirty days from the date of the notification.
(2) In conjunction with the offer of new coverage, the new insurer shall
disclose in writing to each debtor the following:
(a) that the insured debtor may have the right to continue or convert his
old coverage by paying premiums directly to the old insurer;
(b) that the offer of new coverage is not conditioned upon either the
termination or replacement of the old coverage;
(c) the name and address of the new insurer;
(d) the effective date of the new coverage;
(e) that the financial institution is the primary beneficiary of the new
coverage;
(f) whether premium rates under the new plan are guaranteed;
(g) a description of the benefits provided under the new plan;
(h) that payment of the required premium constitutes acceptance of the new
coverage.
(3) Disclosures required under this section may be made on behalf of the new
insurer by the new servicer.
Section 38-85-50. No insurer may participate in any consolidation, including
loan transfer consolidations, unless it complies with the following requirements:
(1) A group certificate must be delivered to each debtor insured under the
new plan. The group certificate shall include the following information:
(a) the name or names of the single or joint insureds;
(b) identification of the insured mortgage;
(c) the amount of insurance under the new plan;
(d) the premium for the new coverage;
(e) the effective date of the new coverage;
(f) the beneficiary for the new coverage.
(2) A group certificate evidencing the new coverage may not include a
contestability clause or, in the case of mortgage life insurance, a provision
excluding suicide.
(3) The new coverage offered to the debtor must be the same type of coverage
as the old coverage.
(4) Notwithstanding the provisions of Section 38-65-210, all group mortgage
life insurance certificates shall include a conversion privilege permitting an
insured debtor to convert, without evidence of insurability, to an individual
policy of decreasing term insurance within thirty days of the date the insured
debtor's group coverage is terminated for any reason other than the nonpayment
of premiums. The initial amount of coverage under the individual policy must be
an amount equal to the amount of coverage terminated under the group policy and
must decrease over a term that corresponds with the scheduled term of the insured
debtor's mortgage loan.
(5) Whenever the offer of coverage under the new plan is based on the same
premium as charged under the old plan, all supplemental benefits provided by the
old plan must be provided by the new plan.
Section 38-85-60. If an insurer charges debtors the same premium for the new
coverage that they were paying for the old coverage, and, as a result, insured
debtors of a financial institution are charged different premium rates for the
same coverage, the rate differences do not constitute unfair discrimination under
Sections 38-55-50 and 38-57-120, so long as all the applicable requirements of
this chapter are met.
Section 38-85-70. No group policy or group certificate of mortgage insurance
used in connection with a consolidation, nor any application, endorsement, or
rider which becomes a part of any such group policy or certificate, may be issued
or delivered in this State until a copy of the form has been filed with and
approved by the Commissioner.
Section 38-85-80. The Commissioner is authorized to promulgate regulations to
implement this chapter."
Time effective
SECTION 3. This act takes effect one hundred twenty days after approval by the
Governor. |