H 4685 Session 112 (1997-1998)
H 4685 General Bill, By Kirsh, Gamble and Law
Similar(S 1015)
A BILL TO AMEND SECTION 34-29-160, CODE OF LAWS OF SOUTH CAROLINA, 1976,
RELATING TO CREDIT INSURANCE IN CONSUMER FINANCE TRANSACTIONS, 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, 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, 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, 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, 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, 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 RELATING TO MINIMUM
CHARGES AND RETENTIONS ON CREDIT INSURANCE.
02/24/98 House Introduced and read first time HJ-12
02/24/98 House Referred to Committee on Labor, Commerce and
Industry HJ-13
A BILL
TO AMEND SECTION 34-29-160, AS AMENDED, CODE OF
LAWS OF SOUTH CAROLINA, 1976, RELATING TO CREDIT
INSURANCE IN CONSUMER FINANCE TRANSACTIONS, SO
AS TO PROHIBIT AN INSURER FROM PAYING A
COMMISSION OF GREATER THAN TWENTY PERCENT ON
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, 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, 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,
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 CONSUMER CREDIT INSURANCE;
TO AMEND SECTION 37-4-201, 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, AS AMENDED, 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, RELATING TO
PROPERTY INSURANCE, SO AS TO DELETE THE PROVISION
ESTABLISHING A MINIMUM CHARGE; TO AMEND
CHAPTER 75, TITLE 38, 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 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, as last amended
by Act 135 of 1995, is further amended to read:
"Section 34-29-160. (A) 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.
(B) Property insurance shall must be in
an amount not to exceed exceeding the reasonable
value of the property insured and must be for the customary
term approximating the term of the loan contract. It shall be
is optional with the borrower to obtain such
insurance in an amount greater than the amount of the loan or for a
longer term.
(C) Life insurance must be in an amount not to
exceed exceeding the approximate amount of the loan
and for a term not exceeding the approximate term of the loan
contract.
(D) Accident and health insurance and unemployment
insurance, or both, must provide periodic benefits which may
not exceed exceeding an amount which
approximately equals the amount of each periodic installment
payment to be made under the terms of the loan
contract.
(E) 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
(1) 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.
(2) Notwithstanding this requirement, if the property
insurance policy or policies cover the insurable interest of the
borrower as well as that of the lender, the policy or policies
may be continued in force at the request of the borrower.
(F) The originally scheduled term of the insurance
must 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.
(G) If the coverage provides accident and health benefits,
the policy or certificate shall contain a provision must
provide that if the insured obligor is disabled, as defined in the
policy, for a period of more than three days, benefits shall
must commence as of the first day of
disability,. provided that Accident and health
insurance shall not be is not allowed on loans with
a cash advance of less than one hundred dollars.
(H) All insurance sold or provided pursuant to this
section shall must bear a reasonable and bona fide
relation to the existing hazard or risk of loss and shall
must be written by an agent or agency licensed in this State
in with an insurance company authorized to conduct
such business in this State.
(I) A licensee shall may not require the
purchasing purchase 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
may not decline existing insurance where such if
the insurance is provided by an insurance company authorized
to conduct such that business in this State.
(J)(1) The licensee shall, within thirty
days after the loan is made, must 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,.
(2) The policy or certificate must show 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 The policy or certificate may contain a
mortgage clause or other appropriate provisions to protect the
insurable interest of the licensee.
(K)(1) 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 the insurance or its sale shall not be deemed
to be is not an additional or further interest or charge in
connection with such a the loan.
(2) An insurer may not pay a commission, directly
or indirectly, of greater than twenty percent on any insurance sold
pursuant to this chapter.
(L) 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
the department and having as their purpose the establishment
and maintenance of premium rates which are:
(1) reasonably commensurate with the coverage
afforded; and which are
(2) adequate, not excessive, and not unfairly
discriminatory giving due consideration to:
(a) past or prospective loss experience within or
without this State, to;
(b) dividends, savings, or unabsorbed premium
deposits allowed or returned by insurers to borrowers,
to;
(c) reasonable expense allowances necessary to
achieve proper risk distribution and spread,; and
to
(d) all other relevant factors within or without this
State., These regulations may include
including 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 so as to provide that statistical
information and data as may be necessary or reasonably appropriate
to the determination of premium rates or rate levels.
(M)(1) 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 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.
(2) 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 are exempt from the
provisions of the Administrative Procedures Act, Chapter 23, Title
1.
(3) Notwithstanding any other provision of this section, a
minimum charge of two dollars may be made as a premium.
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 by
adding:
"(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 by
adding:
"(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 must 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 sooner 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, as last amended
by Act 135 of 1995, is further amended to read:
"Section 37-4-203. (1)(A) 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:
(1) Insurance Commissioner has disapproved the form
or schedule and has notified the insurer of his the
disapproval. A creditor may not use a form or schedule
unless;
(a)(2) the form or schedule has
not been on file with the Insurance Commissioner for ninety
days, or has earlier not been approved by him
earlier; and
(b)(3) the insurer has not
complied with this section with respect to the insurance.
(2)(B)(1) Except as provided in subsection
(3)(C), 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 to them, shall
must be filed by the insurer with the Insurance
Commissioner.
(2) Within ninety days after of the
filing of any a form or schedule, he the
commissioner shall disapprove it if the:
(a) premium rates or charges are unreasonable in relation
to the benefits provided under the form,; or if
the
(b) form contains provisions which:
(i) are unjust, unfair, inequitable, or
deceptive,; or
(ii) encourage misrepresentation of the
coverage, or
(iii) are contrary to any a
provision of the Insurance Code or of any rule or regulation
promulgated thereunder to its rules or regulations.
(3)(C) 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 The commissioner 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 the commissioner's rules or
regulations.
(4)(D) The Department of Insurance annually
shall determine, by regulation, consumer credit insurance premium
rates for each one hundred dollars of indebtedness that are considered
reasonable, provided, that premium rates and rate levels
shall 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
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) A creditor may
not contract for or receive a separate charge for insurance against loss
of or damage to property unless the:
(a)(1) the insurance covers a substantial
risk of loss or damage to property, all or part of which is related to
the credit transaction;
(b)(2) 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)(3) the term of the insurance is
reasonable in relation to the terms of credit.
(2)(B) 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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