§ 73.127. Refunds.
(a) Refund provision. If insurance terminates prior to the scheduled maturity date of the indebtedness, a refund of any unearned premium shall be made as follows:
(1) If the indebtedness is discharged due to prepayment, renewal or refinancing prior to the scheduled maturity date, credit insurance shall be terminated and a refund of the unearned premium shall be made.
(2) A refund of any unearned credit A and H insurance premium, credit involuntary unemployment insurance premium or credit voluntary unemployment insurance premium shall be made if the indebtedness is prepaid by the proceeds of credit life insurance or credit life insurance with TPD benefit. The refund of the unearned credit insurance premium shall be in addition to any credit life insurance or TPD benefit proceeds.
(3) A refund of the total premium charged for credit insurance coverage shall be made if coverage is voided ab initio for any reason other than termination of the indebtedness.
(4) If joint coverage on one of the debtors is voided ab initio, a refund of the difference between the premium actually charged for the joint coverage, and the premium that would have been charged if only single coverage had been provided shall be made.
(b) Refund time frame. Refunds of premiums paid by or charged to the debtor shall be remitted to the debtor or credited to the debtor’s outstanding indebtedness within 10 working days after the agent or group policyholder receives the refund from the insurer.
(c) Refund notice. A refund payment shall be accompanied by an explanation that the payment is a refund of premium. If the refund amount has been deducted from the debtor’s outstanding indebtedness, the debtor shall be notified in writing that the refund was applied toward the outstanding indebtedness.
(d) Refund formulas. Insurers shall file for approval all refund formulas intended for use. A reference to the Rule of 78 shall be acceptable, in lieu of filing the actual formula.
(1) The refund of premiums on a single premium basis shall be calculated by multiplying the original single premium charged, by the appropriate refund factor.
(i) In determining the refund, if fewer than 15 days of insurance coverage has been provided during the loan month, no charge shall be made for that month. If 15 or more days of coverage have been provided during the loan month, a full month may be charged.
(ii) For gross decreasing credit life insurance with or without TPD benefits, the refund shall be computed based on the Rule of 78.
(iii) For level term credit life insurance with or without TPD benefits, the refund shall be computed based on a pro rata basis.
(iv) For full benefit period credit A and H insurance and full benefit period credit involuntary unemployment insurance, the refund shall be computed based on the Rule of 78.
(v) For any coverage not listed in subparagraphs (ii)—(iv), the refund factor shall equal the sum of remaining insured balances divided by the sum of the original insured balances.
(2) Except as provided in § 73.139 (j) (relating to credit insurance on open end loans), the refund of any unearned premiums calculated and remitted to the insured on a monthly outstanding balance basis shall be equal to the monthly premium charged if fewer than 15 days of insurance coverage has been provided during that loan month. If coverage has been provided for 15 or more days of the loan month, no refund of premium is required.
(e) Minimum refund. Insurers need not issue refunds for less than $10.
(f) Termination and refund disclosures. The group policy and group certificate or individual policy issued to provide insurance coverage shall disclose the conditions under which the coverage will terminate and under which a premium refund is required. This refund disclosure shall also describe the method used to calculate the premium refund.
Cross References This section cited in 31 Pa. Code § 73.139 (relating to credit insurance on open end loans); and 31 Pa. Code § 73.140 (relating to credit insurance on closed end variable interest loans).
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