§ 73.139. Credit insurance on open end loans.
(a) General requirements. Credit insurance may be provided in connection with open end loans. This insurance is provided on the outstanding balance of the indebtedness, subject to any maximum dollar amount of coverage or limited benefit period specified in the group certificate or individual policy. If no indebtedness exists, the insurance amount shall be zero and shall remain so until an advance or charge occurs under the plan. This section supersedes other provisions of this chapter to the extent that the provisions would otherwise relate to credit insurance on open end loans.
(b) Identification. A credit insurance program designed for use with open end loans shall be identified as such when filed with the Department in accordance with § 73.136 (relating to filing of forms and rates).
(c) Symbols. The symbols used in this section shall have the following meaning:
(1) i = actual monthly interest rate (APR/12).
(2) i' = (i + .0025).
(3) n = log(z/(z-i))/log(1+i) rounded up to an integer.
(4) NFC = gross/net conversion rate for an open end loan with the monthly benefit equal to a minimum monthly payment that is based on a percentage of the current month’s balance.
(5) z = minimum monthly payment expressed as a decimal fraction.
(d) Life benefit. The credit life insurance benefit shall be equal to the lesser of:
(1) The amount of the outstanding balance of the indebtedness at the time of death.
(2) The maximum dollar amount of coverage specified in the group certificate or individual policy.
(e) TPD benefit. The TPD benefit shall be equal to the lesser of:
(1) The amount of the outstanding balance of the indebtedness at the commencement of the TPD plus the amount any monthly interest accruing on the net unpaid indebtedness from the date TPD commences until the date the TPD benefit is paid.
(2) The maximum dollar amount of coverage specified in the group certificate or individual policy.
(f) A and H and involuntary unemployment benefit. The minimum monthly insurance benefit for A and H insurance and involuntary unemployment insurance shall be equal to the lesser of:
(1) The minimum loan payment for the month in which disability or unemployment commences, excluding indebtedness incurred after the disability or unemployment commences and repayments made during the month in which disability or unemployment commences.
(2) The maximum monthly dollar amount of coverage specified in the group certificate or individual policy.
(g) A and H and involuntary unemployment premium rates. If the A and H and involuntary unemployment premium rates are based on the net outstanding balance, the premium rates shall be determined as follows:
(1) If the benefit amount is based on a percentage of the current month’s balance and the benefit is paid until the indebtedness existing at the time of disability or involuntary unemployment, including accrued interest, is repaid, the following adjustment shall be made:
(i) The monthly outstanding balance prima facie rates published in the Pennsylvania Bulletin shall be converted from rates to be applied to gross monthly outstanding balance, to rates to be applied to the net monthly outstanding balance. The following formula may be used:
NFC = (n/ani') (Opn)
(ii) Each creditor shall have its A and H and involuntary unemployment rate based on the creditor’s minimum repayment schedule and current annual percentage rate. The insurer shall review the minimum monthly installment and annual percentage rate of each creditor at least annually. If there is a change in the minimum repayment percentage or the annual percentage rate, and the resulting premium rate is greater than the current premium rate, the insurer may adjust the rate. If the resulting rate is lower than the current premium rate, the insurer shall adjust the rate if the change results in a rate reduction of greater than 5%.
(iii) Either the actual interest rate used in calculating the loan or interest rate intervals may be used when converting the gross premium prima facie rates published in the Pennsylvania Bulletin in accordance with subparagraphs (i) and (ii). When interest intervals are used, the monthly interest rate ‘‘i’’ shall be set equal to the midpoint of the range. The interest rate intervals shall be set so as to include all interest rates that produce the same loan duration for a specified playback percentage. The insurer shall include with the premium rate filing, required by § 73.136, a complete description of the method and formulas used to determine the interest rate intervals.
(2) For a benefit plan that is different than the plan described in paragraph (1), the insurer shall include with the premium rate filing, a description of the method and formulas used to determine the coverage period and benefit period, and a description of the method and formulas used to adjust the gross outstanding balance rates for a full coverage period and a full benefit period to net outstanding balance rates for the appropriate coverage period and benefit period. The insurer shall include the actuarial justification of the method.
(h) Furnishing of forms. Forms required to be furnished to a debtor as evidence of coverage need be furnished only once for each open end loan and may remain in force until terminated.
(i) Assumption of coverage. If an existing group policy providing insurance coverage in connection with open end loans is assumed by another insurer, the assuming insurer shall issue a replacement certificate to each existing certificate holder.
(j) Premium refund. Refund of premiums is not required in the event of termination of the coverage, except with respect to the termination of credit A and H, credit involuntary unemployment or credit voluntary unemployment insurance as provided in § 73.127(a)(2) (relating to refunds).
Cross References This section cited in 31 Pa. Code § 73.107 (relating to accident and health insurance benefits); 31 Pa. Code § 73.110 (relating to involuntary unemployment insurance benefits); and 31 Pa. Code § 73.127 (relating to refunds).
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