Regarding credit life insurance who is responsible for reporting termination of debt to the insurer

All life insurance and all accident and sickness insurance issued or sold in connection with loans or other credit transactions shall be subject to the provisions of this chapter except:

1. Such insurance issued in connection with a loan or other credit transaction of more than ten years duration;

2. Such insurance written in connection with a credit transaction that is:

a. Secured by a first mortgage or deed of trust; and

b. Made to finance the purchase of real property or the construction of a dwelling thereon, or to refinance a prior credit transaction made for such a purpose;

3. Where the issuance of such insurance is an isolated transaction on the part of the insurer not related to an agreement or a plan for insuring debtors of the creditor.

1960, c. 67, § 38.1-482.1; 1972, c. 527, § 38.2-3700; 1982, c. 223; 1986, c. 562; 1990, c. 236; 1992, c. 586.

For the purposes of this chapter:

"Commission" means the State Corporation Commission.

"Creditor" means the lender of money or vendor or lessor of goods, services, or property, rights or privileges, for which payment is arranged through a credit transaction, or any successor to the right, title or interest of any such lender, vendor, or lessor and an affiliate, associate or subsidiary of any of them or any other person in any way associated with them.

"Credit transaction" means any transaction by the terms of which the repayment of money loaned or loan commitment made, or payment for goods, services or properties sold or leased is to be made at a future date or dates.

"Critical period coverage" means a death benefit or an accident and sickness insurance benefit in which the benefit is equal to a specified number of monthly payments or the remaining payments on the loan, whichever is less.

"Debtor" means a borrower of money or a purchaser or lessee of goods, services, property, rights or privileges for which payment is arranged through a credit transaction.

"Form" means any policy, contract, rider, endorsement, amendment, certificate, application, enrollment request, or notice of proposed insurance pertaining to credit life insurance or credit accident and sickness insurance. For the purpose of administering §§ 38.2-3726, 38.2-3727 and 38.2-3730, (i) the earned premiums and incurred claims of all credit accident and sickness insurance forms issued in this Commonwealth with the same waiting period will be combined to determine the loss ratio in this Commonwealth regardless of differences in the contractual terms of each form and, (ii) the earned premiums and incurred claims of all credit life insurance forms issued in this Commonwealth will be combined to determine the loss ratio in this Commonwealth regardless of differences in the contractual terms or coverage types.

"Indebtedness" means the total amount payable by a debtor to a creditor in connection with a loan or other credit transaction.

"Open-end credit" means credit extended under an agreement in which:

1. The creditor reasonably contemplates repeated transactions;

2. The creditor imposes a finance charge from time to time on an outstanding unpaid balance; and

3. The amount of credit that may be extended to the debtor during the term of the agreement (up to any limit set by the creditor) is generally made available to the extent that any outstanding balance is repaid.

"Truncated coverage" means a credit life insurance benefit or a credit accident and sickness insurance benefit with a term of insurance coverage that is less than the term of the loan.

1960, c. 67, § 38.1-482.2; 1982, c. 223, § 38.2-3701; 1986, c. 562; 1992, c. 586.

A. Credit life insurance and credit accident and sickness insurance shall be issued only in the following forms:

1. Individual policies of life insurance issued to debtors on the term plan;

2. Individual policies of accident and sickness insurance issued to debtors on a term plan or disability benefit provisions in individual policies of credit life insurance;

3. Group policies of life insurance issued to creditors providing insurance upon the lives of debtors on the term plan;

4. Group policies of accident and sickness insurance issued to creditors on a term plan insuring debtors or disability benefit provisions in group credit life insurance policies to provide such coverage.

B. A policy of group credit life insurance or group credit accident and sickness insurance may be issued to a creditor or its parent holding company or to a trustee, trustees or agent designated by two or more creditors, which creditor, holding company, affiliate, trustee, trustees or agent shall be deemed the policyholder, to insure debtors of the creditor or creditors, subject to the following requirements:

1. The debtors eligible for insurance under the policy shall be all of the debtors of the creditor or creditors, or all of any class or classes of the group. The policy may provide that the term "debtors" shall include (i) borrowers of money or purchasers of goods, services or property for which payment is arranged through a credit transaction; (ii) the debtors of one or more subsidiary corporations; and (iii) the debtors of one or more affiliated corporations, proprietors or partnerships if the business of the policyholder and of such affiliated corporations, proprietors or partnerships is under common control.

2. The premium for the policy shall be paid by the policyholder, either from the creditor's funds, or from charges collected from the insured debtors, or from both. Except as provided in subdivision 3 of this subsection, a policy on which no part of the premium is to be derived from the collection of such identifiable charges must insure all eligible debtors.

3. Credit life insurance and credit accident and sickness insurance must be offered to all eligible debtors of a creditor except those for whom evidence of individual insurability is not satisfactory to the insurer.

Code 1950, § 38-428(6); 1950, p. 1001; 1952, c. 317, § 38.1-480; 1960, c. 272, § 38.2-3702; 1962, c. 154; 1975, c. 69; 1982, c. 223, § 38.1-482.3:1; 1983, c. 182; 1986, c. 562; 1987, c. 520; 1992, c. 586.

A. Credit life insurance. 1. Where an indebtedness is repayable in substantially equal installments, the amount of credit life insurance shall at no time exceed the actual amount of unpaid indebtedness.

2. Notwithstanding the provisions of subdivision A 1, insurance on agricultural credit transaction commitments not exceeding one year in duration may be written up to the amount of the loan commitment, on a nondecreasing or level-term plan.

3. Notwithstanding the provisions of subdivision A 1 of this subsection, or any other subsection, insurance on educational credit transaction commitments may be written for the amount of the loan commitment.

B. Credit accident and sickness insurance. -- The total amount of periodic indemnity payable by credit accident and sickness insurance in the event of disability, as defined in the policy, shall not exceed the aggregate of the periodic scheduled unpaid installments of the indebtedness; and the amount of each periodic indemnity payment shall not exceed the original indebtedness divided by the number of periodic installments.

C. Maximum aggregate provisions. -- A provision in a credit life insurance or credit accident and sickness insurance policy or certificate issued thereunder that sets a maximum limit on total benefits payable thereunder shall apply only to that specific indebtedness for which such policy or certificate was issued.

D. The amount of credit life insurance on an indebtedness of any debtor shall not exceed $70,000 with any one insurance company.

1960, c. 67, § 38.1-482.4; 1972, c. 527, §§ 38.2-3703, 38.2-3704; 1982, c. 223; 1986, c. 562; 1992, c. 586.

A. The term of any policy or certificate of credit life insurance or credit accident and sickness insurance shall, subject to acceptance by the insurer, commence on the date when the debtor becomes obligated to the creditor; except that where a group policy provides coverage with respect to existing obligations, the insurance on a debtor with respect to such indebtedness shall commence on the effective date of the policy. Where evidence of insurability is required and such evidence is furnished more than thirty days after the date when the debtor becomes obligated to the creditor, the term of the insurance may commence on the date the insurance company determines the evidence to be satisfactory, and in such event there shall be an appropriate refund or adjustment of any charge to the debtor for insurance. The term of such insurance shall not extend more than fifteen days beyond the scheduled maturity date of the indebtedness except when extended without additional cost to the debtor. In all cases of termination prior to scheduled maturity, a refund shall be paid or credited as provided in § 38.2-3729.

B. Renewal or refinancing of the indebtedness. -- If the indebtedness is discharged due to renewal or refinancing prior to the scheduled maturity date, the insurance in force shall be terminated before any new insurance may be issued in connection with the renewed or refinanced indebtedness. In all cases of such termination prior to scheduled maturity, a refund shall be paid or credited to the debtor as provided in § 38.2-3729. In any renewal or refinancing of the indebtedness, the effective date of the coverage for purposes of application of any policy provision shall be deemed to be the first date on which the debtor became insured under the policy covering the indebtedness which was renewed or refinanced at least to the extent of the remaining amount and duration of coverage in force on the indebtedness that was renewed or refinanced.

C. Termination of group credit insurance policy. -- 1. If a debtor is covered by a group credit insurance policy providing for the payment of single premiums to the insurer, then provision shall be made by the insurer that in the event of termination of the policy for any reason, insurance coverage with respect to any debtor insured under such policy shall be continued for the entire period for which the single premium has been paid.

2. If a debtor is covered by a group credit insurance policy providing for the payment of premiums to the insurer on a monthly outstanding balance basis, then the policy shall provide that, in the event of termination of such policy for whatever reason, notice of termination thereof shall be given to the insured debtor at least thirty days prior to the effective date of termination except where replacement of the coverage by the same or another insurer in the same or greater amount takes place without lapse of coverage. The notice required in this subdivision shall be given by the insurer or, at the option of the insurer, by the creditor, in writing, mailed to the insured debtor at the insured debtor's address as shown in the records of the insurer or creditor.

D. Each credit life insurance or credit accident and sickness insurance policy or certificate shall contain a provision that the insurance may be terminated upon written request of the debtor except if the insurance was required as security for any indebtedness at the time of the credit transaction. If insurance is required, the debtor shall have the right to terminate the insurance by furnishing evidence of other insurance that is at least equal in coverage and protection to the creditor.

1960, c. 67, § 38.1-482.5; 1982, c. 223, § 38.2-3706; 1986, c. 562; 1992, c. 586.

A. Notwithstanding the terms of § 38.2-3720, if the credit transaction provides for a variable interest rate and the insurance premiums are calculated and charged on a single premium basis, the initial amount of insurance coverage shall not exceed the scheduled amounts of unpaid indebtedness based upon the initial contract interest rate; and the death benefit shall be equal to the scheduled amount of insurance at the date of death or the amount required to liquidate the indebtedness in accordance with the terms of the contract of indebtedness, whichever is greater. If the actual interest rate charged at any time exceeds the original contract interest rate, the term of the insurance shall continue without additional charge for a period not to exceed three months. No additional premiums shall be charged for any additional coverage provided beyond that included in the single premium charge.

B. Each individual policy or group certificate of credit insurance issued in connection with credit transactions involving variable interest rates shall include a disclosure (i) that the death benefit shall in no case be less than the insured scheduled amount of coverage or the amount required to liquidate the insured indebtedness in accordance with the terms of the contract of indebtedness, whichever is greater; and (ii) that the term of insurance shall continue for a period not to exceed three months if the actual interest rate charge at any time exceeds the original contract interest rate.

C. Each individual policy or group certificate of credit insurance issued in connection with credit transactions involving variable interest rates shall provide that in the event of termination of the insurance prior to the original scheduled maturity date of the indebtedness, a refund of any amount paid by the debtor for such insurance shall be made in accordance with § 38.2-3729. Such refund shall be based on the terms of the original loan and the actual elapsed time.

For a loan with a term of more than sixty-one months, computation of such refund using the actuarial method shall be deemed to comply with the requirements hereof. For a loan with a term of sixty-one months or less, computation of such refund using the Rule of 78 shall be deemed to comply with the requirement hereof.

1984, c. 664, § 38.1-482.4:2; 1985, c. 234, § 38.2-3705; 1986, c. 562; 1992, c. 586.

A. Each insurer licensed to write credit life insurance in the Commonwealth shall establish and maintain reserves on all its credit life insurance. The minimum standard for the valuation for such reserves:

1. For both male and female insureds shall be the 2001 Commissioners' Standard Ordinary (CSO) Male Composite Ultimate Mortality Table as adopted by the National Association of Insurance Commissioners;

2. Where the credit life policy or certificate insures two lives shall be twice the 2001 CSO Male Composite Ultimate Mortality Table based on the age of the older insured;

3. Shall use, for the interest rate calculation, the calendar year statutory valuation interest rates determined pursuant to § 38.2-1371; and

4. Shall use, as the method of valuation, the Commissioners reserve valuation method set forth in § 38.2-1372.

Reserves may be calculated on an annual or a monthly basis with a reasonable assumption, subject to statistical proof, as to average ages at issue or at expiration.

B. Each insurer licensed to write credit accident and sickness insurance in the Commonwealth shall establish and maintain reserves on all its credit accident and sickness insurance. For contracts other than single premium credit disability contracts, the minimum standard for the valuation of such reserves shall be the total gross unearned premiums calculated by the actuarial method, but not less than the aggregate amounts calculated as of the valuation date by the refund formulas approved for the policies by the Commission pursuant to subsection C of § 38.2-3729. For single premium credit disability contracts, the minimum standard for valuation of such reserves:

1. For plans having less than a 15-day elimination period, the morbidity standard shall be the 1985 Commissioners' Individual Disability Table A as adopted by the NAIC (85CIDA) with claim incidence rates increased by 12 percent;

2. For plans having a greater than 14-day elimination period, the morbidity standard shall be the 85CIDA for a 14-day elimination period with claim incidence rates increased by 12 percent; and

3. The interest rate used shall be the calendar year statutory valuation interest rate for valuation of whole life insurance determined pursuant to § 38.2-1371.

It may be assumed that all business written in any calendar month was written as of the fifteenth of such month.

C. For all credit life and disability contracts in the aggregate, if the net premium refund liability exceeds the aggregate recorded contract reserve, the insurer shall establish an additional reserve liability that is equal to the excess of the net refund liability over the contract reserve recorded. The net refund liability may include consideration of commission, premium tax, and other expenses recoverable. In all cases, such amounts shall be evaluated for probability of recovery.

D. In no event shall the aggregate reserves for all policies, contracts and benefits be less than the aggregate reserves determined by a qualified actuary to be necessary to support fully the insurer's obligations under its policies, certificates and contracts.

1982, c. 223, § 38.1-482.12:1; 1986, c. 562, § 38.2-3715; 1992, c. 586; 2002, c. 72; 2009, c. 642; 2014, c. 571.

A. Credit life insurance and credit accident and sickness insurance shall be evidenced by an individual policy, or in the case of group insurance by a certificate of insurance. The policy or certificate of insurance shall: (i) be a document separate and apart from the loan or credit agreement, (ii) refer exclusively to the insurance coverage, and (iii) be delivered to the debtor.

B. Each policy or certificate of credit life insurance or credit accident and sickness insurance shall set forth:

1. The name and address of the insurer;

2. The name or names of the debtor or, in the case of a certificate, the identity by name or otherwise of the debtor;

3. The age or date of birth of the debtor(s);

4. The premium or amount payable by the debtor separately for credit life insurance and credit accident and sickness insurance;

5. A description of the coverage including the amount and term of the coverage, and any exceptions, limitations or restrictions;

6. A statement that the benefits shall be paid to the creditor to reduce or extinguish the unpaid indebtedness; and

7. A statement that if the amount of insurance exceeds the amount necessary to discharge the indebtedness, any such excess shall be payable to a beneficiary, other than the creditor, named by the debtor or to his estate.

C. A credit life or credit accident and sickness insurance policy or certificate, which provides truncated or critical period coverage or any other type of similar coverage that does not provide benefits or coverage for the entire term or amount of the indebtedness, shall be subject to the following requirements:

1. The credit life or credit accident and sickness insurance policy or certificate shall include a statement printed on the face of the policy or first page of the certificate which clearly describes the limited nature of the insurance. The statement shall be printed in capital letters and in bold twelve-point or larger type; and

2. The credit life or credit accident and sickness insurance policy or certificate shall not include any benefits or coverage other than truncated or critical period coverage or any other type of similar coverage that does not provide benefits or coverage for the entire term or amount of the indebtedness.

D. No individual or group credit life insurance or credit accident and sickness insurance policy shall be delivered or issued for delivery in this Commonwealth unless the policy complies with the following requirements:

1. Each policy shall contain a provision (i) that the policy, or the policy and any application endorsed upon or attached to the policy when issued, shall constitute the entire contract between the parties, and (ii) that all statements made by the creditor or by the individual debtors shall, in the absence of fraud, be deemed representations and not warranties;

2. Each policy shall contain a provision that the validity of the policy shall not be contested, except for nonpayment of premiums, after it has been in force for two years from its date of issue; and that no statement made by any person insured under the policy relating to his insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after the insurance has been in force for a period of two years during such person's lifetime, and prior to the date on which the claim thereunder arose;

3. Each policy shall contain a provision that when a claim for the death or disability of the insured arises, settlement shall be made upon receipt of due proof of such death or disability;

4. On the face of each policy and certificate there shall be a title that briefly and accurately describes the nature and form of the policy;

5. Each policy and certificate, including any rider or endorsement, shall be identified by a form number in the lower lefthand corner of the first page of the form. The type size of the text of the policy form or certificate, including any rider and endorsement, shall not be less than ten-point type, one-point leaded;

6. Each individual policy or group certificate shall meet the readability standards established by the Commission;

7. Each individual policy and certificate shall have printed on it a notice stating in substance that if, during a period of at least ten days from the date the policy or certificate is delivered to the policyowner or certificateholder the policy or certificate is surrendered to the insurer or its agent with a written request for cancellation, the policy or certificate shall be void from the beginning and the insurer shall refund any premium paid for the policy or certificate; and

8. Each individual policy or group certificate paid in advance or by a single premium shall include a provision, separately and prominently captioned, stating in substance the following:

"REFUND OF PREMIUM IN THE EVENT OF EARLY TERMINATION"

"In the event this insurance policy or certificate is terminated prior to its originally scheduled maturity date, or the insured indebtedness is terminated or paid off earlier than scheduled, the insurer shall, within 30 days of receipt of notification from the debtor of such termination or early payoff, refund or credit any amount paid by the debtor for the insurance beyond the actual date of termination or payoff. Early termination of debt includes termination by renewal or refinancing. The debtor's notification to the insurer shall include proof of termination or early payoff of the insured indebtedness."

E. An individual credit life insurance or credit accident and sickness insurance policy or certificate of insurance shall be delivered or mailed to the insured debtor at the time the indebtedness is incurred or within ten business days thereafter except as provided in subsection F of this section. For open-end credit transactions, agricultural or educational loan commitments, or where no direct charge is made to the debtor for his insurance, the individual policy or group certificate of insurance may be delivered to the insured debtor at the time he first becomes eligible for the insurance and need not be delivered again each time new indebtedness is added.

F. If the individual policy or certificate of insurance is not delivered or mailed to the debtor at the time indebtedness is incurred, or within ten business days thereafter, a notice of proposed insurance, setting forth (i) the name and address of the insurer, (ii) the name or names of the debtor, (iii) the age of the debtor, (iv) the premium or amount of payment by the debtor, if any, separately for credit life insurance and credit accident and sickness insurance, and (v) the amount, term and a brief description of the coverage provided, shall be delivered to the debtor. The notice of proposed insurance shall refer exclusively to insurance coverage and shall be separate and apart from the loan or credit transaction. Upon acceptance of the insurance by the insurer and within thirty days of the date upon which the indebtedness is incurred, the insurer shall deliver or mail the individual policy or group certificate of insurance to the debtor. The notice of proposed insurance shall state that upon acceptance by the insurer, the insurance shall become effective as provided in § 38.2-3721.

G. If the policy or certificate is issued by any insurer other than the insurer listed on the application, enrollment request, or notice of proposed insurance, the debtor shall receive a policy or certificate of insurance setting forth the name and address of the substituted insurer and the amount of the premium to be charged. If the amount of the premium is less than that set forth in the notice of proposed insurance, an appropriate refund shall be made.

1960, c. 67, § 38.1-482.6; 1982, c. 223, §§ 38.2-3707, 38.2-3709; 1986, c. 562; 1988, c. 551; 1992, c. 586; 2009, c. 643; 2010, c. 211.

A. No form shall be delivered or issued for delivery in this Commonwealth until a copy of each form has been filed with and approved by the Commission.

B. If a group policy of credit life or credit accident and sickness insurance is delivered in another state, the insurer shall be required to file the group certificate, application or enrollment request, and notice of proposed insurance delivered or issued for delivery in this state for approval. These forms shall comply with § 38.2-3724, with the exception of subsection D and § 38.2-3737. The premium rates shall comply with those established in this chapter or it must be demonstrated to the satisfaction of the Commission that the rates are actuarially equivalent to those required by §§ 38.2-3726 and 38.2-3727 if the coverage differs from that required in Virginia. In no case shall the premiums exceed those set by the Commission in §§ 38.2-3726 and 38.2-3727, as amended by § 38.2-3730.

C. The Commission shall disapprove or withdraw approval previously given to any form if the Commission determines that:

1. It does not comply with the laws of this Commonwealth;

2. It contains any provision or has any title, heading, backing or other indication of the contents of any or all of its provisions which encourage misrepresentation or are unjust, unfair, misleading, deceptive or contrary to the public policy of this Commonwealth; or

3. The premium rates or charges are not reasonable in relation to the benefits provided.

D. The benefits provided by any credit life insurance form shall be considered reasonable in relation to the premium charged provided that the rate does not exceed the current prima facie rate set by the Commission. The prima facie rate that shall be effective January 1, 1993, shall be that set forth in § 38.2-3726. Thereafter, effective January 1, 1995, the Commission shall, on a triennial basis, set forth adjusted prima facie rates that will achieve a sixty percent loss ratio. The methodology used by the Commission in setting the prima facie rates shall be as set forth in § 38.2-3730. The prima facie rates shall be provided to insurers no later than September 1 prior to each triennium and shall be effective as to all forms issued on or after January 1 of the following triennium.

E. The benefits provided by any credit accident and sickness insurance form shall be considered reasonable in relation to the premium charged provided that the rate does not exceed the current prima facie rates set by the Commission. The Commission shall set forth adjusted prima facie rates that will achieve a fifty percent loss ratio as of January 1, 1993, and adjusted prima facie rates that will achieve a sixty percent loss ratio as of January 1, 1995. Thereafter, the Commission shall, on a triennial basis, set forth adjusted prima facie rates that will achieve a sixty percent loss ratio. The methodology used by the Commission in setting the prima facie rates shall be as set forth in § 38.2-3730. The prima facie rates shall be provided to insurers no later than September 1, 1992, for the rates to be effective January 1, 1993; September 1, 1994, for the rates to be effective January 1, 1995; and September 1 prior to each triennium thereafter, and shall be effective as to all forms issued on or after such January 1.

F. If necessary to assure availability of credit insurance, the Commission may consider other factors in order to provide a fair return to insurers. These other factors may include, but are not limited to, the following: (i) actual and expected loss experience; (ii) general and administrative expenses; (iii) loss settlement and adjustment expenses; (iv) reasonable creditor compensation; (v) investment income; (vi) the manner in which premiums are charged; (vii) other acquisition costs, reserves, taxes, regulatory license fees and fund assessments; and (viii) other relevant data consistent with generally accepted actuarial standards.

G. The Commission shall, within thirty days after the filing of any form requiring approval, notify the insurer filing the form of the form's approval or disapproval. If a form is disapproved, the Commission shall also notify the insurer of its reasons for disapproval. The Commission may extend the period within which it shall indicate its approval or disapproval of a form by thirty days. Any form received but not approved or disapproved by the Commission shall be deemed approved at the expiration of the thirty days, or sixty days if the period is extended. No insurer shall use a form deemed approved under the provisions of this section until the insurer has filed with the Commission a written notice of its intent to use the form together with a copy of the form and the original transmittal letter thereof. The notice shall be filed in the offices of the Commission at least ten days prior to the insurer's use of the form.

H. If the Commission proposes to withdraw approval previously given to any form, it shall notify the insurer in writing not less than thirty days prior to the proposed effective date of withdrawal and give its reasons for withdrawal. No insurer shall issue such forms or use them after the effective date of withdrawal, except as provided in subsection I of this section.

I. Any insurer aggrieved by the disapproval or withdrawal of approval of any form may proceed as indicated in § 38.2-1926.

1982, c. 223, § 38.1-482.7:1; 1986, c. 562, § 38.2-3710; 1992, c. 586; 1999, c. 586.

A. The benefits provided by any credit life insurance form shall be deemed reasonable in relation to the premium charged or to be charged if the rates do not exceed the rates set forth below, except as such rates are modified pursuant to the requirements of § 38.2-3730:

1. $.7519 per month per $1,000 of outstanding insured indebtedness if premiums are payable on a monthly outstanding balance basis.

2. $.48 per $100 of initial indebtedness repayable in twelve equal monthly installments. If premiums are payable on a single premium basis and the amount of the insurance decreases in equal monthly amounts, the following formula shall be used to develop single premium rates from the outstanding balance rate:

where Sp is the single term premium per $100 of initial insured indebtedness, n is the credit term in months, and Op is the monthly outstanding balance rate per $1,000 of outstanding insured indebtedness.

3. If premiums are payable on a single premium basis when the benefit provided is level term, the following formula shall be used to develop single premium rates from the outstanding balance rate:

where Sp is the single term premium per $100 of initial insured indebtedness, n is the credit term in months, and Op is the monthly outstanding balance rate per $1,000 of outstanding insured indebtedness.

4. If the benefits provided are other than those described in the introduction to this subsection, premium rates for such benefits shall be actuarially consistent with the rates provided in the above subdivisions.

5. Joint coverage on any of the bases in this subsection shall not exceed 165 percent of the specific rate for that type of coverage.

B. The premium rates in subsection A shall apply to policies providing credit life insurance to be issued with or without evidence of insurability, to be offered to all debtors, and, except as set forth below, containing: (i) no exclusions other than suicide within six months of the incurred indebtedness; and (ii) age restrictions making ineligible for coverage debtors age seventy or over at the time the indebtedness is incurred or debtors having attained age seventy or over on the maturity date of the indebtedness.

1. Insurance written in connection with an open-end credit plan may provide for the cessation of insurance or a reduction in the amount of insurance upon attainment of an age not less than seventy.

2. On insurance written in connection with closed-end credit plans and open-end credit plans where the amount of insurance is based on or limited to the outstanding unpaid balance, no provision excluding or denying a claim for death resulting from a preexisting condition except for those conditions for which the insured debtor received medical diagnosis or treatment within six months preceding the effective date of coverage and which caused the death of the insured debtor within six months following the effective date of coverage. The effective date of coverage for each part of the insurance attributable to a different advance or charge to the plan account is the date on which the advance or charge is posted to the plan account.

3. At the option of the insurer and in lieu of a preexisting condition exclusion on insurance written in connection with open-end credit where the amount of insurance is based on or limited to the outstanding unpaid balance, a provision limiting the amount of insurance payable on death due to natural causes to the balance as it existed six months prior to the date of death if there have been one or more increases in the outstanding balance during such six-month period and if evidence of insurability has not been required in the six-month period prior to date of death.

1992, c. 586.

A. The Commission shall, based on a morbidity study, promulgate seven-, fourteen- and thirty-day retroactive and nonretroactive credit accident and sickness insurance premium rates which will reasonably be expected to produce the loss ratio as required by subsection E of § 38.2-3725. These prima facie rates will be published by the Commission no later than September 1, 1992, and will be effective on or after January 1, 1993. After this date, the premium charged in connection with any credit accident and sickness insurance policy or certificate issued in this Commonwealth may not exceed the then-published prima facie rate as set forth in this section and as may be adjusted pursuant to § 38.2-3730.

The morbidity study shall be based on policies and certificates issued in this Commonwealth for the past three years, the premiums charged for those contracts and the experience produced by those contracts. The Commission may also take into consideration the reserves held on these contracts and the methods used to produce those reserves and any other information which the Commission in its discretion may consider necessary to produce a credible morbidity study.

B. The benefits provided by any credit accident and sickness insurance form shall be deemed reasonable in relation to the premium charged or to be charged if the rates do not exceed the rates initially published by the Commission pursuant to subsection A of this section, except as such rates are modified pursuant to the requirements of § 38.2-3730.

C. If premiums are paid on the basis of a premium rate per month per $1,000 of outstanding insured indebtedness, they shall be computed according to the following formula or according to a formula approved by the Commission which produces rates actuarially equivalent to the single premium rates:

Where Spn = Single Premium Rate per $100 of initial insured indebtedness repayable in n equal monthly installments.

Op = Monthly Outstanding Balance Premium Rate per $1,000.

n = Original repayment period, in months.

D. A credit accident and sickness insurance form may not be issued with a waiting period, retroactive or nonretroactive, which differs from the waiting periods set forth in this section.

E. The premium rates in subsection B shall apply to policies providing credit accident and sickness insurance to be issued with or without evidence of insurability, to be offered to all eligible debtors, and containing:

1. No provision excluding or denying a claim for disability resulting from preexisting conditions except for those conditions for which the insured debtor received medical advice, diagnosis or treatment within six months preceding the effective date of the debtor's coverage and which caused loss within the six months following the effective date of coverage. The effective date of coverage for each part of the insurance attributable to a different advance or charge to an open-end credit account is the date on which the advance or charge is posted to the plan account.

2. No other provision which excludes or restricts liability in the event of disability caused in a specific manner except that it may contain provisions excluding or restricting coverage in the event of normal pregnancy and intentionally self-inflicted injuries.

3. No actively-at-work requirement more restrictive than one requiring that the debtor be actively at work at a full-time gainful occupation on the effective date of coverage. "Full-time" means a regular work week of not less than thirty hours. A debtor shall be deemed to be actively at work if absent from work due solely to regular day off, holiday or paid vacation.

4. No age restrictions, or only age restrictions making ineligible for coverage debtors sixty-five or over at the time the indebtedness is incurred or debtors who will have attained age sixty-six or over on the maturity date of the indebtedness.

5. A daily benefit equal in amount to one-thirtieth of the monthly benefit payable under the policy for the indebtedness.

6. A definition of "disability" which provides that during the first twelve months of disability the insured shall be unable to perform the duties of his occupation at the time the disability occurred, and thereafter the duties of any occupation for which the insured is reasonably fitted by education, training or experience.

7. A provision written in connection with an open-end credit plan which may provide for the cessation of insurance or reduction in the amount of insurance upon attainment of an age not less than sixty-five.

F. Joint coverage on any of the bases in this section shall not exceed 165 percent of the rates applicable to that type of coverage.

1992, c. 586; 1995, c. 167.

A. Use of prima facie rates. An insurer that files rates or has rates on file that are not in excess of the prima facie rates set forth in § 38.2-3726 or published as set forth in § 38.2-3727, to the extent adjusted pursuant to § 38.2-3730, may use those rates without further proof of their reasonableness.

B. Use of rates higher than prima facie rates. An insurer may file for approval of and use rates that are higher than the prima facie rates set forth in § 38.2-3726 or published as set forth in § 38.2-3727, to the extent adjusted by § 38.2-3730. In order to use these higher rates, it shall be demonstrated to the satisfaction of the Commission that the use of such higher rates will result in a ratio of claims incurred to premiums earned (assuming the use of such higher rates) that is not less than the loss ratios as required by § 38.2-3725 D and E for those accounts to which such higher rates apply and that such upward deviations will not result on a statewide basis for that insurer of a ratio of claims incurred to premiums earned of less than the expected loss ratio underlying the current prima facie rate developed or adjusted pursuant to § 38.2-3730. Deviations effective for 1993 and 1994 for credit life insurance shall be derived based upon a fifty percent loss ratio.

If rates higher than the prima facie rates provided for in §§ 38.2-3726 and 38.2-3727, to the extent adjusted pursuant to § 38.2-3730, are filed for approval, the filing shall specify the account or accounts to which such rates apply. Such rates may be applied on an equitable basis approved by the Commission to only one or more accounts specified by the insurer for which the experience has been less favorable than expected.

C. Approval period of deviated rates.

1. A deviated rate will be in effect for a period of time not longer than the experience period used to establish such rate. In no event will deviated rates remain in effect after the effective date that new prima facie rates are effective as set forth in § 38.2-3730.

2. Notwithstanding subsection A of this section, the prima facie rates shall be employed in the event that the account becomes insured by another insurer.

D. As used in this section:

1. "Experience" means "earned premiums" and "incurred claims" during the experience period.

2. "Experience period" means the most recent period of time for which experience is reported, but not for a period longer than three full years.

3. "Incurred claims" means total claims paid during the experience period, adjusted for the change in claim reserve.

1992, c. 586.

A. Each individual policy or group certificate shall provide that, in the event of termination of the insurance prior to the scheduled maturity date of the indebtedness, any refund of an amount paid by the debtor for insurance shall be paid or credited promptly to the debtor or person entitled thereto.

B. If a creditor requires a debtor to make any payment for credit life insurance or credit accident and sickness insurance and an individual policy or group certificate of insurance is not issued, the creditor shall immediately give written notice to such debtor and shall promptly make an appropriate credit to the account.

C. Refund formulas which any insurer desires to use for decreasing term credit life insurance with terms of more than sixty-one months must develop refunds which are at least as favorable to the debtor as refunds based on the actuarial method. Refund formulas for decreasing term credit life insurance with terms of sixty-one months or less must develop refunds which are at least as favorable to the debtor as refunds based on the Rule of 78 or the actuarial method, whichever method is consistent with the original method of premium calculation. Refund formulas for credit accident and sickness insurance shall develop refunds that are at least as favorable to the debtor as refunds based on the actuarial method. The actuarial method will result in refunds equal to the premium cost of scheduled benefits subsequent to the date of cancellation or termination, computed at the schedule of premium rates in effect on the date of issue. The refund of premiums for level term credit life insurance shall be no less than the pro rata unearned gross premium. Refund formulas must be filed with and approved by the Commission prior to use.

D. The requirements of subsection C of this section that refund formulas be filed with the Commission shall be considered fulfilled if the refund formulas are set forth in the individual policy or group certificate filed with the Commission.

E. Refunds may be computed:

1. On a daily basis; or

2. From the end of the loan month if sixteen days or more of a loan month have been earned, provided that, if fifteen days or less of a loan month have been earned, the refund is computed from the beginning of the loan month.

F. No refund of five dollars or less need be made.

G. Voluntary prepayment of indebtedness. If a debtor prepays the indebtedness other than as a result of death:

1. Any credit life insurance covering such indebtedness shall be terminated and an appropriate refund of the credit life insurance premium shall be paid or credited to the person entitled to the refund in accordance with this section; and

2. Any credit accident and sickness insurance covering such indebtedness shall be terminated and an appropriate refund of the credit accident and sickness insurance premium shall be paid or credited to the person entitled to the refund in accordance with this section. If a claim under such coverage is in progress at the time of prepayment, the amount of refund may be determined as if the prepayment did not occur until the payment of benefits terminates. No refund need be paid during any period of disability for which credit accident and sickness benefits are payable. A refund shall be computed as if prepayment occurred at the end of the disability period.

H. Involuntary prepayment of indebtedness. If an indebtedness is prepaid by the proceeds of a credit life insurance policy covering the debtor, then it shall be the responsibility of the insurer to see that the following are paid to the insured debtor, if living, or the beneficiary, other than the creditor, named by the debtor or to the debtor's estate:

1. An appropriate refund of the credit accident and sickness insurance premium in accordance with this section; and

2. The amount of benefits in excess of the amount required to repay the indebtedness after crediting any unearned interest or finance charges.

1960, c. 67, § 38.1-482.8; 1982, c. 223, § 38.2-3711; 1986, c. 562; 1992, c. 586; 2002, c. 72; 2009, c. 643.

A. Each insurer doing insurance business in this Commonwealth shall annually file with the National Association of Insurance Commissioners a report of credit life and credit accident and sickness written on a calendar year basis. Such report shall utilize the Credit Insurance Supplement-Annual Statement Blank as then approved by the National Association of Insurance Commissioners. Such filing shall be made in accordance with and no later than the due date in the Instructions in the Annual Statement.

B. The Commission shall, on a triennial basis, recalculate rates to determine the actual loss ratio for each form of insurance and adjust the prima facie rates, as provided in §§ 38.2-3726 and 38.2-3727, by applying the ratio of the actual loss ratio to the loss ratio standard set forth in § 38.2-3725 to the prima facie rates. The Commission shall publish notice of the adjusted actual statewide prima facie rates to be used by insurers during the next triennium and provide an opportunity for a hearing. As set forth in this section, the following formula shall be used to adjust the prima facie rates:

Where PFR is the prima facie rate as provided in §§ 38.2-3726 and 38.2-3727, the Actual Loss Ratio is the ratio of the incurred claims to the earned premiums at prima facie rates for all companies for the preceding three years as reported in the Annual Statement Supplements and the Loss Ratio Standard is the loss ratio provided in § 38.2-3725.

1992, c. 586; 2015, c. 11; 2022, c. 412.

A. All claims shall be promptly reported to the insurer or its designated claim representative. The insurer shall maintain adequate claim files. All claims shall be settled as soon as possible and in accordance with the terms of the insurance contract.

B. All claims shall be paid or credited by: (i) electronic means to the account of the claimant to whom payment of the claim is due pursuant to the policy provisions or to an account or person specified by such claimant; or (ii) draft drawn upon the insurer or by check of the insurer to the order of the claimant to whom payment of the claim is due pursuant to the policy provisions, or to a person specified by such claimant.

C. No plan or arrangement shall be used where any person other than the insurer or its designated claim representative shall be authorized to settle or adjust claims. The creditor shall not be designated as claim representative for the insurer in adjusting claims. A group policyholder may, by arrangement with the insurer, draw drafts or checks, or credit by electronic means in payment of claims due to the group policyholder subject to audit and review by the insurer. The insurer shall periodically review claims payments made on its behalf by claim representatives or group policyholders.

1960, c. 67, § 38.1-482.11; 1982, c. 223, § 38.2-3713; 1986, c. 562; 1992, c. 586.

Any insurer that delegates to a creditor any of its duties under the laws of this Commonwealth or the regulations of this Commission shall be responsible to see that such creditor discharges such duties in accordance with said laws and regulations. A finding by the Commission that either the insurer or its delegee has failed to comply with such requirements shall subject the insurer and creditor to any and all disciplinary actions authorized under this title. Such responsibility shall include but not be limited to a determination that:

1. Proper insurance rates are being charged by the creditor;

2. Proper refunds are being made;

3. Claims are being filed and properly handled;

4. Amounts of insurance payable on death in excess of the amounts necessary to discharge indebtedness are properly distributed; and

5. The creditor is promptly and fairly processing complaints concerning its credit insurance operations and is maintaining proper procedures for and records of complaints processed.

1992, c. 586.

A. A portion of the premium for credit life insurance or credit accident and sickness insurance may be allowed by the insurer to a creditor for providing and servicing such insurance. Such portion of the premium so allowed shall not be deemed as a rebate of premium or as interest charges or consideration or an amount in excess of permitted charges in connection with the loan or other credit transaction.

B. All of the acts necessary to provide and service credit life insurance and credit accident and sickness insurance may be performed within the same place of business in which is transacted the business giving rise to the loan or other credit transaction.

1960, c. 67, § 38.1-482.9; 1982, c. 223, § 38.2-3712; 1986, c. 562; 1992, c. 586.

Any person who, in this Commonwealth, on behalf of an insurer licensed in this Commonwealth, sells, solicits, or negotiates individual or group policies of credit life insurance shall first apply for and obtain a license from the Commission as either a life and annuities insurance agent or as a limited lines credit insurance agent as defined in § 38.2-1800. Any person who, in this Commonwealth, on behalf of an insurer licensed in this Commonwealth, sells, solicits, or negotiates individual or group policies of credit accident and sickness insurance, shall first apply for and obtain a license from the Commission as either a health agent or as a limited lines credit insurance agent as defined in § 38.2-1800 of this title, and shall be required to be appointed to represent such insurer in this Commonwealth as set forth in § 38.2-1833.

1992, c. 586; 2001, c. 706.

A. If a creditor makes available to the debtors more than one plan of credit life insurance or more than one plan of credit accident and sickness insurance, all debtors must be informed of all such plans for which they are eligible. In the case of credit life insurance:

1. If a creditor offers a plan of insurance that insures the actual amount of unpaid indebtedness, the creditor shall also offer to the debtor a plan of insurance that insures only the actual amount of indebtedness less any unearned interest or finance charges; and

2. In the event that a plan of insurance that insures the actual amount of unpaid indebtedness is offered, the creditor shall provide to each debtor a disclosure form which shall clearly disclose the difference in premiums charged for a contract wherein the gross indebtedness is insured versus a contract wherein only the net indebtedness is insured. This disclosure shall include the differences between the amount financed, the monthly payment and the total charge for each type of insurance. The form shall be signed and dated by the debtor and the agent, if any, soliciting the application or the creditor's representative, if any, soliciting the enrollment request. A copy of this disclosure shall be given to the debtor, and a copy shall be made a part of the creditor's loan file.

Nothing contained in this subsection shall be construed to prohibit the creditor from combining such disclosure, in order to avoid redundancy, with other forms of disclosure required under state or federal law.

B. When elective credit insurance is offered, the borrower must be given written disclosure that purchase of credit insurance is not required and is not a factor in granting credit. The disclosure shall also include notice that the borrower has the right to use alternative coverage or to buy insurance elsewhere.

C. If the debtor is given a contract which includes a single premium payment to be charged for elective credit insurance, the debtor must be given:

1. A contract which does not include the elective credit insurance premium; or

2. A disclosure form which shall clearly disclose the difference in premiums charged for a contract with credit insurance and one without credit insurance. This disclosure shall include the difference between the amount financed, the monthly payment and the charge for each kind of insurance. The form shall be signed and dated by the debtor and the agent, if any, soliciting the application or the creditor's representative, if any, soliciting the enrollment request. A copy of this disclosure shall be given to the debtor and a copy shall be made a part of the creditor's loan file.

Nothing contained in this subsection shall be construed to prohibit the creditor from combining such disclosure, in order to avoid redundancy, with other forms of disclosure required under state or federal law.

D. If credit life insurance or credit accident and sickness insurance is required as security for any indebtedness, the debtor shall have the option of (i) furnishing the required amount of insurance through existing policies of insurance owned or controlled by him or (ii) procuring and furnishing the required coverage through any insurer authorized to transact insurance in this Commonwealth. The creditor shall inform the debtor of this option in writing and shall obtain the debtor's signature acknowledging that he understands this option. Nothing contained in this subsection shall be construed to prohibit the creditor from combining such disclosure, in order to avoid redundancy, with other forms of disclosure required under state or federal law.

E. No contract of insurance upon a debtor paid in advance or by a single premium shall be made or effectuated unless, at the time of the contract, the debtor is provided with a notice prominently disclosing his rights to a refund of premium in the event the insurance is terminated prior to its scheduled maturity date or the insured indebtedness is terminated or paid off early, and of the obligation of the debtor to provide notification to the insurer under subdivision D 8 of § 38.2-3724. This notice shall be signed and dated by the debtor and the agent, if any, soliciting the application or the creditor's representative, if any, soliciting the enrollment request. A copy of the signed notice shall be given to the debtor and a copy shall be made part of the insurer's file.

F. Readability. -- The Commission shall not approve any form unless the policy or certificate is written in nontechnical, readily understandable language, using words of common everyday usage.

A form shall be deemed acceptable under this section if the insurer certifies that the form achieves a Flesch Readability Score of forty or more, using the Flesch Readability Formula as set forth in Rudolf Flesch, The Art of Readable Writing (1949, as revised 1974), and certifies compliance with the guidelines set forth in this section.

1992, c. 586; 1999, c. 586; 2009, c. 643; 2010, c. 211.

If no specific charge is made to the debtor for credit life or credit accident and sickness insurance, the Commission is granted discretion in applying the provisions of this chapter. Each company must comply with § 38.2-3725 and the filing letter must specifically request an exemption from Virginia law. For purposes of this section, it will be considered that the debtor is charged a specific amount for insurance if an identifiable charge for insurance is disclosed in the credit or other instrument furnished the debtor which sets out the financial elements of the credit transactions, or if there is a differential in finance, interest, service or other similar charges made to debtors who are in like circumstances, except for their insured or noninsured status.

1992, c. 586.

A. No contract of insurance upon a debtor shall be made or effectuated unless at the time of the contract, the debtor, being of lawful age and competent to contract for insurance, applies for the insurance in writing on a form approved by the Commission.

B. The application or enrollment request shall be required to:

1. Contain the name and signature of the agent or creditor's representative, if any, who solicited the application or enrollment request;

2. Contain the name and address of the insurer and creditor; the name and age of the debtor(s); the premium, rate or amount payable by the debtor separately for credit life insurance and credit accident and sickness insurance; the type of insurance coverage provided; the date of application; and separately, the amount and term, including the effective and cancellation dates, of the insurance and loan contracts; and

3. Include the disclosure requirements set forth in subsections A, B, C, D, and E of § 38.2-3735 unless such requirements have been separately disclosed in another form or forms approved by the Commission.

C. The application or enrollment request form shall be separate and apart from the loan or credit transaction papers and will refer exclusively to insurance coverage.

D. No individual or group credit life insurance or credit accident and sickness insurance application form shall contain a question of general good health unless the application form contains appropriate specific questions concerning the applicant's health history or medical treatment history.

E. Neither this section nor subsection B of § 38.2-3735 shall apply to credit life or credit accident and sickness insurance that will insure open-end monthly outstanding balance credit transactions if the following criteria are met:

1. The credit life insurance and credit accident and sickness insurance that will insure the open-end monthly outstanding balance credit transaction are offered to the debtor after the loan or credit transaction that it will insure has been approved by the creditor and has been effective at least seven days;

2. The solicitation for the insurance is by mail or telephone. The person making the solicitation shall not condition the future use or continuation of the open-end credit upon the purchase of credit life or credit accident and sickness insurance;

3. The creditor makes available only one plan of credit life insurance and one plan of credit accident and sickness insurance to the debtor;

4. The debtor is provided written confirmation of the insurance coverage within thirty days of the effective date of such coverage. The effective date of coverage shall begin on the date the solicitation is accepted; and

5. The individual policy or certificate has printed on it a notice stating that if, during a period of at least thirty days from the date that the policy or certificate is delivered to the policyowner or certificate holder, the policy or certificate is surrendered to the insurer or its agent with a written request for cancellation, the policy or certificate shall be void from the beginning and the insurer shall refund any premium paid for the policy or certificate. This statement shall be prominently included on the face page of the policy or certificate, and shall be printed in capital letters and in bold 12-point or larger type.

F. The following shall be applicable to open-end credit transactions by mail, telephone, or brochure solicitations, that are not excluded from the requirements of this section and of subsection B of § 38.2-3735 by subsection E, where the insurer is offering only one plan of credit life insurance or one plan of credit accident and sickness insurance:

1. Section 38.2-3735 shall not apply to such transactions, provided that the following disclosures are included in such solicitations, whether as part of the application or enrollment request or separately:

a. The name and address of the insurer(s) and creditor; and

b. A description of the coverage offered, including the amount of coverage, the premium rate for the insurance coverage offered, and a description of any exceptions, limitations, or restrictions applicable to such coverage.

2. Subsections B and D of this section shall not apply to such transactions, provided that the application or enrollment request utilized as part of such transaction:

a. Is printed in a type size of not less than eight-point type, one point leaded, notwithstanding the requirements set forth in subdivision D 5 of § 38.2-3724 regarding minimum type size for policies and certificates;

b. Contains a prominent statement that the insurance offered is optional, voluntary, or not required;

c. Contains no questions relating to insurability other than the debtor's age or date of birth and, if applicable, active employment status; and

d. If the disclosures required by subdivision 1 of this subsection are not included in the application or enrollment request, makes reference to such disclosures with sufficient information so as to assist the reader in locating such disclosures within the solicitation.

3. Each insurer proposing to utilize an application or enrollment request in such transactions shall file such form for approval by the Commission. If the insurer anticipates utilizing such application or enrollment form in more than one solicitation, the insurer shall submit, as part of its filing of such form, a certification signed by an officer of the insurer, stating that any such subsequent use of the application or enrollment form will utilize the same form number and will not vary in substance from the wording and format in which the form is submitted for approval. Upon approval of such application or enrollment form by the Commission, the insurer shall be permitted to utilize such form in various solicitation materials, provided that the application or enrollment form, when incorporated into such solicitation materials, has the same form number and wording substantially identical to that contained on the approved application or enrollment form.

G. Notwithstanding the provisions of subsection A, a contract of insurance may be made or effectuated in connection with a credit transaction between a creditor regulated pursuant to Chapter 13 (§ 6.2-1300 et seq.) of Title 6.2 or 12 U.S.C. § 1751 et seq. and a debtor who is of lawful age, competent to contract for the insurance and a member of the creditor if:

1. The credit transaction and the solicitation for such insurance is effected by mail, telephone or other electronic means;

2. The purchase of credit insurance is not required by the creditor and is not a factor in granting the credit;

3. The creditor or insurer, within three business days after the credit transaction is effected, transmits to the debtor, either separately or with the documents that pertain to the credit transaction, an application or enrollment request form approved by the Commission which includes or to which is attached a prominent notice that clearly advises the debtor that unless he mails the completed and signed application or enrollment request to the creditor within forty-five days following the date of the credit transaction, all such coverage requested in connection with the credit transaction will be void from the beginning; and

4. In the event the debtor does not transmit the completed and signed application or enrollment request to the creditor within the time specified in subdivision 3, the full amount of the premium charged for the insurance is returned to or credited to the account of the debtor and written notice thereof is sent to the debtor within fifteen days of the date the policy or certificate is cancelled.

1992, c. 586; 1993, c. 627; 1994, c. 202; 1995, c. 167; 1999, c. 586; 2009, c. 643.

In the event of conflict between the provisions of this chapter and other provisions of this title, the provisions of this chapter shall be controlling. Subdivisions 1 and 2 of § 38.2-508 shall not apply to the insurance subject to the provisions of this chapter where application of these subdivisions would conflict with the requirements of any federal agency.

1960, c. 67, § 38.1-482.1; 1972, c. 527, § 38.2-3716; 1982, c. 223; 1986, c. 562; 1992, c. 586.