Law:Title 7. Life Insurance And Annuities. Subtitle C. Specialized Coverages from Chapter 1153. Credit Life Insurance And Credit Accident And Health Insurance (Texas)

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Subtitle C. Specialized Coverages

Contents

Chapter 1153. Credit Life Insurance And Credit Accident And Health Insurance

Subchapter A. General Provisions

Section  1153.001.  Short Title.

This chapter may be cited as the Act for the Regulation of Credit Life Insurance and Credit Accident and Health Insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.002.  Purpose; Legislative Intent; Construction.

(a) The purpose of this chapter is to promote the public welfare by regulating credit life insurance and credit accident and health insurance.

(b)  This chapter is not intended to prohibit or discourage reasonable competition.

(c)  This chapter shall be liberally construed.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.003.  Definitions.

In this chapter:

(1)  "Credit accident and health insurance" means insurance to provide indemnity for payments that become due on a specific credit transaction of a debtor when the debtor is disabled, as defined in the insurance policy.

(2)  "Credit life insurance" means insurance on the life of a debtor in connection with a specific credit transaction.

(3)  "Credit transaction" includes the lending of money.

(4)  "Creditor" means:

(A)  a person who lends money or who sells or leases goods, services, property, rights, or privileges, for which the payment is arranged through a credit transaction;

(B)  a successor to the right, title, or interest of a person described by Paragraph (A); or

(C)  a person who is in any way associated with a person described by Paragraph (A) or (B), including a director, officer, employee, affiliate, associate, or subsidiary of the person described by Paragraph (A) or (B).

(5)  "Debtor" means a person who borrows money or who purchases or leases goods, services, property, rights, or privileges, the payment for which is arranged through a credit transaction.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.004.  Applicability Of Chapter.

(a) This chapter applies to life insurance and accident and health insurance that is sold in connection with a credit transaction that is charged to or paid for by, in whole or part, the debtor, except insurance that is issued or sold:

(1)  in connection with a credit transaction of more than 10 years' duration;

(2)  in connection with a credit transaction that is:

(A)  secured by a first mortgage or deed of trust; and

(B)  made to:

(i)  finance the purchase of commercial real property or the construction of or improvement to a building, other than a single-family dwelling, on the real property if the purchase, construction, or improvement is secured by a lien on the real property; or

(ii)  refinance a credit transaction made for a purpose described by Subparagraph (i); or

(3)  as an isolated transaction on the part of the insurer that is not related to an agreement or a plan for insuring debtors of the creditor.

(b)  This chapter applies to insurance described by Subsection (a) regardless of the nature, kind, or plan of the credit insurance coverage or premium payment system and regardless of whether the credit insurance is charged to or paid for by the debtor directly or indirectly.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.005.  Rules.

After notice and a hearing, the commissioner may adopt rules to implement this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.006.  Filing Fee.

(a) The department shall set and collect a fee for a form or schedule filed under this chapter in an amount not to exceed $200.

(b)  Fees collected under this section shall be deposited in the Texas Department of Insurance operating account.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.007.  Gain Or Advantage From Insurance Not Prohibited Charge.

(a) The premium or cost of credit life insurance or credit accident and health insurance authorized under this chapter is not considered to be interest, a charge, consideration, or an amount in excess of permitted charges in connection with the underlying credit transaction.

(b)  Any benefit, return, or other gain or advantage to the creditor arising out of the sale or provision of the insurance under this chapter is not a violation of any law of this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Subchapter B. Forms

Section  1153.051.  Filing Of Form.

(a) An insurer shall file with the commissioner the form of each policy, certificate of insurance, notice of proposed insurance, application for insurance, endorsement, and rider to which this chapter applies that is delivered or issued for delivery in this state.

(b)  If a group policy of credit life insurance or credit accident and health insurance is delivered in another state, the insurer is required to file only the group certificate and notice of proposed insurance delivered or issued for delivery in this state, as specified in Section 1153.052.

(c)  The commissioner shall approve a certificate filed under Subsection (b) if it conforms with the requirements provided by Section 1153.052 and if the schedule of premium rates applicable to the insurance evidenced by that certificate or notice does not exceed the presumptive premium rate established by the commissioner.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.052.  Requirements Relating To Insurance Policy Or Certificate.

(a) A policy or certificate of credit life insurance or credit accident and health insurance must:

(1)  specify:

(A)  the name and home office address of the insurer;

(B)  the name of each debtor;

(C)  in the case of a certificate under a group policy, the identity, by name or otherwise, of each insured;

(D)  the full amount of premium or the total identifiable insurance charge, if any, to the debtor, separately for credit life insurance and credit accident and health insurance; and

(E)  each exception or limitation to or restriction on the coverage;

(2)  describe the coverage, including the amount and term of the coverage; and

(3)  state that the benefits are to be paid to the creditor to reduce or extinguish the unpaid amount of the debt and that any amount of benefits that exceeds the unpaid debt is to be paid to a beneficiary, other than the creditor, named by the debtor or to the debtor's estate.

(b)  The requirements of this section are in addition to the other requirements of law.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.053.  Disapproval Of Form.

(a) Not later than the 60th day after the date an insurer files a form under Section 1153.051, the commissioner shall disapprove the form if:

(1)  the benefits provided are not reasonable in relation to the premium charge; or

(2)  the form contains a provision that:

(A)  is unjust, unfair, inequitable, misleading, or deceptive;

(B)  encourages misrepresentation of the coverage; or

(C)  is contrary to this code or a rule adopted under this code.

(b)  The commissioner shall specify in the notice of disapproval of a form the reason for the disapproval and state that, if the insurer delivers to the commissioner a written request for a hearing on the disapproval of the form, the hearing will be granted not later than the 20th day after the date of the request.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.054.  Withdrawal Of Approval Of Form.

The commissioner may hold a hearing on the withdrawal of the approval of a form not earlier than the 21st day after the date written notice of the hearing is given to the insurer who submitted the form. The notice of the hearing must state the reason for the proposed withdrawal of approval. At any time after the hearing, the commissioner may withdraw approval of the form for any ground provided by Section 1153.053(a).

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.055.  Prohibitions Relating To Issuance Or Use Of Form.

(a) A policy, certificate of insurance, notice of proposed insurance, application for insurance, endorsement, or rider to which this chapter applies may not be issued or used before the 61st day after the date the form is filed with the commissioner under Section 1153.051, unless the commissioner gives prior written approval of the issuance or use of the form.

(b)  An insurer who is notified by the commissioner that a form is disapproved may not issue or use that form.

(c)  After the effective date of the withdrawal of the approval of a form under Section 1153.054, the insurer may not issue or use that form.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Subchapter C. Rates

Section  1153.101.  Filing Of Schedule Of Rates. An

insurer shall file with the commissioner each schedule of premium rates relating to a document required to be filed under Section 1153.051.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.102.  Revision Of Schedule Of Rates.

(a) An insurer may revise its schedules of premium rates for various classes of business.

(b)  The insurer shall file the revised schedules and classes of business with the commissioner.

(c)  An insurer may not issue a credit life insurance policy or credit accident and health insurance policy for which the premium rate exceeds the rate determined by using the appropriate schedule for that class of business that the insurer has on file with the commissioner.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.103.  Presumptive Premium Rate.

(a) After notice and a hearing, the commissioner by rule may adopt a presumptive premium rate for various classes of business and terms of coverage. An insurer that does not file a different rate under Section 1153.105 or 1153.106 shall file the presumptive rate adopted by the commissioner.

(b)  Except as provided by this chapter, any hearing conducted or order adopting a presumptive rate under this subchapter shall be held in accordance with the rulemaking provisions of Chapter 2001, Government Code.

(c)  In the commissioner's order adopting a presumptive rate, the commissioner shall set forth findings and conclusions on all material issues presented at the hearing.

(d)  In determining the presumptive premium rate, the commissioner shall consider any relevant data, including reasonable acquisition costs, loss ratios, administrative expenses, reserves, loss settlement expenses, the type or class of business, the duration of various credit transactions, and reasonable and adequate profits to the insurers.

(e)  In determining the presumptive premium rate, the commissioner may not set or limit the amount of compensation actually paid by a company to an agent but may request from an insurer or agent any relevant data relating to the presumptive premium rate, including information relating to compensation paid for the sale of credit insurance, expenses, losses, and profits. An insurer or agent shall provide the requested information to the commissioner in a timely manner.

(f)  The commissioner may not adopt a presumptive premium rate that is unjust, unreasonable, inadequate, confiscatory, or excessive to the insureds, the insurers, or the agents.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.304(a), eff. Sept. 1, 2003.



Section  1153.104.  Appeal Of Presumptive Rate.

Any person who is aggrieved by any action of the commissioner taken in the setting of a presumptive rate may, not later than the 30th day after the date the commissioner adopts a presumptive rate order, file a petition for judicial review in a district court in Travis County. Judicial review under this section is governed by Subchapter B, Chapter 2001, Government Code.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.304(a), eff. Sept. 1, 2003.



Section  1153.105.  Rate Within Certain Percentages Of Presumptive Rate.

(a) An insurer electing to deviate from the presumptive rate shall file with the commissioner the insurer's proposed rate for credit life and credit accident and health insurance.

(b)  On filing the rate with the commissioner, the insurer may use the filed rate until the insurer elects to file a different rate.

(c)  Except as provided by Section 1153.106, an insurer may not use a rate that is more than 30 percent higher or more than 30 percent lower than the presumptive rate.

(d)  Except as provided by this subchapter, a rate that complies with this section is valid and in compliance with the requirements of this subchapter and other applicable law.

Added by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.304(b), eff. Sept. 1, 2003.



Section  1153.106.  Rate Outside Certain Percentages Of Presumptive Rate.

(a) An insurer may file with the commissioner a proposed rate for credit life and credit accident and health insurance that is more than 30 percent higher or more than 30 percent lower than the presumptive rate adopted by the commissioner under this subchapter.

(b)  The commissioner may disapprove a rate filed under this section on the ground that the rate is not actuarially justified.

(c)  A rate filed under this section is considered approved and the insurer may use the rate if the rate is not disapproved by the commissioner before the 60th day after the date the insurer filed the rate.

(d)  A hearing under this section is a contested case hearing conducted under Chapter 2001, Government Code. Judicial review of any action of the commissioner under this section is governed by Subchapter D, Chapter 36.

Added by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.304(b), eff. Sept. 1, 2003.



Section  1153.107.  Rate Standard.

(a) A rate filed under this subchapter is not excessive unless the rate is unreasonably high for the coverage provided and a reasonable degree of competition does not exist with respect to the classification to which the rate is applicable.

(b)  A rate filed under this subchapter is not inadequate unless the rate is insufficient to sustain projected losses and expenses or the rate substantially impairs, or is likely to substantially impair, competition with respect to the sale of the product.

Added by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.304(b), eff. Sept. 1, 2003.



Subchapter D. Credit Insurance Requirements

Section  1153.151.  Forms Of Credit Life Insurance.

Credit life insurance may be issued only as:

(1)  an individual policy of life insurance issued to a debtor on a term plan; or

(2)  a group policy of life insurance issued to a creditor on a term plan providing insurance on the lives of debtors.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.152.  Forms Of Credit Accident And Health Insurance.

Credit accident and health insurance may be issued only as:

(1)  an individual policy of accident and health insurance issued to a debtor on a term plan;

(2)  a disability benefit provision in an individual policy of credit life insurance;

(3)  a group policy of accident and health insurance issued to a creditor on a term plan insuring debtors; or

(4)  a disability benefit provision in a group policy of credit life insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.153.  Evidence Of Insurance.

Credit life insurance or credit accident and health insurance shall be evidenced by an individual policy or group certificate of insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.154.  Requirements For Delivery Or Issuance Of Credit Insurance Policy.

A policy of credit life insurance or credit accident and health insurance that is delivered or issued for delivery in this state may be delivered or issued for delivery only by an insurer authorized to engage in the business of insurance in this state and may be issued only through a holder of a license issued by the commissioner.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.155.  Limits On Amount Of Credit Life Insurance.

(a) The initial amount of credit life insurance on a debtor may not exceed the total amount of debt repayable under the contract that evidences the credit transaction.

(b)  If the debt is repayable in substantially equal installments, the amount of insurance may not at any time exceed the greater of the scheduled or actual unpaid amount of the debt under the contract.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.156.  Limits On Amount Of Credit Accident And Health Insurance.

(a) The total amount of indemnity payable by credit accident and health insurance may not exceed the total amount of debt repayable under the contract that evidences the credit transaction.

(b)  The amount of a periodic indemnity payment may not exceed the scheduled periodic installment payment on the debt.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.157.  Beginning Of Term Of Credit Insurance Coverage.

(a) Except as otherwise provided by this section, the term of credit life insurance or credit accident and health insurance begins, subject to acceptance by the insurer, on the date that the debtor becomes obligated to the creditor.

(b)  With respect to an obligation that exists when a group policy takes effect, coverage begins on the later of the effective date of the policy or the date of enrollment for coverage under the policy.

(c)  If evidence of insurability is required and is provided after the 30th day after the date the debtor becomes obligated to the creditor, the term of the insurance may begin on the date the insurance company determines that the evidence is satisfactory.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.158.  Delivery Of Evidence Of Insurance To Debtor.

(a) At the time a debt for which credit insurance is sold is incurred:

(1)  the individual policy or group certificate of insurance, as appropriate, shall be delivered to the debtor; or

(2)  a copy of the application for the policy or certificate of insurance or a notice of proposed insurance that satisfies Section 1153.159 shall be delivered to the debtor.

(b)  If delivery to the debtor is made under Subsection (a)(2), the insurer shall deliver the individual policy or group certificate of insurance to the debtor on acceptance of the insurance by the insurer and not later than the 45th day after the date the debt is incurred.

(c)  If the insurer named in the application or notice under Subsection (a)(2) does not accept the risk, the debtor shall receive a policy or certificate of insurance that specifies the name and home office address of the substituted insurer and the amount of the premium to be charged for the insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.159.  Requirements Relating To Application For Insurance Or Notice Of Proposed Insurance.

A copy of an application for insurance or a notice of proposed insurance delivered under Section 1153.158 must:

(1)  be signed by the debtor;

(2)  specify:

(A)  the name and home office address of the insurer;

(B)  the name of each debtor;

(C)  the full amount of the premium or the total identifiable insurance charge, if any, to be paid by the debtor, separately for credit life insurance and credit accident and health insurance; and

(D)  the amount, term, and a brief description of the coverage to be provided;

(3)  refer exclusively to insurance coverage;

(4)  be separate from the instrument or agreement for the loan or sale or other credit statement of account, unless the information required by this section is prominently set forth in that instrument, agreement, or statement; and

(5)  provide that on acceptance by the insurer, the insurance becomes effective as provided by Section 1153.157.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.160.  Termination Of Credit Insurance.

(a) The term of credit life insurance or credit accident and health insurance must end not later than the 15th day after the scheduled maturity date of the debt unless the coverage after that date is without additional cost to the debtor.

(b)  If the debt is discharged by renewing or refinancing the debt before the scheduled maturity date, the insurance in force must terminate before new insurance may be issued in connection with the renewed or refinanced debt.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.161.  Insurance May Be Provided By Debtor.

If credit life insurance or credit accident and health insurance is required as additional security for a debt, the debtor, on request to the creditor, may provide the required amount of insurance through:

(1)  an existing insurance policy owned or controlled by the debtor; or

(2)  an insurance policy obtained from an insurer authorized to engage in the business of insurance in this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Subchapter E. Charges, Refunds, Adjustments, And Claims

Section  1153.201.  Maximum Amount Of Insurance Charge To Debtor.

A creditor may not charge a debtor for credit life or credit accident and health insurance issued to the debtor an amount that exceeds the amount of the premium that the insurer charges the creditor for that insurance, as computed at the time the charge to the debtor is determined.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.202.  Refund Of Insurance Charge On Termination Of Debt Or Insurance; Filing Of Formula.

(a) Each individual policy or group policy and group certificate must include a written notice stating that:

(1)  if the underlying debt or the insurance terminates before the originally scheduled termination date of the insurance, including the termination of a debt by renewing or refinancing the debt, the debtor shall be entitled to a refund of unearned premium; and

(2)  in the event that the underlying debt or the insurance terminates before the originally scheduled termination date of the insurance, including the termination of a debt by renewing or refinancing the debt, the person who is the holder of the underlying debt instrument on the date the debt terminates shall, no later than 60 days after the termination of the insurance, provide notice to the insurer of the termination of the debt, that includes the name and address of the insured and the payoff date of the underlying debt.

(a-1)  The refund of any amount of unearned premium paid by or charged to the debtor for insurance shall be paid or credited promptly to the person entitled to the refund no later than 30 days after receipt of the notice required to be sent to the insurer under Subsection (a)(2).

(a-2)  In any claim or action asserted by an insured against an insurer for failure to refund any unearned premium in accordance with this section, the insurer shall be entitled to indemnity from a holder who failed to provide the notice required under Subsection (a)(2).

(b)  A refund is not required if the amount of the refund is less than $3.

(c)  The formula to be used in computing the refund of the amount paid by or charged to the debtor for insurance if the underlying debt or the insurance terminates before the scheduled maturity date of the debt must be filed with and approved by the commissioner.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 502, Sec. 1, eff. September 1, 2007.



Section  1153.203.  Certain Refunds Or Adjustments Required.

(a) If the beginning of the term of insurance is delayed under Section 1153.157(c), the charge to the debtor for insurance shall be adjusted or the appropriate amount shall be refunded to the debtor.

(b)  If insurance is substituted under Section 1153.158(c) and the amount of premium for the substituted insurance is less than the amount specified in the application or notice of proposed insurance, the appropriate amount shall be refunded to the debtor.

(c)  If a creditor requires a debtor to make any payment for credit life insurance or credit accident and health insurance and an individual policy or group certificate of insurance is not issued, the creditor shall:

(1)  immediately give written notice to the debtor; and

(2)  promptly make an appropriate credit to the debtor's account.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.204.  Claim Under Policy.

(a) A claim for recovery under a policy to which this chapter applies shall be reported promptly to the insurer or the insurer's designated claim representative.

(b)  An insurer shall maintain adequate claim files.

(c)  A claim shall be settled as soon as possible and in accordance with the insurance contract.

(d)  A claim shall be paid by a draft drawn on the insurer or by check of the insurer to the order of the claimant to whom payment of the claim is due under the policy or on direction of the claimant to the person specified.

(e)  A plan or arrangement may not be used to authorize an individual, firm, or corporation, other than the insurer or the insurer's designated claim representative, to settle or adjust a claim. The creditor may not be designated as claim representative for the insurer in settling or adjusting a claim. Notwithstanding this subsection, a group policyholder, under an arrangement with the group insurer, may draw drafts or checks in payment of claims due to the group policyholder subject to audit and review by the insurer.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Subchapter O. Enforcement Of Chapter; Penalty

Section  1153.701.  Compliance Order.

(a) If, after written notice to an insurer or other person who holds a license or other authorization issued by the commissioner and a hearing, the commissioner determines that a violation of this chapter or a rule adopted under this chapter has occurred, the commissioner shall issue the details of that determination and an order for compliance by a specified date.

(b)  An order issued under this section is binding on the insurer or other person to whom it is issued on the date specified in the order unless:

(1)  the order is withdrawn by the commissioner before that date; or

(2)  the order is appealed under Subchapter D, Chapter 36.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.702.  Penalty.

(a) An individual, firm, or corporation who violates a final order issued under this chapter is liable to the state in a civil action for a penalty of not more than:

(1)  $250; or

(2)  $1,000, if the court finds the violation to be wilful.

(b)  The penalty provided by this section is in addition to any other penalty provided by law.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.



Section  1153.703.  Revocation Or Suspension Of Authority On Violation Of Order.

After notice and a hearing, the commissioner may revoke or suspend the license or certificate of authority of an individual, firm, or corporation that violates an order issued under this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.


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