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You are here: Home . rules . 2002 . 1125d-059
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Subchapter FF. Credit Life and Accident and Health Insurance

28 TAC §§3.5103, 3.5105, 3.5106, 3.5601-3.5603, 3.5605-3.5610, 3.5701, 3.5702, 3.5801, and 3.6011

The Texas Department of Insurance proposes amendments to §§3.5103, 3.5105, 3.5106, 3.5601-3.5603, 3.5605-3.5610, 3.5701, 3.5702, 3.5801, and 3.6011, concerning credit life and accident and health insurance. These amendments are proposed to update certain language in the rules, to improve application and policy provisions for credit life and accident and health insurance, to change language regarding disability claim payments so that the rule is more easily understood, to implement Texas Insurance Code Art. 3.53, as amended by Acts 2001, 77th Legislature in House Bill (HB) 2159, and to introduce more flexibility into the process for annual calls by the department for statistical data and experience reports regarding credit life and accident and health insurance.

To date, some of these sections still make reference to the State Board of Insurance, which is no longer a part of the organizational structure of the department. This proposal amends §§3.5601 and 3.5801 to replace those references to the Board with references to the commissioner and the department, respectively, to reflect the current structure of the department.

The proposal amends §3.5103 to require that both the age and birth date of debtors be included in policies for credit life and accident and health insurance. The current rule only requires that the age or birth date of the debtor be included in the application. Inclusion of the age and specific birth date of the debtor will provide a more effective means of verifying the identity of the debtor, when that is necessary.

The proposal also amends §3.5103(6) to provide more specific and clearer guidance. The current rule requires that each individual policy or group certificate of credit life and accident and health insurance set forth a description of the coverage provided by that policy. This proposal specifies that the description of coverage should be a prominent statement on the first page of the policy or certificate. Additionally, the amendment requires that the description identify whether it is a credit life policy or a credit accident and health policy. The amendment also requires that the description on the first page of the policy identify the premium payment mode for the policy and any limitations that affect the policy, such as truncated or critical period coverage.

The proposal amends §3.5105 to require that both the age and birth date of debtors be included in applications for credit life and accident and health insurance. The current rule only requires that the age of the debtor be included in the application. Inclusion of the specific birth date of the debtor will provide a more effective means of verifying the identity of the debtor, when that is necessary.

This proposal amends §3.5106(a)(2)(J), solely to improve clarity, rather than to effect substantive change to the requirements about policy provisions regarding disability claim payments that are currently set forth in the rule.

This proposal amends §§3.5601 through 3.5603, and §§3.5605 through 3.5610, primarily to implement Texas Insurance Code Art. 3.53, as amended by Acts 2001, 77th Legislature in HB 2159. HB 2159 changed the way rates are established for credit life and credit accident and health insurance policies. Before the effective date of HB 2159, the Commissioner of Insurance was charged with setting a presumptive premium rate for various classes of business and terms of coverage, through a contested case proceeding. This presumptive premium rate was to be used by all insurers that issued credit life or credit accident and health policies. Insurers that experienced excessive loss ratios could request approval from the commissioner to set their premiums at a rate that deviated from the presumptive premium rate. Those insurers could not use the deviated presumptive premium rate until they had received approval for the rate deviation in writing from the commissioner. Insurers were required to submit applications for rate deviations at least 30 days prior to the proposed effective date of the deviated rate, but no deadline existed for the commissioner to render a decision on those applications.

HB 2159 requires that the commissioner set the presumptive premium rate by rule, rather than through a contested case proceeding. It also allows insurers to set their rates in an amount that deviates from the presumptive premium rate without seeking written approval of the commissioner, as long as the deviated rate is no more than 30% above nor more than 30% below the presumptive premium rate. An insurer can now use a rate within these parameters immediately upon filing the rate with the department.

HB 2159 allows insurers to use rates more than 30% above or more than 30% below the presumptive premium rate, if the insurer obtains specific written approval for that rate from the commissioner. However, if the commissioner does not disapprove the application for such a rate before the 60th day after the rate is filed with the department by the insurer, the rate is considered approved and the insurer may use the rate. An insurer may oppose a commissioner's disapproval by requesting a contested case hearing under Chapter 2001 of the Government Code.

The changes to rate setting that are effected by HB 2159 are included in the proposed amendment to §3.5601. The amendment notes that two types of rate deviation are allowed. Deviations that are no more than 30% above nor more than 30% below the presumptive premium rate are designated in proposed §3.5601(1) as automatic deviations, because they are effective immediately upon filing with the department. An insurer's request for Deviations deviations that are more than 30% above or more than 30% below the presumptive premium rate are designated in proposed §3.5601(2) as approved deviations or approved deviated rates., because they cannot take effect until the insurer files a request for written approval by the commissioner. These rates cannot go into are not effective until the commissioner has issued written approval for them. However, if the commissioner has not taken action to approve or disapprove the request before the 60th day after the insurer filed the rate for approval, the rate is considered approved and the insurer may use the rate.

The amendment at §3.5601(3) identifies the grounds that the commissioner may rely upon to deny a request for an approved deviated rate. The commissioner can disapprove a request for an approved deviated rate if the requested rate is not actuarially justified. This standard was enacted in HB 2159 and is found at Insurance Code art. 3.53, §8(A)(6). All rates must still meet the standards of art. 3.53, §8(A)(3), which were in place before the passage of HB 2159. However, HB 2159 provided more guidance about how to determine if a proposed rate is excessive or inadequate, which is found at art. 3.53, §8(A)(7). The proposed amendment restates this standard so that the rule contains a complete statement of possible grounds for disapproval of a request for an approved deviated rate.

The grounds for disapproval identified in proposed §3.5601(3) must be considered in tandem with the loss ratio standard found currently in §3.5202. The department will review this section in the next proceeding to set a presumptive premium rate. The department will also consider at that time whether more specific guidance should be given by rule on the questions of how to identify whether a reasonable degree of competition exists with regard to a classification to which a proposed rate applies, and how to identify whether a proposed rate will, or is likely to, substantially impair competition.

Proposed §3.5601(4) recognizes that an approved deviation will take effect if it is not disapproved by the commissioner before the 60th day after the rate is filed by the insurer.

The amendments to §§3.5602, 3.5606, 3.5608 and 3.5610 add the word "approved" where appropriate to reflect that these sections address requests for those rate deviations that must be submitted for the commissioner's written approval before they can become effective. The proposed amendment to §3.5602 also includes updated language to reflect that requests for such approval are now filed with the Filings Intake Division of the department. The proposed amendment also deletes a specific reference to a form number and substitutes the language that these requests are to be submitted in the manner prescribed on the form provided by the department. Proposed amendments conforming to this procedure are also found in the amendment to the definition of "earned premium" in §3.5603 and the amendment to §3.5610.

The proposed amendments to §3.5605 reflect the differing effective dates for the two types of deviations from the presumptive premium rate.

The proposed amendment to §3.5609 makes clear that the when a creditor changes insurers, notice must be sent to the commissioner, regardless of whether the rate is an automatic deviated rate or an approved deviated rate.

The proposed amendments to §§3.5701 and 3.5702 are intended to create more flexibility in the process of annual calls by the department for statistical data and experience reports from credit life and credit accident and health insurers. In recent years, the department has accompanied data calls with mailed computer diskettes, which contained the forms needed for responding to the data call. This approach enabled responding insurers to provide the data in a manner that facilitated the department's expeditious review of the information submitted. The department hopes to continue taking advantage of advancements in information technology to improve efficiency, and sees a possibility of changing the media used from diskette to CD-ROM, or even the direct electronic delivery of the information. Such changes are likely to involve changing formatting of report forms. The specifics of the information requested may change over time as well.

The proposed amendment to §3.5701 points out that the forms will also be available from the department's Filings Intake Division and accessible at the department's internet web site. Statistical data and experience reports will be requested pursuant to Insurance Code §38.001. The current practice of the department is to provide the forms and their respective instructions when the data call is issued and that will continue.

The proposed amendment to §3.5702 deletes the instructions for the specific forms that are identified in §3.5702. Because the instructions accompany the forms and will continue to do so, there is no need to include them in the rule. The list of forms remains in the rule, because those same forms will continue to be used. However, the proposed amendment removes the reference to revision dates, in case the form needs to be updated periodically. Subsection (a) directs the public to the department's Filings Intake Unit and web site for copies of the forms. Subsection (l), which addressed submitting the data on diskette, is proposed as subsection(c) and amended to include the possibility of using other media or protocols for data submittal.

The proposed amendment to §3.6011 directs the public to the correct sources for obtaining a copy of the Consumer Bill of Rights for Credit Life, Credit Disability and Involuntary Unemployment Insurance.

2. FISCAL NOTE. Kim Stokes, Senior Associate Commissioner, Life, Health and Licensing Division, has determined that for each year of the first five years the proposed amendments will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the amendments. There will be no measurable effect on local employment or the local economy as a result of the proposal.

3. PUBLIC BENEFIT/COST NOTE. Ms. Stokes has also determined that for each of the first five years the proposed amendments will be in effect, the public benefits anticipated as a result of the amendments will be greater flexibility and less cost for insurers in setting rates for credit life and credit accident and health insurance policies.

Any costs to insurers complying with the amended sections each year of the first five years the proposed amendments will be in effect are the result of the legislative enactment of HB 2159, and not a result of the adoption and implementation of this proposal. The proposal allows more flexibility in the gathering of information and provides for clearer understanding on the part of policyholders, but the proposal does not create new costs or increase existing costs for insurers.

It is the department's position that adoption of the proposed amendment will have no adverse effect on small or micro businesses. Waiver or modification of the amendment for small or micro businesses is therefore not appropriate.

4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on January 6, 2003 to Gene C. Jarmon, Acting General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to Bill Bingham, Mail Code 107-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. A request for a public hearing should be submitted separately to the Office of the Chief Clerk.

5. STATUTORY AUTHORITY. The amendments are proposed under the Insurance Code Article 3.53 and §36.001. Article 3.53 provides the statutory basis for the regulation of credit life and credit accident and health insurance in Texas, including the setting of rates. Section 36.001 provides that the Commissioner of Insurance may adopt rules to execute the duties and functions of the Texas Department of Insurance as authorized by statute.

The following article is affected by this proposal: Insurance Code Arts. 3.50 & 3.53

DIVISION 2. APPLICATIONS AND POLICIES

§3.5103. Policy Provisions. Each individual policy or group certificate of credit life insurance or credit accident and health insurance delivered or issued for delivery in this state shall, in addition to the other requirements of law, set forth:

(1) (No change.)

(2) the name , [ and] age and [ or] birth date of the insured debtor (or debtors, if joint life);

(3) - (5) (No change.)

(6) a brief description , located on the first page of the policy or certificate, of the coverage to include a prominent statement regarding:

(A) the type of coverage (e.g., credit life or credit accident and health),

(B) premium mode (e.g., single premium, monthly outstanding balance, or closed-end or open-end/revolving account), and

(C) limitations (e.g., truncated or critical period).

(7) - (9) (No change.)

§3.5105. Application Provisions.

(a) (No change.)

(b) Every application, enrollment form or notice of proposed insurance, shall provide for the signature of the debtor and shall set forth:

(1) (No change.)

(2) the name , [ and] age and birth date of the debtor or debtors;

(3) - (7) (No change.)

(c) - (e) (No change.)

§3.5106. Prohibited Provisions and Practices.

(a) The policy or certificate of insurance shall not contain provisions which would encourage misrepresentation or are unjust, unfair, inequitable, misleading, deceptive or contrary to law or to the public policy of this state. A policy, certificate of insurance, notice of proposed insurance, application for insurance, endorsement and rider filed with the commissioner shall be presumed to be unjust, unfair, inequitable, misleading, deceptive, or to encourage misrepresentation unless:

(1) (No change.)

(2) each policy or certificate of insurance contains provisions substantially as follows.

(A)-(I) (No change.)

(J) Disability claim payments. Benefits payable under the policy shall be paid in the following manner.

(i) For any loss for which the policy provides periodic payment, all accrued benefits shall be paid (insert period for payment as provided in the policy) during the period for which the insurer is liable, and any balance remaining unpaid at the termination of such period shall be paid in full after receipt of due written proof of such loss.

(ii) For any other loss, benefits shall be paid upon receipt of due written proof of such loss. [for any loss other than loss for which the policy provides any periodic payment will be paid upon receipt of due written proof of such loss. Subject to due written proof of loss, all accrued benefits payable for loss for which the policy provides periodic payment shall be paid ____ (insert period for payment as provided in the policy) during the continuance of the period for which the insurer is liable, and any balance remaining unpaid at the termination of such period shall be paid after receipt of due written proof.]

(K) - (L) (No change.)

(b) - (c) (No change.)

DIVISION 6. DEVIATION PROCEDURES

§3.5601. Deviation by Case Allowed. Two types of rate deviation are allowed. They are:

(1) Automatic Deviation. An insurer electing to deviate from the presumptive premium rate established by the commissioner shall file with the commissioner the insurer´s proposed rate for credit life and credit accident and health insurance. On filing the rate with the commissioner, the insurer may use the filed rate until the insurer elects to file a different rate. Except as provided in paragraph (2) of this section, an insurer may not use a rate that is more than 30% higher or 30% lower than the presumptive premium rate.

(2) Approved Deviation by Case. Notwithstanding the determination by the Commissioner [ State Board] of Insurance of presumptive premium rates [ presumably acceptable maximum rates] which are reasonable in relation to the benefits of a policy providing the coverage to which the rates are applicable, an insurer who has experienced excessive loss ratios or who fails to develop the minimum loss ratio as defined in §3.5202 of this title (relating to Reasonable Relation of Benefits to Premiums), for a case consisting of a single account or combination of accounts, as "account" is hereinafter defined, will be permitted, at its own request, or may be required by the commissioner, to adjust the premium rate or premium rate schedule for such case in accordance with the deviation procedures set out in §§3.5601-3.5610 of this title (relating to Deviation Procedures).

(3) The commissioner may disapprove a request for an approved deviated rate on the grounds that the rate is not actuarially justified, or is unjust, unreasonable, excessive or inadequate. A rate is excessive if it 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 would be applicable. A rate is inadequate if 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.

(4) The insurer may use the rate if the commissioner does not disapprove it before the 60th day after the date the insurer filed the rate.

§3.5602. Request for an Approved Deviated Premium [ Presumptive] Rate. A request for an approved [ a] deviated rate must be made in writing and shall include all of the information which is required under §§3.5601 to 3.5610 of this title (relating to Deviation Procedures). It must be accompanied by a list of the creditors whose experience is the basis for such request, and must be attested to by an officer of the insurer. The use of any approved rate deviation approved by the commissioner is limited to those creditors whose names appear on such list. No rate deviation may be used unless and until approved by the commissioner in writing. Any request for an approved deviated [ presumptive] rate [ rates] shall be submitted to the commissioner through the Filings Intake Division [ Credit Life and Credit Accident and Health Section] in the manner prescribed on the form provided by the department for that purpose. The form can be obtained from the Texas Department of Insurance, Filings Intake Division, MC 106-1E, P.O. Box 149104, Austin, Texas 78714-9104. The form can also be obtained from the department's internet web site at http://www.tdi.state.tx.us [ Form CI-DRF (§3.5610 of this title (relating to Determination of Deviated Presumptive Case Rates))]. In order to provide the commissioner sufficient time for review, all requests for approved rate deviations must be submitted a minimum of 60 [ 30] days prior to the proposed effective date of the approved deviated rate.

§3.5603. Definitions. The following words and terms, when used in §§3.5601 to 3.5610 of this title (relating to Deviation Procedures), shall have the following meanings, unless the context clearly indicates otherwise.

(1) - (5) (No change.)

(6) Earned premium -- Premium earned during the experience period at the presumptive rate. If the rate for a case is not the presumptive rate, premium earned at the presumptive rate must be determined in accordance with the conversion method set forth in the form provided by the department for that purpose, [ §§3.570 and 3.5702 of this title (relating to Experience Calls) (Forms CI-EP-L, CI-EP-DIS-1/60, and CI-EP-DIS-61/120)] and set out in an attachment by the insurer to its deviation request form. The form can be obtained from the Texas Department of Insurance, Filings Intake Division, MC 106-1E, P.O. Box 149104, Austin, Texas78714-9104. The form can also be obtained from the department's internet web site at http://www.tdi.state.tx.us.

(7) - (10) (No change.)

§3.5605. Effective Date of Deviated [ Presumptive] Rate. An automatic rate deviation shall be effective immediately upon filing with the commissioner. The effective date for any approved rate deviation shall be the earlier of the date of approval in writing by the commissioner, or the 60th day after the date the insurer filed its request for approval of an approved deviated rate. [ no later than 60 days after the date of approval in writing by the commissioner.]

§3.5606. Effective Period of Downward Deviated Case Rate. A downward approved deviated single account case rate as determined in §3.5609 of this title (relating to Notice of Change of Insurer on Deviated Presumptive Rates Required) remains with the case, regardless of any change of insurers, and shall continue for a period equal to the experience period on which it was based, not to exceed three years, subject however to the provisions of §3.5608 of this title (relating to Annual Review of Approved Deviated Rates).

§3.5607. Termination of Upward Deviated Case Rate. Said authorization shall continue for a period equal to the experience period on which it was based, not to exceed three years, subject however to the provisions of §3.5608 of this title (relating to Annual Review of Approved Deviated Rates). If a change of insurers occurs, an upward approved deviated single account case rate may be continued by the replacement carrier by giving written notification to the commissioner, within 30 days of the effective date of providing coverage to the account, of the new carrier's intent to continue the upward approved deviated single account case rate. The period of continuance shall not go beyond the expiration date originally granted to the previous insurer for that account. If a change of insurers occurs, an upward approved deviated multiple account case rate shall not be continued by the replacement insurer beyond the date the original carrier lost the account unless all of the accounts forming the multiple account pool are taken over. If all accounts are taken over, the requirements for continuation are the same as mentioned in the preceding paragraph for single account cases.

§3.5608. Annual Review of Approved Deviated Rates. All approved deviated rates shall be reviewed for each case in accordance with these §§3.5601 - 3.5610 of this title (relating to Deviation Procedures) each year for each case. At the time of such review of approved deviated rates, adjustments may be made in the rates if the commissioner finds that experience shows that an adjustment is appropriate.

§3.5609. Notice of Change of Insurer on Deviated [ Presumptive] Rates Required. When a creditor changes insurers, and that creditor is charging a rate other than the presumptive premium rate, the previous insurer shall within 60 days file written notice of the change with the commissioner. [ The previous insurer shall, within 60 days of a change of insurers, give written notice to the commissioner that a creditor for which a deviated presumptive rate has been approved, has made a change of insurer.]

§3.5610. Determination of Approved Deviated [ Presumptive] Case Rates.

(a) For cases which are not of credible size, or have no experience, no approved deviation shall be made in the presumptive rates under these deviation procedures; except that nothing herein shall be construed as preventing any insurer from filing its rate schedules as otherwise provided under the Insurance Code, Article 3.53.

(b) (No change.)

(c) Schedule of new case rates. When submitting a Request for Deviated Rate pursuant to [ form CI-DRF as required by] §3.5602 of this title (relating to Request for an Approved Deviated Premium [ Presumptive] Rate) the insurer shall also file a schedule of new case rates as determined by this section.

(d) Approved Deviation Request Form. As required by §3.5602 of this title [ (relating to Request for Deviated Presumptive Rate)] any request for approved deviated [ presumptive] rates shall be submitted to the commissioner through the Filings Intake Division [ Credit Life and Credit Accident and Health Section] in the manner prescribed on the form provided by the department for that purpose. [ by form CI-DRF, Credit Insurance Deviation Request Form State of Texas, which is filed with the Office of the Secretary of State, Texas Register Section and incorporated by reference.] The form can be obtained from the Texas Department of Insurance, Filings Intake Division, MC 106-1E, [Publications Department, MC 108-5A], P.O. Box 149104, Austin, Texas78714-9104. The form can also be obtained from the department's internet web site at http://www.tdi.state.tx.us.

DIVISION 7. EXPERIENCE CALL

§3.5701. Statistical Data and Annual Experience Calls.

(a) Insurers writing credit life insurance and accident and health insurance in Texas shall keep statistical data in such form and manner as necessary to enable the commissioner to determine if rates are reasonable in relation to the benefits afforded by the various policy contracts together with appropriate expenses. Each such insurer shall submit experience reports as shall be required by specific annual call of the commissioner upon reporting forms supplied by such call. Each insurer shall complete each of the forms in accordance with the instructions that the department provides with the forms. Additional copies of the forms can be obtained from the Texas Department of Insurance, Filings Intake Division, MC 106-1E, P.O. Box 149104, Austin, Texas78714-9104. The forms can also be obtained from the department's internet web site at http://www.tdi.state.tx.us.

(b)The experience reports required by subsection (a) of this section [ these §3.5701 and §3.5702 of this title (relating to Experience Calls)] shall not replace other annual reports of credit insurance experience and are separate and distinct from the NAIC annual statement and from the deviation request permitted by §3.5601 of this title (relating to Deviation by Case Allowed) and are not used in any manner to determine the financial condition of the company.

§3.5702 Instructions for Preparing Forms.

(a) Identification of Forms: These forms shall be used for submission of credit life and accident and health insurance annual experience call responses [ are filed with the Office of the Secretary of State, Texas Register Section, and incorporated by reference]. They can be obtained from the Texas Department of Insurance, Filings Intake Division, MC 106-1E [ Publications Department, MC 108-5A], P.O. Box 149104, Austin, Texas 78714-9104. The forms can also be obtained from the department's internet web site at http://www.tdi.state.tx.us.

FORM---------------------- DESCRIPTION

CI-I-PR---------------------------Inventory Information Form PresumptiveRates

CI-I-DR---------------------------Inventory Information Form Deviated Rates

CI-ACT-CERT-----------------Actuarial Reserve Certification Form

CI-VAL-AFF------------------Affidavit of Validity of Experience Data Form

CI-EX-L[ (Rev. 1992)]---------Credit Life Insurance Experience Report Form

CI-EX-DIS[ (Rev. 1992)]-------Credit Disability Insurance Experience Report Form

CI-EXP-L-------------------------Credit Life General Expense Report Form

CI-EXP-DIS-----------------------Credit Disability General Expense Report Form

CI-EP-L [ (Rev. 1992)]]---------------Earned Premiums Credit Life Insurance

CI-EP-DIS [ (Rev. 1992)]---------------Earned Premium Credit Disability Insurance

CI-R-L [ (Rev. 1992)]-----------------Reconciliation to State Page Credit Life

CI-R-DIS [ (Rev. 1992)]----------------Reconciliation to State Page Credit Disability

(b) Calculations and work papers. Copies of all calculations, work papers and other data used in preparing these forms are not to be mailed to the Texas Department of Insurance unless requested, but must be maintained at the home office of the company and be available for examination by the commissioner of insurance.

[ (c) Copies of forms. The forms listed in subsection (a) of this section should be reproduced as needed so as to provide for separate reports prescribed by §3.5701 of this title (relating to Statistical Data and Annual Experience Calls) and this section.]

[ (d) Experience period.]

[ (1) The experience period will consist of a maximum of three calendar years.]

[ (2) Data included in this report is to be the direct business of the current insurer, only, without adjustment for reinsurance assumed or ceded. The data is to be limited to credit life and credit accident and health insurance in force or written directly in the State of Texas on loans or other credit transactions of 120 months or less duration.]

[ (e) Inventory forms (CI-I-PR and CI-I-DR). The purpose of these forms is to identify all classes, loan durations, and plans of credit insurance on which the insurer either wrote any premium or held any unearned premium reserves during the year. Check all boxes in which either any premium was written or any unearned premium reserves were held during the year. For any boxes checked, appropriate forms as listed in subsection (a) of this section must be filed with the commissioner. A separate form CI-I-PR (or CI-I-DR if appropriate) must be filled out for each class of business (A, B, C, D, E, or F) and loan duration as indicated at the top of forms CI-I-PR and CI-I-DR.]

[ (f) Actuarial certification form (CI-ACT-CERT). The purpose of this form is to provide verification as to the method used to compute the unearned premium reserves for single premium credit insurance. The form is to be signed by a qualified actuary. A qualified actuary is a member of the American Academy of Actuaries.]

[ (g) Affidavit of validity form (CI-VAL-AFF). The purpose of form CI-VAL-AFF is to provide an affidavit as to the completeness and validity of the credit insurance experience data submitted. The affidavit requires a notarized signature of an officer of the company and certifies that the information submitted for the insurer is a full and true statement of the credit experience for the reporting year(s) requested, according to the best information, knowledge, and belief of the affiant.]

[ (h) Experience forms (CI-EX-L (Revised 1992) and CI-EX-DIS (Revised 1992)). The purpose of these forms is to provide statewide experience data in order to determine if the benefits provided under contracts of credit insurance are reasonable in relation to premiums charged in order that the board may discharge its statutory obligations for the supervision of credit insurance operations under the Insurance Code, Article 3.53. A separate form CI-EX-L (Revised 1992) or CI-EX-DIS (Revised 1992) must be filed for each class of business and plan of benefits.]

[ (1) Earned premiums.]

[ (A) Line 1a Net written premiums. Net premiums to be shown on line 1a are to be determined as follows: Gross premium written (before deductions for dividends and experience rating credits) less refunds on terminations.]

[ (B) Line 1d Actual earned premiums. The total of all premiums earned at the premium rates actually charged and in force during the experience period.]

[ (C) Line 1e Earned premiums at presumptive rate. Actual earned premiums adjusted (on form CI-EP-L (Revised 1992) or CI-EP-DIS (Revised 1992), to the amount which would have been earned had the premium rate during the experience period been equal to the presumptive rate in effect at the end of the reporting period. Note that if premiums in force differ from the presumptive rate in effect at the end of the reporting year, line 1d will not equal line 1e.]

[ (2) Mean insurance in force, line 4 Form CI-EX-L (Revised 1992).]

[ (A) Particular care should be exercised to assure sufficiently accurate results in determining the amounts of "mean insurance in force."]

[ (B) The average of the monthly amounts should be calculated and entered as the mean insurance in force on line 4. Exclude reinsurance assumed and do not deduct any ceded. For joint coverage, the amount of insurance in force shall equal twice the death benefit payable under the contract and shall not be reported as twice the death benefit.]

[ (3) Commissions and Service Fees Incurred, line 6a of Form CI-EX-L (Revised 1992) or line 4a of Form CI-EX-DIS (Revised 1992). The amount to be reported on this line shall be the total amount of commissions and service fees incurred in the state of Texas (direct business only). Commissions and service fees incurred means those that are paid, plus the change in due and unpaid commissions and service fees. The commissions shall be inclusive of commissions for agents or general agents and shall be reflected separately for each class of business and plan of benefits as indicated at the top of either Form CI-EX-L (Revised 1992) or CI-EX-DIS (Revised 1992).]

[ (i) General expense forms (CI-EXP-L and CI-EXP-DIS). The purpose of these forms is to provide general expense and allocation information to assist the board in promulgating presumptive premium rates for this state. For credit life coverage, the data should be the total of all classes of business and plans of life benefits. The credit life data will be reported on form (CI-EXP-L). For credit disability coverage, the data should be the total of all classes of business and plans of disability benefits. The credit disability data will be reported on form (CI-EXP-DIS). The reported nationwide general expenses are to be limited to those items listed on page 2, 3, 4 and 5 of forms CI-EXP-L and CI-EXP-DIS. Commissions are to be reflected solely on forms CI-EX-L (Revised 1992) and CI-EX-DIS (Revised 1992). The expenses shall be limited to the credit insurance general expenses for loan durations not exceeding 120 months.]

[ (1) Number of single premium policies and certificates of insurance for Texas experience.]

[ (A) Line 1a Incepting in the reporting year. The total number of policies and certificates of insurance which took effect (incepted) in the reporting year shall be shown on line 1a of CI-EXP-L or CI-EXP-DIS, as appropriate. If coverage for both life and disability are written on the same policy or certificate of insurance, report the coverages as if each coverage had been written separately.]

[ (B) Line 1b In-force from previous years and continuing in-force after the reporting year. The total number of policies and certificates of insurance which took effect before the reporting year and are still in-force at the end of the reporting year shall be reported on line 1b. If coverage for both life and disability are written on the same policy or certificate of insurance, report the coverage as if each coverage had been written separately.]

[ (C) Line 1c Policies and certificates going out of force during the reporting year, for any reason. The total number of policies and certificates of insurance which terminated during the reporting year shall be reported on line 1c. If coverage for both life and disability are written on the same policy or certificate of insurance, report the coverages as if each coverage had been written separately.]

[ (D) Line 1d Total number of policies and certificates of insurance in force at the start of the reporting year. The sum total of policies and certificates of insurance which are in force at the beginning of the reporting year are to be reflected on line 1d. If coverage for both life and disability are written on the same policy or certificate of insurance, report the coverages as if each coverage had been written separately.]

[ (E) Line 1e Total number of policies and certificates of insurance in force at the end of the reporting year. The sum total of policies and certificates of insurance which were in force at the beginning of the reporting year plus those that took effect during the reporting year minus those that terminated during the year are to be reflected on line 1e. If coverage for both life and disability are written on the same policy or certificate of insurance, report the coverages as if each coverage had been written separately. Line 1e equals Line 1a plus Line 1d minus Line 1c.]

[ (2) Number of single premium policies and certificates of insurance for nationwide experience. The instructions are the same as those listed for lines 1a- 1e, described in paragraphs (1)(A)-(E) of this subsection, except that the data is to reflect the nationwide experience rather than being limited to the Texas experience.]

[ (3) Number of monthly outstanding balance policies and certificates of insurance for Texas experience.]

[ (A) Line 3a Incepting in the reporting year in Texas. The total number of policies and certificates of insurance which took effect (incepted) in the reporting year shall be shown on line 3a of CI-EXP-L or CI-EXP-DIS, as appropriate. If coverage for both life and disability are written on the same policy or certificate of insurance, report the coverages as if each coverage had been written separately.]

[ (B) Line 3b Total number of policies and certificates of insurance in force at the start of the reporting year. The sum total of policies and certificates of insurance which are in force at the beginning of the reporting year are to be reflected on line 3b. If coverage for both life and disability are written of the same policy or certificate of insurance, report the coverages as if each coverage had been written separately.]

[ (C) Line 3c Total number of policies and certificates of insurance in force at the end of the reporting year. The sum total of policies and certificates of insurance which were in force at the beginning of the reporting year plus those that took effect during the reporting year minus those that terminated during the year are to be reflected on line 3c. If coverage for both life and disability are written on the same policy or certificate of insurance, report the coverages as if each coverage had been written separately.]

[ (4) Number of monthly outstanding policies and certificates of insurance for nationwide experience. The instructions are the same as those listed for lines 3a- 3c of this subsection except that the data is to reflect the nationwide experience rather than being limited to the Texas experience.]

[ (5) Average original term of policies and certificates of insurance, in months, for single premium business only.]

[ (A) Line 5a Incepting in the reporting year in Texas. The average original term of all single premium policies and certificates of insurance which took effect in Texas ONLY during the reporting year shall be reflected on line 5a. For coverage with odd days, round the term to the nearest whole month.]

[ (B) Line 5b Incepting in the reporting year nationwide. The average original term of all single premium policies and certificates of insurance which took effect during the reporting year, for the carriers' nationwide business, shall be reflected on line 5b. For coverage with odd days, round the term to the nearest whole month.]

[ (6) Expense and allocation table. The expense line items, shown to the left of column 1, track exactly to those in Exhibit 5 of the NAIC Life Annual Statement for life and accident and health carriers. Casualty carriers should contact the Credit Life and Credit Accident and Health Section of the Texas Department of Insurance for more detailed instructions.]

[ (A) Column 2. Enter the amount for each expense line item in column 2. The total of column 2 should reconcile to the amount shown on the page entitled "Analysis of Operations by Lines of Business" of the NAIC Life Annual Statement for the reporting year. For life and accident and health companies, refer to line 22, column 6, for credit life coverages or line 22, column 10, for credit accident and health coverages. Casualty carriers should contact the Credit Life and Credit Accident and Health Section of the Texas Department of Insurance for more detailed instructions. ]

[ (B) Column 3. Percentage allocated. The call differentiates general expenses into two categories -- directly incurred versus allocated. Expenses directly incurred are those specifically and uniquely attributable to credit life or credit accident and health insurance. Directly incurred expenses would include salaries, professional fees, marketing expenses, etc. whose expenditure is solely a function of the credit life or credit accident and health insurance transaction. Allocated expenses would include corporate overhead or other expenses shared with lines of insurance other than credit life or credit accident and health. For example, if the insurer sells several lines of insurance in addition to credit life and credit accident and health, the share of corporate management salaries assigned to credit life or credit accident and health would be the result of an allocation.]

[ (C) Column 4 Basis for allocation. If Column 3 contains a percentage greater than 0%, explain the basis of allocation; such as: square feet of office space, number of employees, premium volume, number of claims, policies or certificates of insurance in-force, policies or certificates of insurance issued or any other basis employed.]

[ (D) Examples. Enter the percentage of the general expense line item resulting from an allocation, as opposed to directly incurred expenses, in column 3. Examples include:]

[ (i) If the entire form 1, line 22 amount is an allocation of corporate general expenses, enter that dollar amount in Column 2, line 10--Total, and enter 100% in Column 3, line 10. Explain the basis for allocation in Column 4, line 10. ]

[ (ii) If legal fees are incurred only in conjunction with credit life claims or other credit life activities, enter 0% in Column 3, line 4.1.]

[ (iii) If traveling expenses are incurred jointly (and only) for the benefit of credit life and credit accident and health and if the total amount is allocated to each line, enter 100% in Column 3, line 5.1, and explain the basis for allocation in Column 4, line 5.1.]

[ (iv) If the cost of claim investigation and settlement consists partly of contract investigators incurred solely on behalf of credit life claims ($30,000) and partly as a result of a corporate allocation of claims investigation ($30,000), enter $60,000 in Column 2, line 4.5, and enter 50% in Column 3, line 4.5. Explain the basis for the corporate allocation of claims investigation in Column 4, line 4.5.]

[ (7) Additional miscellaneous information.]

[ (A) Line 7a Sundry general expenses. Please list the major components of the expense items referred to as "Sundry General Expenses."]

[ (B) Line 7b Aggregate write-ins. Please list the major components of the expense items referred to as "Aggregate Write-Ins."]

[ (C) Line 7c. If the company writes creditor-paid insurance, fill in the ratio of premiums written during the reporting period for creditor-paid business to all business, and the ratio of policies and certificates in force at the end of the reporting period for creditor-paid business to all business.]

[ (j) Earned premium forms (CI-EP-L (Revised 1992) and CI-EP-DIS (Revised 1992)).]

[ (1) The purpose of these forms is to convert actual earned premiums to the amount of premiums which would have been earned had all business been written at the current presumptive rate in effect at the end of the reporting year. If more than one year's data is requested, each year's data shall use the presumptive rate that was in effect at the end of each reporting year.]

[ (2) Form CI-EP-L (Revised 1992) is applicable to credit life insurance, Form CI-EP-DIS (Revised 1992) is applicable to credit disability insurance. Note that Forms CI-EP-L (Revised 1992) and CI-EP-DIS (Revised 1992) should be reproduced as needed to correspond to the class of business, loan duration and plan of benefits, as shown on the corresponding Form CI-EX-L (Revised 1992) or CI-EX-DIS (Revised 1992).]

[ (A) General.]

[ (i) A Form CI-EP-L (Revised 1992) or CI-EP-DIS (Revised 1992), as applicable, must be completed for each Form CI-EX-L (Revised 1992) or CI-EX-DIS (Revised 1992) where the presumptive earned premium differs from the actual earned premium. More than one form may be required when more than one year's data is presented, due to changes in the presumptive rates or other factors.]

[ (ii) Actual earned premiums are to be converted to presumptive earned premiums by the use of a conversion factor which is the ratio of the presumptive premium rate to the actual premium rate. This conversion must be performed for each premium rate with premiums in force during the experience period.]

[ (iii) The overall totals presented on Form CI-EP-L (Revised 1992) or CI-EP-DIS (Revised 1992) must agree to the appropriate lines on the Form CI-EX-L (Revised 1992) or CI-EX-DIS (Revised 1992) to which they are attached.]

(iv) Note that Form CI-EP-L (Revised 1992) and Form CI-EP-DIS (Revised 1992) include actual earned premium at the presumptive rate, in effect at the end of the reporting year, on Line A. This data is for balancing purposes only, and in no way indicates that Form CI-EP-L (Revised 1992) or CI-EP-DIS (Revised 1992) must be completed if actual earned premium is equal to presumptive earned premium, in effect at the end of the reporting year.

]

[ (B) Form CI-EP-L (Revised 1992)--credit life insurance.]

[ (i) Presumptive earned premium (Column 4) is the product of actual earned premium (Column 1) times the conversion factor (Column 2/Column 3).]

[ (ii) See also subparagraph (A)(iii) and (iv) of this paragraph.]

[ (C) Form CI-EP-DIS (Revised 1992)--credit disability insurance.]

[ (i) Since deviated rates generally can be expressed as a percentage of the presumptive rates, the conversion factor will tend to be constant for all periods. When using Form CI-EP-DIS (Revised 1992), the conversion factor to be utilized is the average of three ratios taken between presumptive and actual rates for 12-, 24-, and 36-month terms. The sum of these ratios, divided by three, becomes the conversion factor.]

[ (ii) Presumptive premium rates are to be presented on Line A, Columns 2- 4 of Form CI-EP-DIS (Revised 1992), as applicable. All ratios (Line b) are to be calculated by dividing Line A by Line a.]

[ (iii) These forms should be reproduced as necessary to present the required conversion for all premium rates in force during the experience period.]

[ (iv) See also subparagraph (A)(iii) and (iv) of this paragraph.]

[ (k) Reconciliation forms (CI-R-L (Revised 1992) and CI-R-DIS (Revised 1992)).]

[ (1) The purpose of this form is to present a reconciliation between current year data presented on the various forms, CI-EX-L (Revised 1992) and CI-EX-DIS (Revised 1992) and the total presented on the page entitled "DIRECT BUSINESS IN THE STATE OF TEXAS DURING THE YEA" (commonly known as the "state page") (46) of the annual statement.]

[ (2) Form CI-R-L (Revised 1992) is applicable to credit life insurance and Form CI-R-DIS (Revised 1992) is applicable to credit disability insurance.]

R

[ (A) Due to the volume of forms CI-EX-L (Revised 1992) and CI-EX-DIS (Revised 1992) which may be filed, each such form will be listed by page number only on the appropriate form, CI-R-L (Revised 1992) or CI-R-DIS (Revised 1992). Each form, CI-EX-L (Revised 1992) or CI-EX-DIS (Revised 1992), must contain a page number to identify it on forms, CI-R-L (Revised 1992) and CI-R-DIS (Revised 1992).]

[ (B) Line references included in column headings refer to the appropriate form CI-EX-L (Revised 1992) or CI-EX-DIS (Revised 1992).]

[ (C) This form should be reproduced as necessary to include all forms CI-EX-L (Revised 1992) or CI-EX-DIS (Revised 1992).]

(c) [ (l)] Experience data submissions to be filed electronically [ on diskette]. The experience data of each carrier must be submitted using the electronic media specified in the instructions that accompany the forms [ on diskette]. The diskette or CD-ROM, if required, will be furnished by the Texas Department of Insurance. If the instructions specify another media or format, specific instructions for filing will be provided by the department. The experience data shall be submitted in the required electronic format, [ entered onto the diskette and returned] along with a hard copy of the information. Any carrier who cannot comply with the filing of their credit experience data in the required electronic format [ on diskette] shall contact the Filings Intake Division [ Credit Life and Accident and Health Section] of the Texas Department of Insurance immediately, after receiving the credit experience data call packet, to request an alternative method for filing of their experience data. The request for using an alternative method for the submission of experience data shall be forwarded to the Texas Department of Insurance, Filings Intake Division [ Credit Life and Credit Accident and Health Section], MC 106-1E [ MC 106-1C], P.O. Box 149104, Austin, Texas 78714-9104.

[ (m) Notice of dates for submission of credit experience annual call documents. The dates for submission of credit insurance annual experience call documents will be listed in a letter written under the Insurance Code, Article 1.24. The letter will list dates for submission that will allow a reasonable period of time for insurers to comply with the request for the documents.]

DIVISION 8. ADDITIONAL COVERAGES

§3.5801. Proposal for Other Types of Coverage. If a company proposes to write any type of coverage other than those set forth in this subchapter, it may request the department [ board] to set a public hearing to determine if a public need exists for such coverage and to determine, through credible statistics, whether the rate proposed may be presumed to be reasonable in relation to the benefits offered, until such time that experience indicates a different rate.

DIVISION 10. RESPONSIBILITIES AND OBLIGATIONS OF INSURANCE COMPANIES AND THEIR AGENTS AND REPRESENTATIVES

§3.6011. Responsibility and Obligation of Insurers to Provide Copies of Consumer Bill of Rights for Credit Life, Credit Disability, and Involuntary Unemployment Insurance to Each Insured.

(a) All insurers writing credit life, credit disability, and involuntary unemployment insurance policies must provide with each new policy and certificate of credit life, credit disability, and involuntary unemployment insurance a copy of the Texas Department of Insurance [ form CL-CD-IU-CBR. This form,] Consumer Bill of Rights for Credit Life, Credit Disability, and Involuntary Unemployment Insurance . [ ,] This form is filed with the Office of the Secretary of State, Texas Register Section . [ and is incorporated in this rule by reference.] The form can be obtained from the Texas Department of Insurance, Filings Intake Division, MC 106-1E [ Publications Department, MC 108-5A], P.O. Box 149104, Austin, Texas 78714-9104. The form can also be obtained from the department's internet web site at http://www.tdi.state.tx.us. The [ Form CL-CD-IU-CBR,] Consumer Bill of Rights for Credit Life, Credit Disability, and Involuntary Unemployment Insurance shall accompany each renewal notice for credit life, credit disability, and involuntary unemployment insurance unless the current version of the form has been previously provided to the insured by the insurer.

(b) Insurers may reproduce the Consumer Bill of Rights for Credit Life, Credit Disability, and Involuntary Unemployment Insurance [ Form CL-CD-IU-CBR] for the distribution required by subsection (a) of this section. Alternatively, insurers may generate it [ the form] on their own equipment. If the Consumer Bill of Rights for Credit Life, Credit Disability, and Involuntary Unemployment Insurance [ form] is generated by the insurers, it must appear in no less than 10-point type and be on separate pages with no other text on those pages.

(c) The Texas Department of Insurance has promulgated a Spanish language version of the Consumer Bill of Rights [ contained in Form CL-CD-IU-CBR which is called Form CL-CD-IU-CBR (SP) and] , which is filed with the Secretary of State's Office. The Spanish language version of the Consumer Bill of Rights must be provided to any consumer who requests it from the company. The form can be obtained from the Texas Department of Insurance, Filings Intake Division, MC 106-1E, [Publications Department, Mail Code 108-5A], P.O. Box 149104, Austin, Texas 78714-9104. The form can also be obtained from the department's internet web site at http://www.tdi.state.tx.us.

(d) Insurers may reproduce the Spanish language version of the Consumer Bill of Rights [ Form CL-CD-IU-CBR(SP)] for the distribution required by subsection (c) of this section. Alternatively, insurers may generate the form on their own equipment. If the form is generated by the insurers, it must appear in no less than 10 point type and be on separate pages with no other text on those pages.



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