1.1                          A bill for an act 
  1.2             relating to insurance; credit; regulating rates and 
  1.3             coverages; establishing minimum anticipated loss 
  1.4             ratios for certain policies; amending Minnesota 
  1.5             Statutes 2000, sections 62B.04, subdivision 2, and by 
  1.6             adding a subdivision; 62B.05; and 62B.07, subdivisions 
  1.7             2, 3, 4, and 5; proposing coding for new law in 
  1.8             Minnesota Statutes, chapter 62B. 
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  [62B.015] [ATTRIBUTION.] 
  1.11     For the purposes of this chapter, the acts of the creditor 
  1.12  are considered to be the acts of the insurer.  
  1.13     Sec. 2.  Minnesota Statutes 2000, section 62B.04, 
  1.14  subdivision 2, is amended to read: 
  1.15     Subd. 2.  [CREDIT ACCIDENT AND HEALTH INSURANCE.] (a) The 
  1.16  total amount of periodic indemnity payable by credit accident 
  1.17  and health insurance in the event of disability, as defined in 
  1.18  the policy, shall not exceed the aggregate of the periodic 
  1.19  scheduled unpaid installments of the indebtedness; and the 
  1.20  amount of each periodic indemnity payment shall not exceed the 
  1.21  original indebtedness divided by the number of periodic 
  1.22  installments.  If the credit transaction provides for a variable 
  1.23  rate of finance charge or interest, the initial rate or the 
  1.24  scheduled rates based on the initial index must be used in 
  1.25  determining the aggregate of the periodic scheduled unpaid 
  1.26  installments of the indebtedness. 
  1.27     (b) If for any reason a policy of credit disability 
  2.1   insurance will not or may not provide the policyholder or 
  2.2   certificate holder with coverage for the total amount of 
  2.3   indebtedness on the related loan or debt in the event of any one 
  2.4   instance of disability, the applicant must be given a written 
  2.5   disclosure on or accompanying the application.  If the 
  2.6   disclosure is on the application, it must be immediately above 
  2.7   the signature line, within a box and the word "WARNING" must be 
  2.8   in 14-point bold face capital letters.  The rest of the text 
  2.9   must be in capital letters and bold face 10-point print.  If the 
  2.10  disclosure is on a separate sheet, it must be on an 8-1/2 inch 
  2.11  by 11 inch sheet of paper with the word "WARNING" in 14-point 
  2.12  bold face capital letters with the remaining text in 10-point 
  2.13  bold face capital letters.  If a separate disclosure is used, it 
  2.14  must be signed by the applicant with one copy provided to the 
  2.15  applicant and one copy maintained by the insurer for at least 
  2.16  the term of the policy or certificate, if coverage is issued.  
  2.17  The disclosure must state: 
  2.18     WARNING:  IF YOU BECOME DISABLED AS DEFINED IN THE 
  2.19  POLICY/CERTIFICATE, THIS DISABILITY INSURANCE POLICY/CERTIFICATE 
  2.20  MAY NOT COVER YOUR ENTIRE INDEBTEDNESS.  IF YOU BECOME DISABLED 
  2.21  AT A POINT WHERE THE NUMBER OF MONTHLY INSTALLMENT PAYMENTS 
  2.22  REMAINING EXCEEDS THE PERIOD OF COVERAGE BEING PROVIDED BY THIS 
  2.23  POLICY/CERTIFICATE, THE BENEFITS AVAILABLE WILL BE LESS THAN THE 
  2.24  AMOUNT NECESSARY TO PAY OFF YOUR LOAN.  IF YOU WANT COVERAGE FOR 
  2.25  THE FULL AMOUNT OF YOUR INDEBTEDNESS OR HAVE ANY QUESTIONS ABOUT 
  2.26  THE EXTENT OR NATURE OF YOUR COVERAGE, YOU SHOULD DISCUSS THEM 
  2.27  WITH YOUR AGENT AND/OR ENROLLER BEFORE SUBMITTING YOUR 
  2.28  APPLICATION.  
  2.29     (c) Any policy or certificate of credit disability 
  2.30  insurance which contains a critical period must make available 
  2.31  for any single instance of disability monthly indemnity benefit 
  2.32  payments for the term of the loan, 24 months, or the term of the 
  2.33  disability, whichever is less.  For the purposes of this 
  2.34  section, a critical period is when there is a limited number of 
  2.35  monthly benefit payments that may be paid to the beneficiary or 
  2.36  the policyholder or certificate holder as a result of any one 
  3.1   instance of disability.  
  3.2      (d) Unless the policy or certificate provides for such 
  3.3   coverage, nothing in this section shall be interpreted as 
  3.4   requiring an insurer to provide coverage for the final payment 
  3.5   of a balloon loan or for a period that exceeds the age 
  3.6   limitation in the policy or certificate or for amounts that 
  3.7   exceed the insurer's maximum liability limits. 
  3.8      (e) A debtor who has not maintained continuous coverage may 
  3.9   be subjected to a one-time preexisting condition limitation of 
  3.10  no more than 12 months for contracts of indebtedness of more 
  3.11  than three years and no more than six months for all other 
  3.12  contracts of indebtedness.  If the debtor maintains continuous 
  3.13  coverage, a debtor must not be subject to any preexisting 
  3.14  condition limitation, or preexisting condition exclusion, under 
  3.15  any credit insurance authorized by this subdivision, except an 
  3.16  unexpired portion of a limitation under prior insurance.  
  3.17  Continuous coverage is coverage maintained on any indebtedness 
  3.18  through the same creditor and includes a creditor that 
  3.19  refinances an existing indebtedness upon which a debtor has 
  3.20  maintained coverage. 
  3.21     Sec. 3.  Minnesota Statutes 2000, section 62B.04, is 
  3.22  amended by adding a subdivision to read: 
  3.23     Subd. 4.  [SUITABILITY OF INSURANCE.] In recommending the 
  3.24  purchase of any credit insurance authorized by this chapter to a 
  3.25  debtor, the creditor must have reasonable grounds for believing 
  3.26  that the recommendation is suitable for the debtor and must make 
  3.27  reasonable inquiries to determine suitability.  The suitability 
  3.28  of a recommended purchase of insurance will be determined by 
  3.29  reference to the totality of the particular debtor's 
  3.30  circumstances, including, but not limited to the debtor's 
  3.31  income, the debtor's need for insurance, and the values, 
  3.32  benefits, and costs of the debtor's existing insurance program, 
  3.33  if any, when compared to the values, benefits, restrictions, 
  3.34  exclusions, and costs of the recommended insurance. 
  3.35     Sec. 4.  Minnesota Statutes 2000, section 62B.05, is 
  3.36  amended to read: 
  4.1      62B.05 [TERM OF CREDIT INSURANCE.] 
  4.2      The term of any credit life insurance, credit accident and 
  4.3   health insurance, or credit involuntary unemployment insurance 
  4.4   shall, subject to acceptance by the insurer, commence on the 
  4.5   date when the debtor becomes obligated to the creditor, except 
  4.6   that, where a group policy provides coverage with respect to 
  4.7   existing obligations, the insurance on a debtor with respect to 
  4.8   the indebtedness shall commence on the effective date of the 
  4.9   policy.  Where evidence of insurability is required and the 
  4.10  evidence is furnished more than 30 days after the date when the 
  4.11  debtor becomes obligated to the creditor, the term of the 
  4.12  insurance may commence on the date on which the insurance 
  4.13  company determines the evidence to be satisfactory, and in that 
  4.14  event there shall be an appropriate refund or adjustment of any 
  4.15  charge to the debtor for insurance.  The term of the insurance 
  4.16  shall not extend more than 15 days beyond the scheduled maturity 
  4.17  date of the indebtedness except when extended without additional 
  4.18  cost to the debtor. 
  4.19     If an indebtedness is prepaid in full before its scheduled 
  4.20  maturity, except by performance of the insurer's obligation 
  4.21  under the policy, the insurance shall be deemed canceled and a 
  4.22  refund shall be paid or credited as provided in section 62B.08.  
  4.23  Upon prepayment in full, the creditor shall make the refund of 
  4.24  unearned premium, unless the credit insurance was originated by 
  4.25  a third party, in which case the creditor shall promptly notify 
  4.26  the third party who shall make the refund. 
  4.27     Sec. 5.  Minnesota Statutes 2000, section 62B.07, 
  4.28  subdivision 2, is amended to read: 
  4.29     Subd. 2.  [DISAPPROVAL.] The commissioner shall within 60 
  4.30  days after the filing of policies, certificates of insurance, 
  4.31  notices of proposed insurance, applications for insurance, 
  4.32  endorsements and, riders, and schedules of premium rates, 
  4.33  disapprove any such form or schedule of premium rates if the 
  4.34  premium rates charged or to be charged are excessive in relation 
  4.35  to benefits, or if it the form or rate filing contains 
  4.36  provisions which are unjust, unfair, inequitable, misleading, 
  5.1   deceptive or encourage misrepresentation of the coverage, or are 
  5.2   contrary to any provision of the insurance laws or of any rule 
  5.3   promulgated thereunder.  
  5.4      In order to determine whether the premium to be charged 
  5.5   under a particular policy form submitted by an insurer is 
  5.6   excessive in relation to benefits, and to facilitate the 
  5.7   submission and approval of policy forms and premium rates to be 
  5.8   used in connection therewith, the commissioner shall give full 
  5.9   consideration to and make reasonable allowances for underwriting 
  5.10  expenses including, but not limited to, claim adjustment 
  5.11  expenses, general administrative expenses including costs for 
  5.12  handling return premiums, compensation to agents, expense 
  5.13  allowances to creditors, if any, branch and field expenses and 
  5.14  other acquisition costs, the types of policies actually issued 
  5.15  and authorized as defined in section 62B.03, clauses (1), (2), 
  5.16  (3), (4), (5), and (6), and any and all other factors and trends 
  5.17  demonstrated to be relevant.  An insurer may support these 
  5.18  factors by statistical information, experience, actuarial 
  5.19  computations, and/or estimates certified by an executive officer 
  5.20  of the insurer, and the commissioner shall give due 
  5.21  consideration to such supporting data.  
  5.22     The party responsible for filing a schedule of premium 
  5.23  rates has the burden of proving by a preponderance of the 
  5.24  evidence that the schedule does not violate this subdivision.  
  5.25     The minimum anticipated and lifetime loss ratio for a 
  5.26  credit life insurance policy must not be less than 55 percent 
  5.27  and the minimum anticipated and lifetime loss ratio for a credit 
  5.28  accident and health policy must not be less than 65 percent. 
  5.29  "Anticipated loss ratio" means the ratio at the time of filing, 
  5.30  at the time of notice of withdrawal under subdivision 4, or at 
  5.31  the time of subsequent rate revision of the present value of all 
  5.32  expected claims incurred to the present value of all expected 
  5.33  premiums earned.  "Lifetime loss ratio" means the ratio at the 
  5.34  time of filing, at the time of notice of withdrawal under 
  5.35  subdivision 4, or at the time of subsequent rate revision of the 
  5.36  present value of all lifetime claims incurred to the present 
  6.1   value of all lifetime premiums earned. 
  6.2      Sec. 6.  Minnesota Statutes 2000, section 62B.07, 
  6.3   subdivision 3, is amended to read: 
  6.4      Subd. 3.  [CONSEQUENCES OF DISAPPROVAL.] If the 
  6.5   commissioner notifies the insurer that the form or schedule of 
  6.6   premium rates is disapproved, it is unlawful thereafter for the 
  6.7   insurer to issue or use it.  In the notice, the commissioner 
  6.8   shall specify the reason for disapproval and state that a 
  6.9   hearing will be granted within 20 days after a request in 
  6.10  writing by the insurer.  No A policy, certificate of insurance, 
  6.11  notice of proposed insurance, nor any application, 
  6.12  endorsement or, rider, shall or schedule of premium rates must 
  6.13  not be issued or used until the expiration of 60 days after it 
  6.14  has been filed, unless the commissioner gives prior written 
  6.15  approval thereto approves it before that time.  
  6.16     The 60-day period within which the commissioner is to 
  6.17  approve or disapprove the form or schedule of premium rates does 
  6.18  not begin to run until a complete filing of all data and 
  6.19  materials required by statute or requested by the commissioner 
  6.20  has been submitted.  
  6.21     Sec. 7.  Minnesota Statutes 2000, section 62B.07, 
  6.22  subdivision 4, is amended to read: 
  6.23     Subd. 4.  [WITHDRAWAL.] The commissioner may, at any time 
  6.24  after a hearing held not less than 20 days after 20-day written 
  6.25  notice to the insurer, withdraw approval of a form or schedule 
  6.26  of premium rates on any ground set forth in subdivision 2 above. 
  6.27  The written notice of the hearing shall withdrawal of approval 
  6.28  must advise the insurer of the right to a hearing under the 
  6.29  contested case procedures of chapter 14, must specify the 
  6.30  matters to be considered at the hearing, and must state the 
  6.31  reason for the proposed withdrawal. 
  6.32     The insurer has 60 days from the date of receipt of the 
  6.33  commissioner's notice of withdrawal of approval to file an 
  6.34  amended schedule of premium rates that complies with this 
  6.35  section.  If the insurer fails to file an amended schedule of 
  6.36  premium rates within the prescribed time, the commissioner may 
  7.1   order that the insurer's filed rates be reduced to an amount 
  7.2   that would have resulted in a loss ratio that complied with this 
  7.3   section had the reduced rates been in effect.  The insurer's 
  7.4   failure to file amended rates within the specified time of the 
  7.5   issuance of the commissioner's order amending the rates does not 
  7.6   preclude the insurer from filing an amendment of its rates at a 
  7.7   later time. 
  7.8      Sec. 8.  Minnesota Statutes 2000, section 62B.07, 
  7.9   subdivision 5, is amended to read: 
  7.10     Subd. 5.  [ISSUANCE AFTER WITHDRAWAL.] It is not lawful for 
  7.11  the insurer to issue forms after the effective date of their 
  7.12  withdrawal by the commissioner use a form or schedule of premium 
  7.13  rates after the effective date of the withdrawal of approval by 
  7.14  the commissioner.