2007 Minnesota Statutes

CHAPTER 59A. INSURANCE PREMIUM FINANCE COMPANIES

59A.01 CITATION.
Sections 59A.01 to 59A.15 may be cited as the "Insurance Premium Finance Company Act."
History: 1974 c 353 s 1

59A.02 DEFINITIONS.
    Subdivision 1. Scope. For the purposes of sections 59A.01 to 59A.15, the words, terms and
phrases defined in this section have the meanings ascribed to them except where the context
clearly indicates a different meaning.
    Subd. 2. Insurance premium finance agreement. "Insurance premium finance agreement"
means an agreement by which an insured or prospective insured promises to pay to a premium
finance company or to its assignee the amount advanced or to be advanced under the agreement
to an insurer or to an insurance agent or broker in payment of premiums on an insurance policy
together with a service charge. Any agreement to finance premiums is a premium finance
agreement if an insurance policy, other than a life or disability insurance policy, is made the
security or collateral for the repayment of the debt incurred under the agreement. Provided,
however, an agreement to finance premiums for insurance which is included in a retail installment
transaction or purchased in connection with a real estate transaction, mortgage, deed of trust or
other security agreement is not a premium finance agreement. Provided further, that an agreement
by an insurance company to finance policies written by itself or by companies other than itself or
its parent company, its subsidiaries or companies with which it shares a common parent company
is not a premium finance agreement.
    Subd. 3. Licensee. "Licensee" means a person licensed by the commissioner to engage in
the business of insurance premium financing. The term does not include a person in the business
of insurance premium financing exclusively financing premiums for business, agricultural, or
corporate purposes.
    Subd. 4. Commissioner. "Commissioner" means the commissioner of commerce.
History: 1974 c 353 s 2; 1983 c 289 s 114 subd 1; 1984 c 655 art 1 s 92; 1993 c 257 s 43

59A.03 LICENSES; PENALTY.
    Subdivision 1. Requirement. No person other than a savings association, bank, savings
bank, trust company, regulated lender, industrial loan and thrift company, credit union or
resident insurance agent who, within 15 days after entering into an insurance premium finance
agreement, transfers such agreement to a licensee or to any of the organizations exempt under
this subdivision may engage in the business of entering into, acquiring or holding insurance
premium finance agreements unless licensed to do so by the commissioner. A violation of this
subdivision is a misdemeanor.
    Subd. 2. Required fees. The applicant at the time of making application, shall pay to the
commissioner the sum of $250 as a fee for investigating the application, and the additional sum
of $200 as an annual licensee fee for a period terminating on May 31 of each year. In addition
to the annual license fee, every licensee shall pay to the commissioner the actual costs of each
examination as may be required to be conducted under the terms of sections 59A.01 to 59A.15.
    Subd. 3. Commissioner's authority. The person to whom the license or the renewal thereof
may be issued shall file sworn answers to such interrogatories as the commissioner may require.
The commissioner shall have authority, at any time, to require the applicant to fully disclose the
identity of all stockholders, partners, officers and employees and may refuse to issue or issue
a license in the name of any firm, partnership, or corporation if not satisfied that any officer,
employee, stockholder or partner thereof, who may materially influence the applicant's conduct,
meets the standards of sections 59A.01 to 59A.15.
History: 1974 c 353 s 3; 1976 c 2 s 34; 1976 c 111 s 1; 1986 c 444; 1994 c 382 s 13; 1995
c 202 art 1 s 25; 1999 c 151 s 37

59A.04 ACTION BY COMMISSIONER ON APPLICATION.
    Subdivision 1. Investigation and hearing. Upon the filing of an initial application and the
payment of the license fee, the commissioner shall make an investigation of each applicant. If a
license has not been issued within 30 days after receipt of the application the commissioner shall,
at the request of the applicant, give the applicant a full hearing.
    Subd. 2. License issued. The commissioner shall issue or renew a license when satisfied that
the person to be licensed:
(a) is competent and trustworthy and intends to act in good faith in the financing of insurance
premiums;
(b) has a good business reputation and has had experience, training or education so as to be
qualified in financing insurance premiums; and
(c) if a corporation, is a corporation incorporated under the laws of this state or a foreign
corporation authorized to transact business in this state.
History: 1974 c 353 s 4; 1986 c 444

59A.05 REVOCATION AND SUSPENSION OF LICENSES.
The commissioner may after a hearing revoke, suspend, or refuse to renew the license of any
licensee if it appears to the commissioner that:
(a) the license was obtained by fraud;
(b) there was any misrepresentation in the application for the license;
(c) the holder of the license is untrustworthy or incompetent to finance insurance premiums,
or is involved in any fraudulent, dishonest or deceptive practice; or
(d) the licensee has violated any of the provisions of sections 59A.01 to 59A.15 or rules
adopted pursuant to sections 59A.01 to 59A.15.
History: 1974 c 353 s 5; 1986 c 444

59A.06 BOOKS AND RECORDS.
    Subdivision 1. Licensee duties. Every licensee shall maintain records satisfactory to the
commissioner of its premium finance transactions. The records shall be open to examination and
investigation by the commissioner at any time during ordinary business hours. The commissioner
may, at any time, require any licensee to bring these records to the commissioner's office for
examination.
    Subd. 2. Retention requirements. Every licensee shall preserve its records of premium
finance transactions for at least three years after making the final entry in respect to any premium
finance agreement. The records may be preserved in photographic form or in a form acceptable to
the commissioner under section 46.04, subdivision 3.
    Subd. 3. Commissioner's examination authority; recovery of costs. The commissioner
may at any time make an examination of the affairs, business, office, and records of each licensee.
Each licensee shall pay to the commissioner the actual costs of examination as well as amounts
required under section 46.131, and the commissioner may maintain an action for the recovery of
such costs in any court of competent jurisdiction.
    Subd. 4. Annual report. Each licensee shall annually before March 15 file a report under
oath with the commissioner, in the form prescribed, giving information as required concerning
the business and operations of each licensed place of business during the preceding year. The
commissioner shall make and publish annually an analysis and recapitulation of the reports.
History: 1974 c 353 s 6; 1976 c 26 s 1; 1986 c 444; 1987 c 349 art 2 s 2; 1995 c 202 art 2 s 24

59A.07 POWER TO MAKE RULES.
The commissioner shall promulgate any rules which may be necessary to the administration
of sections 59A.01 to 59A.15.
History: 1974 c 353 s 7; 1985 c 248 s 70

59A.08 PREMIUM FINANCE AGREEMENTS.
    Subdivision 1. Contents; specific information. A premium finance agreement shall:
(a) be dated and signed by or on behalf of the insured, and the printed portion thereof shall
be in at least eight point type;
(b) contain the name and place of business of the insurance agent or insurance broker
negotiating the related insurance contract, the name and residence or the place of business of
the insured as specified, the name and place of business of the premium finance company to
which installments or other payments are to be made, the name of the insurer issuing the related
insurance contract, a description of the insurance contracts including the term and type of policy,
the premiums for which are advanced or are to be advanced under the agreement and the amount
of the premiums therefor; and
(c) set forth the following items where applicable:
(1) the total amount of the premiums,
(2) the amount of the down payment,
(3) the balance of premiums due, the amount financed (the difference between items (1)
and (2)),
(4) the amount of the finance charge,
(5) the amount of the flat service fee,
(6) the total of payments (sum of items (3), (4) and (5)).
    Subd. 2. Contents; sequence or order. The items set forth in subdivision 1, clause (c) need
not be stated in the sequence or order in which they appear and additional items may be included
to explain the computations made in determining the amount to be paid by the insured.
    Subd. 3. Other premiums. Additional or subsequent premiums may be added to an
insurance premium finance agreement from time to time, provided that:
(a) The additional or subsequent insurance premium to be added results from additional
premiums required under policies presently being financed under the insurance premium finance
agreement or from a renewal of a policy or from other policies owned or purchased by the insured.
(b) The insurance premium finance company receives written notice or advice from an
insurer authorized to do business in this state or from an insurance agent licensed in this state
acknowledging that the premium on an existing financed policy has been increased or that a
policy has been renewed or that additional policies have or will be issued to the insured. The
notice or advice shall contain the amount of the additional premium, the down payment collected
by the insurer or agent, if any, and the amount of premium to be added to the insurance premium
finance agreement.
(c) If the additional premiums to be added to the insurance premium finance agreement result
from additional premiums required on policies presently financed under the agreement or from a
renewal of a policy or from other policies owned or purchased by the insured, a written notice must
be mailed, faxed, or delivered to the insured outlining any changes to the information required by
subdivision 1 along with a conspicuous statement to the insured that the insured may tender the
premiums in full or affirm the proposed changes by tendering either an additional down payment
or tendering the proposed revised installment amount, or disaffirm the financing of the additional
premium by continuing the original payment amount as agreed to in the initial agreement.
If the proposed revisions in paragraph (c) are affirmed by the insured, the finance company
may make an additional finance charge according to section 59A.09 for the additional premium
financed and added to the open-end agreement; however, no additional flat service fee may
be made or charged for adding additional or subsequent premiums to an open-end insurance
premium finance agreement for which a flat service fee was previously made or charged.
    Subd. 4. Copy. The premium finance company or the insurance agent shall deliver to the
insured, or mail to the insured at the address shown in the agreement, a completed copy of that
agreement. Within 15 days of receiving the policy number of the policy being financed, the
premium finance company shall mail to the insurer a notice of financed premium, which contains
the term, amount of premium, and type of policy being financed.
    Subd. 5. Competitive equality. No insurance agent, insurance broker, or insurer may require
a person to use a particular insurance premium finance company or other installment payment
plan for which a finance charge or other fee in connection with an installment payment has
been or will be imposed or refuse to accept premium payment from a company licensed under
sections 59A.01 to 59A.15.
History: 1974 c 353 s 8; 1975 c 309 s 1; 1986 c 444; 1992 c 564 art 1 s 9,10; 1997 c
157 s 52,53

59A.09 MAXIMUM FINANCE CHARGE.
    Subdivision 1. Grant of authority. No person engaged in the business of financing insurance
premiums may charge, contract for, receive or collect a finance charge plus flat service fee with
respect to an insurance premium finance agreement other than as permitted by this section.
    Subd. 2. Balance determined. The finance charge shall be computed on the balance of the
premiums due, after subtracting the down payment made by the insured in accordance with the
premium finance agreement, from the effective date of the insurance coverage, for which the
premiums are being advanced, to and including the date when final installment of the premium
finance agreement is payable.
    Subd. 3. How computed. The finance charge must not exceed five percent in excess of the
discount rate on 90-day commercial paper in effect at the Federal Reserve Bank located in the
Ninth Federal Reserve District when an insurance premium finance agreement is made or when an
additional or subsequent premium is added under an open end agreement. For expenses incurred
in servicing the loan including any filing fees, application fee for the examination or investigation
of the character of the borrower, comaker or security, and drawing any necessary papers in
making the loan, an insurance premium finance company may contract for a flat rate service fee
not exceeding the greater of one percent of the amount financed or $20 per premium finance
agreement. The flat service fee need not be refunded upon prepayment in full before maturity.
    Subd. 4. When computed. The finance charge shall be computed in advance on the principal
balance of a premium finance agreement according to the actuarial method on terms payable in
substantially equal successive monthly installments.
    Subd. 5. Prepayment. Notwithstanding the provisions of any premium finance agreement,
any insured may prepay the obligation in full at any time. In such event the insured shall receive a
refund credit. The amount of such refund credit shall represent at least as great a proportion of the
finance charge as the sum of the periodic balances after the month in which prepayment is made
bears to the sum of all periodic balances under the schedule of installments in the agreement.
Where the amount of the refund is less than $1, no refund need be made. If, in addition to the
finance charge, an additional flat service fee was imposed, the flat service fee need not be refunded
nor taken into consideration in computing the refund credit.
    Subd. 6. Limitation. Subdivision 3 applies only to a premium finance agreement in which
the related insurance contract is for personal, family, or household use. The rate charged under an
agreement made to finance an insurance policy for business, agricultural, or corporate purposes
shall be as agreed to by the parties to the agreement.
History: 1974 c 353 s 9; 1979 c 261 s 1; 1983 c 200 s 1-3; 1986 c 444

59A.10 DEFAULT CHARGES.
    Subdivision 1. Delinquencies. A premium finance agreement may provide for payment by
the insured of a delinquency charge. The delinquency charge may not exceed five percent of the
delinquent installment. The delinquency charge may be imposed upon any installment which is
in default for a period of ten days or more.
    Subd. 2. Cancellations and collections. If the default results in the cancellation or
subsequent reinstatement of any insurance contract listed in the agreement, the agreement may
provide for payment by the insured of a cancellation charge of $10. A premium finance agreement
may also provide for the payment of statutory attorneys fees and statutory court costs if the
agreement is referred for collection to an attorney not a salaried employee of the insurance
premium finance company.
History: 1974 c 353 s 10; 1991 c 283 s 1

59A.11 CANCELLATION OF INSURANCE CONTRACT UPON DEFAULT.
    Subdivision 1. Grant of authority. When a premium finance agreement contains a power
of attorney or other authority enabling the insurance premium finance company to cancel any
insurance contract listed in the agreement, the insurance contract or contracts shall not be
canceled by the premium finance company unless such cancellation is effectuated in accordance
with this section.
    Subd. 2. Notice required. Not less than ten days' written notice shall be mailed to the
insured setting forth the intent of the insurance premium finance company to cancel the insurance
contract unless the default is cured prior to the date stated in the notice. The insurance agent or
insurance broker indicated on the premium finance agreement shall also be given ten days' notice
of this action in a manner agreed upon between the insurance premium finance company and
insurance agent or insurance broker.
    Subd. 3. Regulation of required notice. (a) Pursuant to the power of attorney or other
authority referred to above, the insurance premium finance company may cancel on behalf of the
insured by mailing to the insurer written notice stating when thereafter the cancellation shall be
effective, and the insurance contract shall be canceled as if such notice of cancellation had been
submitted by the insured personally, but without requiring the return of the insurance contract. In
the event that the insurer or its agent does not provide the insurance premium finance company
with a specific mailing address for the purposes of receipt of the above notice, then mailing by the
insurance premium finance company to the insurer at the address which is on file and of record
with the commissioner of commerce pursuant to the provisions of chapters 60A and 72A shall be
considered sufficient notice under this section. The notice requirements of this paragraph only
apply if an insurance premium finance company and an insurer have not agreed on a method
of providing notice of cancellation.
(b) The insurance premium finance company shall also mail a notice of cancellation to the
insured at the insured's last known address.
(c) Written notice of the cancellation must also be given to the insurance agent or insurance
broker indicated on the premium finance agreement. Written notice to the insurance agent or
broker required by this paragraph may be given in a manner agreed upon between the insurance
premium finance company, insurer, agent, or broker.
    Subd. 4. Notice to third party. Where statutory, regulatory or contractual restrictions
provide that the insurance contract may not be canceled unless notice is given to a governmental
agency, mortgagee, or other third party, the insurer shall give the prescribed notice on behalf of
itself or the insured to the governmental agency, mortgagee or other third party within ten days
after the day it receives the notice of cancellation from the premium finance company. When the
above restrictions require the continuation of insurance beyond the effective date of cancellation
specified by the premium finance company, the insurance shall be limited to the coverage to which
the restrictions relate and to the persons they are designed to protect.
History: 1974 c 353 s 11; 1983 c 289 s 114 subd 1; 1984 c 655 art 1 s 92; 1986 c 444; 1992
c 564 art 1 s 11; 1997 c 157 s 54,55

59A.12 APPLICATION OF UNEARNED PREMIUMS.
    Subdivision 1. Pro rata return after cancellation. Whenever a financed insurance contract
is canceled, within 30 days of the effective date of cancellation, if the premium finance company
has notified the insurer that the premiums are financed, the insurer shall return whatever gross
unearned premiums, computed pro rata, are due under the insurance contract to the premium
finance company for the account of the insured or insureds. This action by the insurer satisfies
the insurer's obligations under the insurance contract which relate to the return of the unearned
premiums.
    Subd. 2. Premium audit; determination of final premium amount. In the event that
a premium is subject to an audit to determine the final premium amount, the gross unearned
premium will be calculated upon the deposit premium and the insurer shall return whatever gross
unearned premiums are due based upon the deposit rather than the actual unearned premium to
the finance company for the account of the insured or insureds.
    Subd. 3. Assigned risk policies. Assigned risk policies shall be handled in conformance
with section 59A.11 and subdivisions 1 and 2.
    Subd. 4. Refund to insured. If the crediting of returned premiums to the account of the
insured results in a surplus over the amount due from the insured, the premium finance company
must refund the excess to the insured within 30 days after receipt of the returned premium; but no
refund is required if it amounts to less than $1.
    Subd. 5. Return of unearned premium; notice to policyholder. Whenever an insurer, after
having been advised that an insurance policy has been financed by a premium finance agreement,
returns an unearned premium on such a policy, the insurer shall deliver or mail to the policyholder
a notice that includes the following information: the amount of premium paid, the term of the
policy, the date coverage began and ceased, the amount of the unearned premium, the name of the
party receiving the funds, and a statement of the obligation of the premium finance company to
return within 30 days of receipt of the unearned premium any amount of the unearned premium in
excess of the amount owed by the policyholder to the premium finance company.
History: 1974 c 353 s 12; 1983 c 200 s 4,5; 1992 c 564 art 1 s 12; 1994 c 485 s 3

59A.13 EXEMPTION FROM FILING.
No filing of the premium finance agreement or recording of a premium finance transaction
shall be necessary to perfect the validity of the agreement as a secured transaction as against
creditors, subsequent purchasers, pledgees, encumbrances, successors or assigns.
History: 1974 c 353 s 13

59A.14 [Repealed, 1997 c 157 s 72]

59A.15 APPLICABILITY OF CHAPTER 14.
The provisions of chapter 14, shall apply to sections 59A.01 to 59A.15.
History: 1974 c 353 s 15; 1982 c 424 s 130