CHAPTER 4. CREDIT LIFE AND CREDIT ACCIDENT AND HEALTH INSURANCE
IC 27-8-4
Chapter 4. Credit Life and Credit Accident and Health Insurance
IC 27-8-4-1
Purpose
Sec. 1. The purpose of this chapter is to promote the publicwelfare through the establishment of unified and consistent rulesrelating to the implementation and administration of the laws of thisstate pertaining to credit life insurance and credit accident and healthinsurance, as such insurances are defined and limited in this chapter.
(Formerly: Acts 1961, c.47, s.1.) As amended by P.L.252-1985,SEC.295.
IC 27-8-4-2
Citation; scope; definitions
Sec. 2. (a) Citation and Scope:
(1) This chapter may be cited as the Model Act for theRegulation of Credit Life Insurance and Credit Accident andHealth Insurance.
(2) All life insurance and all accident and health insurance ofthe nature in this chapter defined in connection with loans orother credit transactions shall be subject to the provisions ofthis chapter, except such insurance issued in relation to anisolated transaction on the part of the insurer not related to anagreement or a plan for insuring debtors of the creditor.
(b) Definitions. For the purpose of this chapter:
(1) "Credit life insurance" means insurance on the life of adebtor pursuant to or in connection with a specific loan or othercredit transaction.
(2) "Credit accident and health insurance" means insurance ona debtor to provide funds for payments becoming due on aspecific loan or other credit transaction while the debtor isdisabled as defined in the policy.
(3) "Creditor" means the lender of money or vendor or lessor ofgoods, services, property, rights, or privileges, for whichpayment is arranged through a credit transaction, or anysuccessor to the right, title, or interest of any such lender,vendor, or lessor, and any affiliate, associate, or subsidiary ofany of them or any director, officer, or employee of any of themor any other person in any way associated with any of them.
(4) "Debtor" means a borrower of money or a purchaser orlessee of goods, services, property, rights, or privileges forwhich payment is arranged through a credit transaction. Theterm includes the following:
(A) A joint debtor.
(B) A co-maker.
(C) An endorser.
(D) A guarantor.
(5) "Indebtedness" means the total amount payable by a debtorto a creditor in connection with a loan or other credit
transaction.
(6) "Commissioner" means insurance commissioner of Indiana.
(7) The term "accident and health insurance" has the samemeaning as "accident and sickness insurance" sometimes usedin other statutes relating to insurance against accident andsickness.
(Formerly: Acts 1961, c.47, s.2.) As amended by P.L.252-1985,SEC.296; P.L.153-1986, SEC.4; P.L.132-1994, SEC.2.
IC 27-8-4-3
Forms of insurance
Sec. 3. Credit life insurance and credit accident and healthinsurance shall be issued only in the following forms:
A. Individual policies of life insurance issued to debtors on theterm plan;
B. Individual policies of accident and health insurance issued todebtors on a term plan or disability benefit provisions in individualpolicies of credit life insurance;
C. Group policies of life insurance issued to creditors providinginsurance upon the lives of debtors on the term plan;
D. Group policies of accident and health insurance issued tocreditors on a term plan insuring debtors or disability benefitprovisions in group credit life insurance policies to provide suchcoverage.
(Formerly: Acts 1961, c.47, s.3.)
IC 27-8-4-4
Limitations on amount of insurance
Sec. 4. A. Credit Life Insurance. The initial amount of credit lifeinsurance shall not exceed the total amount repayable under thecontract of indebtedness and, when an indebtedness is repayable insubstantially equal installments, the amount of insurance shall at notime exceed the scheduled or actual amount of unpaid indebtedness,whichever is greater. Notwithstanding the provisions of thisparagraph, insurance on agriculture credit transaction commitments,not exceeding one (1) year in duration, may be written up to theamount of the loan commitment on a non-decreasing or level termplan.
B. Credit Accident and Health Insurance. The aggregate amountof periodic benefits payable by credit accident and health insurancein the event of disability, as defined in the policy, shall not, in thecase of an indebtedness payable in installments, exceed the aggregateof the periodic scheduled unpaid installments of the indebtedness orin the case of an indebtedness payable in one sum, the unpaid amountof such indebtedness; and the amount of each periodic benefitpayment shall not exceed the original indebtedness divided by thenumber of periodic installments.
(Formerly: Acts 1961, c.47, s.4.)
IC 27-8-4-5 Term of insurance
Sec. 5. The term of any credit life insurance or credit accident andhealth insurance shall, subject to acceptance by the insurer,commence on the date when the debtor becomes obligated to thecreditor, except that, where a group policy provides coverage withrespect to existing obligations, the insurance on a debtor with respectto such indebtedness shall commence on the effective date of thepolicy. This rule shall apply when no evidence of insurability isrequired and, as well, when such evidence is required and isfurnished within the period of thirty (30) days after the date when thedebtor becomes obligated to the creditor; but should such evidenceof insurability be furnished after such thirty (30) day period, the termof the insurance may commence on the date on which the insurancecompany determines the evidence to be satisfactory, and in suchevent there shall be an appropriate refund or adjustment of anycharge to the debtor for insurance. The term of such insurance shallnot extend more than fifteen (15) days beyond the scheduled maturitydate of the indebtedness except when extended without additionalcost to the debtor. If the indebtedness is discharged due to renewalor refinancing prior to the scheduled maturity date, the insurance inforce shall be terminated before any new insurance may be issued inconnection with the renewed or refinanced indebtedness. In all casesof termination prior to scheduled maturity, a refund shall be paid orcredited as provided in section 8 of this chapter.
(Formerly: Acts 1961, c.47, s.5.) As amended by P.L.252-1985,SEC.297.
IC 27-8-4-6
Policy or certificate; delivery; rejection of risk; to another insurer;credit for lower premium
Sec. 6. (a) All credit life insurance and credit accident and healthinsurance shall be evidenced by an individual policy, or in the caseof group insurance by a certificate of insurance, which individualpolicy of group certificate of insurance shall be delivered to thedebtor.
(b) Each individual policy or group certificate of credit lifeinsurance or credit accident and health insurance shall, in addition toother requirements of law, set forth:
(1) the name and home office address of the insurer;
(2) the name or names of the debtor or in the case of acertificate under a group policy, the identity by name orotherwise of the debtor;
(3) the premium or amount of payment, if any, by the debtorseparately for credit life insurance and credit accident andhealth insurance;
(4) a description of the coverage including the amount and termthereof;
(5) any exceptions, limitations, and restrictions; and
(6) that the benefits shall be paid to the creditor to reduce orextinguish the unpaid indebtedness and, wherever the amount
of insurance may exceed the unpaid indebtedness, that any suchexcess shall be payable to a beneficiary, other than the creditor,named by the debtor or to his estate.
(c) Said individual policy or group certificate of insurance shallbe delivered to the insured debtor at the time the indebtedness isincurred except as provided in this chapter.
(d) If said individual policy or group certificate of insurance is notdelivered to the debtor at the time the indebtedness is incurred, acopy of the application for such policy or a notice of proposedinsurance, signed by the debtor and setting forth:
(1) the name and home office address of the insurer;
(2) the name or names of the debtor;
(3) the premium or amount of payment by the debtor, if any,separately for credit life insurance and credit accident andhealth insurance; and
(4) the amount, term, and a brief description of the coverageprovided;
shall be delivered to the debtor at the time such indebtedness isincurred. The copy of the application for, or notice of proposedinsurance, shall also refer exclusively to insurance coverage, andshall be separate and apart from the loan, sale, or other creditstatement of account, instrument, or agreement, unless theinformation required by this subsection is prominently set forththerein. Upon acceptance of the insurance by the insurer and withinthirty (30) days of the date upon which the indebtedness is incurred,the insurer shall cause the individual policy or group certificate ofinsurance to be delivered to the debtor. Said application or notice ofproposed insurance shall state that upon acceptance by the insurer,the insurance shall become effective as provided in section 5 of thischapter.
(e) If the named insurer does not accept the risk, then and in suchevent the debtor shall receive a policy or certificate of insurance, ifone can be obtained from another insurer, setting forth the name andhome office address of the substituted insurer and the amount of thepremium to be charged, and if the amount of premium is less thanthat set forth in the notice of proposed insurance an appropriaterefund shall be made.
(Formerly: Acts 1961, c.47, s.6.) As amended by P.L.252-1985,SEC.298; P.L.255-1995, SEC.8.
IC 27-8-4-7
Filing of documents; disapproval of form of policy; effect;withdrawal of approval; review
Sec. 7. (a) All policies, certificates of insurance, notices ofproposed insurance, applications for insurance, endorsements, andriders delivered or issued for delivery in this state and the schedulesof premium rates pertaining thereto shall be filed with thecommissioner.
(b) The commissioner shall, within thirty (30) days after the filingof any such policies, certificates of insurance, notices of proposed
insurance, applications for insurance, endorsements, and riders,disapprove any such form if the benefits provided therein are notreasonable in relation to the premium charge, or if it containsprovisions which are unjust, unfair, inequitable, misleading,deceptive, or encourage misrepresentation of the coverage, or arecontrary to any provision of this title or of a rule promulgated underthis title.
(c) If the commissioner notifies the insurer that the form isdisapproved, it shall be unlawful thereafter for such insurer to issueor use such form. In such notice, the commissioner shall specify thereason for his disapproval and state that a hearing will be grantedwithin twenty (20) days after request in writing by the insurer. Nosuch policy, certificate of insurance, notice of proposed insurance,nor any application, endorsement, or rider, shall be issued or useduntil the expiration of thirty (30) days after it has been so filed,unless the commissioner shall give his prior written approval thereto.
(d) The commissioner may, at any time after a hearing held notless than twenty (20) days after written notice to the insurer,withdraw his approval of any such form on any ground set forth insubsection (b). The written notice of such hearing shall state thereason for the proposed withdrawal.
(e) It shall be unlawful for the insurer to issue such forms or usethem after the effective date of such withdrawal.
(f) If a group policy of credit life insurance or credit accident andhealth insurance:
(1) has been delivered by an insurer in this state before July 6,1961; or
(2) has been or is delivered by an insurer in another state beforeor after July 6, 1961;
such insurer shall be required to file only the group certificate andnotice of proposed insurance delivered or issued for delivery in thisstate as specified in sections 6(b) and 6(d) of this chapter, and suchforms shall be approved by the commissioner if they conform withthe requirements specified in sections 6(b) and 6(d) and if theschedules of premium rates applicable to the insurance evidenced bysuch certificate or notice are not in excess of the insurer's schedulesof premium rates on file with the commissioner; provided, however,that the premium rate in effect on group policies existing on July 6,1961, may be continued until the first policy anniversary datefollowing the date this section becomes operative as provided insection 12 of this chapter.
(g) Any order or final determination of the commissioner underthe provisions of this section shall be subject to judicial review.
(Formerly: Acts 1961, c.47, s.7.) As amended by P.L.252-1985,SEC.299.
IC 27-8-4-8
Revision of rate schedules; credit or refund of premiums
Sec. 8. A. Any insurer may revise its schedules of premium ratesfrom time to time, and shall file such revised schedules with the
commissioner. No insurer shall issue any credit life insurance policyor credit accident and health insurance policy for which the premiumrate exceeds that determined by the schedules of such insurer as thenon file with the commissioner.
B. Each individual policy, or group certificate shall provide thatin the event of termination of the insurance prior to the scheduledmaturity date of the indebtedness, any refund of an amount paid bythe debtor for insurance shall be paid or credited promptly to theperson entitled thereto; Provided, however, That the commissionershall prescribe a minimum refund and no refund which would be lessthan such minimum need be made. The formula to be used incomputing such refund shall be filed with and approved by thecommissioner.
C. If a creditor requires a debtor to make any payment for creditlife insurance or credit accident and health insurance and anindividual policy or group certificate of insurance is not issued, thecreditor shall immediately give written notice to such debtor andshall promptly make an appropriate credit to the account.
D. The amount charged to a debtor for any credit life or credithealth and accident insurance shall not exceed the premiums chargedby the insurer, as computed at the time the charge to the debtor isdetermined.
(Formerly: Acts 1961, c.47, s.8.)
IC 27-8-4-9
Persons authorized to issue or deliver policies
Sec. 9. All policies of credit life insurance and credit accident andhealth insurance shall be delivered or issued for delivery in this stateonly by an insurer authorized to do an insurance business therein,and shall be issued only through holders of licenses issued by thecommissioner.
(Formerly: Acts 1961, c.47, s.9.)
IC 27-8-4-9.5
Debtor's right to cancel policy; required provisions in applicationform; time limit
Sec. 9.5. (a) An individual or group policy of credit life insuranceor credit accident and health insurance may not be delivered orissued for delivery in Indiana unless the application or authorizedform:
(1) provides the debtor with a right to cancel the policy notmore than fourteen (14) days after the policy is issued; and
(2) informs the debtor of the right to cancel in plain andconspicuous language.
(b) The language informing the debtor of the right to cancel undersubsection (a)(2) must explain the way in which the debtor maycancel the policy and, if applicable, the address to which the debtormay mail the notice of cancellation.
(c) After the debtor cancels a policy under a provision required bysubsection (a), the insurer or creditor shall return to the debtor the
premium paid by the debtor.
As added by P.L.226-1993, SEC.1.
IC 27-8-4-10
Report, adjustment, and settlement of claims
Sec. 10. A. All claims shall be promptly reported to the insurer orits designated claim representative, and the insurer shall maintainadequate claim files. All claims shall be settled as soon as possibleand in accordance with the terms of the insurance contract.
B. All claims shall be paid either by draft drawn upon the insureror by check of the insurer to the order of the claimant to whompayment of the claim is due pursuant to the policy provisions, orupon direction of such claimant to one specified.
C. No plan or arrangement shall be used whereby any person, firmor corporation other than the insurer or its designated claimrepresentative shall be authorized to settle or adjust claims. Thecreditor shall not be designated as claim representative for theinsurer in adjusting claims; Provided, That a group policyholder may,by arrangement with the group insurer, draw drafts or checks inpayment of claims due to the group policyholder subject to audit andreview by the insurer.
(Formerly: Acts 1961, c.47, s.10.)
IC 27-8-4-11
Debtor's choice of insurer; use of existing policies
Sec. 11. When life insurance or accident and health insurance isrequired as additional security for any indebtedness, the debtor shallhave the option of furnishing the required amount of insurancethrough existing policies of insurance owned or controlled by him orof procuring and furnishing the required coverage through anyinsurer authorized to transact an insurance business within this state.As used in this section, "life insurance" and "accident and healthinsurance" includes any form and any amount of life insurance oraccident and health insurance that affords security to the creditor forthe indebtedness involved.
(Formerly: Acts 1961, c.47, s.11.)
IC 27-8-4-12
Rules; order for compliance
Sec. 12. The commissioner may, after notice and hearing, issuesuch rules as he deems appropriate for the supervision of thischapter. Whenever the commissioner finds that there has been aviolation of this chapter or any rules issued pursuant to this chapterand after written notice thereof and hearing given to the insurer orother person authorized or licensed by the commissioner, he shall setforth the details of his findings together with an order for complianceby a specified date. Such order shall be binding on the insurer andother person authorized or licensed by the commissioner on the datespecified unless sooner withdrawn by the commissioner or a staythereof has been ordered by a court of competent jurisdiction. The
provisions of sections 5, 6, 7, and 8 of this chapter shall not beoperative until October 4, 1961, and the commissioner in hisdiscretion may extend until not later than January 2, 1962, the initialperiod within which the provisions of sections 5, 6, 7, and 8 shall notbe operative.
(Formerly: Acts 1961, c.47, s.12.) As amended by P.L.252-1985,SEC.300.
IC 27-8-4-13
Judicial review
Sec. 13. Any party to the proceeding affected by an order of thecommissioner shall be entitled to judicial review under IC 4-21.5-5.
(Formerly: Acts 1961, c.47, s.13.) As amended by P.L.252-1985,SEC.301; P.L.7-1987, SEC.153.
IC 27-8-4-14
Violations; civil penalty; revocation or suspension of license orcertificate of authority
Sec. 14. In addition to any other penalty provided by law, anyperson, firm, or corporation which violates an order of thecommissioner after it has become final, and while such order is ineffect, shall, upon proof thereof to the satisfaction of the court,forfeit and pay to the state of Indiana a sum not to exceed twohundred fifty dollars ($250), which may be recovered in a civilaction, except that if such violation is found to be willful, the amountof such penalty shall be a sum not to exceed one thousand dollars($1000). The commissioner, in his discretion, may revoke or suspendthe license or certificate of authority of the person, firm, orcorporation guilty of such violation. Such order for suspension orrevocation shall be upon notice and hearing, and shall be subject tojudicial review as provided in section 13 of this chapter.
(Formerly: Acts 1961, c.47, s.14.) As amended by P.L.252-1985,SEC.302.