§ 3701 Purpose.
The purpose of this chapter is to promote the public welfare by regulating consumer credit insurance. Nothing in this chapter is intended to prohibit or discourage reasonable competition. The provisions of this chapter shall be liberally construed.
§ 3702 Scope and definitions.
(a) Citation and scope. —
(1) This act may be cited as the "Delaware Consumer Credit Insurance Model Act."
(2) All consumer credit insurance issued or sold in connection with loans or other credit transactions for personal, family or household purposes shall be subject to the provisions of this chapter, except:
a. Insurance written in connection with a credit transaction that is:
1. Secured by a 1st mortgage or deed of trust; and
2. Made to finance the purchase of real property or the construction of a dwelling thereon or to refinance a prior credit transaction made for such a purpose.
b. Insurance sold as an isolated transaction on the part of the insurer and not related to an agreement or a plan for insuring debtors of the creditor.
c. Insurance for which no identifiable charge is made to the debtor.
d. Insurance written in connection with a credit transaction where the initial term exceeds 10 years. Consumer credit insurance forms and premium rates approved for use with credit transactions of 10 years or less may be used for long term transactions, if the term of the insurance does not exceed 10 years.
(b) Definitions. — For the purpose of this chapter:
(1) "Commissioner" means the insurance supervisory authority of the State;
(2) "Consumer credit insurance" is a general term used in this chapter to refer to any or all of credit life insurance credit accident and health insurance or any other insurance specifically defined in this chapter;
(3) "Credit accident and health insurance" means insurance on a debtor or debtors to provide indemnity for payments or debt becoming due on a specific loan or other credit transaction while the debtor is disabled as defined in the policy;
(4) "Credit life insurance" means insurance on a debtor or debtors, pursuant to or in connection with a specific loan or other credit transaction, to provide for satisfaction of a debt, in whole or in part, upon the death of an insured debtor;
(5) "Credit transaction" means any transaction by the terms of which the repayment of money loaned or loan commitment made or payment for goods, services or properties sold or leased is to be made at a future date or dates;
(6) "Creditor" means the lender of money or vendor or lessor of goods, services or property, rights or privileges for which payment is arranged through a credit transaction or any successor to the right, title or interest of any such lender, vendor or lessor and an affiliate, associate or subsidiary of any of them or any director, officer or employee of any of them or any other person in any way associated with any of them;
(7) "Debtor" means a borrower of money or a purchaser or lessee of goods, services, property, rights or privileges for which payment is arranged through a credit transaction;
(8) "Gross debt" means the sum of the remaining payments owed to the creditor by the debtor;
(9) "Identifiable charge" means a charge for a type of consumer credit insurance that is made to debtors having such insurance and not made to debtors not having such insurance; it includes a charge for insurance that is disclosed in the credit or other instrument furnished to the debtor which sets out the financial elements of the credit transaction and any difference in the finance, interest, service or other similar charge made to debtors who are in like circumstances except for the insured or noninsured status of the debtor or of the property used as security for the credit transaction; and
(10) "Open-end credit" means credit extended by a creditor under an agreement in which:
a. The creditor reasonably contemplates repeated transactions;
b. The creditor imposes a finance charge from time to time on an outstanding unpaid balance; and
c. The amount of credit that may be extended to the debtor during the term of the agreement (up to any limit set by the creditor) is generally made available to the extent that any outstanding balance is repaid.
§ 3703 Types of consumer credit insurance.
The types of consumer credit insurance defined in § 3702 of this title may be written separately or in combination with other types of consumer credit insurance on an individual policy or group policy basis.
§ 3704 Amount of consumer credit insurance.
(a) Credit life insurance. —
(1) The initial amount of credit life insurance shall not exceed the total amount repayable under the credit transaction, which is the gross debt.
(2) In cases where an indebtedness is repayable in substantially equal installments, the amount of insurance shall at no time exceed the scheduled or actual amount of unpaid indebtedness, whichever is greater.
(3) Notwithstanding paragraph (1) or (2) of this subsection, insurance on agricultural credit transactions not exceeding 2 years in duration may be written up to the amount of the loan commitment on a nondecreasing or level term plan.
(4) Notwithstanding paragraphs (1) and (2) of this subsection, or any other subsection, insurance on educational credit transaction commitments may be written for the amount of the portion of such commitment that has not been advanced by the creditor.
(b) Credit accident and health insurance. —
(1) The total amount of periodic indemnity payable by credit accident and health insurance in the event of disability as defined in the policy shall not exceed the aggregate of the periodic scheduled unpaid installments of the gross debt and the amount of each periodic indemnity payment shall not exceed the original gross debt divided by the number of periodic installments.
(2) Notwithstanding paragraph (1) of this subsection, for credit accident and health insurance written in connection with an open-end credit agreement, the amount of insurance shall not exceed the gross debt which would accrue on that amount using the periodic indemnity. Subject to any policy maximums, the periodic indemnity must not be less than the creditor's minimum repayment schedule.
§ 3705 Term of consumer credit insurance.
(a) Effective date of coverage. —
(1) For consumer credit insurance made available to and elected by the debtor before or contemporaneous with a credit transaction to which the insurance relates, the term of the insurance shall, subject to acceptance by the insurer, commence on the date when the debtor becomes obligated to the creditor, except that when evidence of individual insurability is required and such evidence is furnished more than 30 days after the date when the debtor becomes obligated to the creditor, the term of the credit insurance may commence on the date on which the insurance company determines the evidence to be satisfactory.
(2) For insurance coverage made available to and elected by the debtor on a date subsequent to the date of the consumer credit transaction to which the insurance relates, the insurance shall, subject to acceptance by the insurer, commence on a date not earlier than the date the election is made by the debtor not later than 30 days following the date on which the insurance company accepts the risk for coverage, according to an objective method such as one related to a particular date within a billing or repayment cycle or a calendar month.
(3) Notwithstanding paragraphs (1) and (2) of this subsection, when a group policy provides coverage with respect to debts existing on the policy effective date, the insurance relating to the debt shall not commence before the effective date of the group policy.
(4) In no event shall a charge for insurance be made to the debtor and retained by the creditor or insurer for any time prior to commencement of the consumer credit insurance to which the charge is related.
(b) Termination date of coverage. —
(1) The term of any consumer credit insurance shall not extend beyond the termination date specified in the policy. The termination date of insurance may precede, coincide with or follow the scheduled maturity date of the debt to which it relates, subject to any other requirements and restrictions of this chapter.
(2) The term of any consumer credit insurance shall not extend more than 15 days beyond the scheduled maturity date of the debt, except when extended without additional cost to the debtor or except when extended pursuant to a written agreement, signed by the debtor, in connection with a variable interest rate credit transaction or a deferral, renewal, refinancing or consolidation of debt.
(3) If the debt is discharged due to renewal, refinancing or consolidation prior to the scheduled termination date of the insurance, any insurance in force shall be terminated before any new insurance may be written in connection with the renewed, refinanced or consolidated debt.
(4) In all cases of termination of insurance prior to the scheduled termination of the insurance, an appropriate refund or credit to the debtor shall be made of any unearned insurance charge paid by the debtor for a term of insurance after the date of the termination, except that no refund is required of a charge made for insurance if the insurance is terminated by performance of the insurer's obligation with respect to the insurance.
(5) An insured debtor may terminate consumer credit insurance at any time by providing advance request to the insurer. The individual policy or group certificate may require that the request be in writing or that the debtor surrender the individual policy or group certificate, or both. The debtor's right to terminate coverage may also be subject to the terms of the credit transaction contract.
§ 3706 Disclosure to debtors and provisions of policies and certificates of insurance.
(a) Pre-purchase disclosure. — Before the debtor elects to purchase consumer credit insurance in connection with a credit transaction, the following shall be disclosed to the debtor in writing or as provided for in subsection (b) of this section:
(1) That the purchase of consumer credit insurance is optional and not a condition of obtaining credit approval;
(2) If more than 1 kind of consumer credit insurance is being made available to the debtor, whether the debtor can purchase each kind separately or the multiple coverage only as a package;
(3) The conditions of eligibility;
(4) That within the 1st 30 days after receiving the individual policy or group certificate, the debtor may cancel the coverage and have all premium paid by the debtor refunded or credited. Thereafter, the debtor may cancel the policy at any time during the term of the loan and receive a refund of any of the unearned premium. However, only in those instances where insurance is a requirement for the extension of credit, the debtor may be required to offer evidence of alternative insurance acceptable to the creditor at the time of cancellation; and
(5) A brief description of the coverage.
(b) The disclosure required in subsection (a) of this section shall be provided in the following manner:
(1) In connection with consumer credit insurance offered contemporaneously with the extension of credit or offered through direct mail advertisements, disclosure shall be made in writing and presented to the consumer in a clear or conspicuous manner;
(2) In conjunction with the offer of credit insurance subsequent to the extension of credit by other than direct mail advertisements, disclosure may be provided orally so long as written disclosures are provided to the debtor no later than the earlier of:
a. Ten days after the offer; or
b. The date any other written material is provided to the debtor.
(c) All consumer credit insurance shall be evidenced by an individual policy or a group certificate of insurance which shall be delivered to the debtor.
(d) The individual policy or group certificate shall, in addition to other requirements of law, set forth the following:
(1) The name and home office address of the insurer;
(2) The name or names of the debtor or debtors, or in the case of a group certificate, the identity by name or otherwise of the debtor or debtors;
(3) The premium or amount of payment by the debtor separately for each kind of coverage or for all coverages in a package, except that for open-end loans, the premium rate and the basis of premium calculation (e.g., average daily balance, prior monthly balance) shall be specified;
(4) A full description of the coverage or coverages, including the amount of term thereof and any exceptions, limitation and exclusions; and
(5) A statement that the benefits shall be paid to the creditor to reduce or extinguish the unpaid debt and, whenever the amount of insurance benefit exceeds the unpaid debt, that any such excess shall be payable to a beneficiary other than the creditor, named by the debtor or the debtor's estate.
(e) Unless the individual policy or group certificate of insurance is delivered to the debtor at the time the debt is incurred or at such other time that the debtor elects to purchase coverage, a copy of the application for the policy or a notice of proposed insurance, signed by the debtor and setting forth the name and home office address of the insurer, the name or names of the debtor, the premium rate or amount of payment by the debtor for the insurance, the amount of payment by the debtor for the insurance and the amount, term and a brief description of the coverage provided, shall be delivered at the time the debt is incurred or the election to purchase coverage is made. The copy of the application for or notice of proposed insurance shall also refer exclusively to insurance coverage and shall be separate and apart from the loan, sale or other credit statement of account, instrument or agreement, unless the information required by this subsection is prominently set forth therein. Upon acceptance of the insurance by the insurer and within 30 days of the date upon which the debt is incurred or the election to purchase coverage is made, the insurer shall cause the individual policy or group certificate of insurance to be delivered to the debtor. The application or notice of proposed insurance shall state that upon acceptance by the insurer, the insurance shall become effective as provided in § 3705 of this title.
(f) The application, notice of proposed insurance or certificate may be used to fulfill all of the requirements of subsections (a) and (d) of this section if it contains all of the information required by those subsections.
(g) The debtor has 30 days from the date that he or she receives either the individual policy or the group certificate to review the coverage purchased. At any time within the 30 day period, the debtor may contact the creditor or insurer issuing the policy or certificate and request that the coverage be canceled. The individual policy or group certificate may require the request to be in writing or that the policy or certificate be returned to the insurer or both. The debtor shall, within 30 days of the request, receive a full refund or credit of all premiums or insurance charges paid by the debtor, provided no loss has occurred and no claim has been made.
(h) If the named insurer does not accept the risk, the debtor shall receive a policy or certificate of insurance setting forth the name and home office address of the substituted insurer and the amount of the premium to be charged, and, if the amount of premium is less than that set forth in the notice or proposed insurance, an appropriate refund shall be made within 30 days. If no insurer accepts the risk, then all premiums paid shall be refunded or credited within 30 days of application to the person entitled thereto.
(i) For the purpose of subsection (e) of this section, an individual policy or group certificate delivered in conjunction with an open-end consumer credit agreement or any consumer credit insurance requested by the debtor after that date of the debt shall be deemed to be delivered at the time the debt is incurred or election to purchase coverage is made if the delivery occurs within 30 days of the date the insurance is effective.
(j) An individual policy or group certificate delivered in conjunction with an open-end credit agreement shall continue from its effective date through the term of the agreement unless the individual policy or group certificate is terminated in accordance with its terms at an earlier date.
§ 3707 Filing, approval and withdrawal of forms.
(a) All policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders delivered or issued for delivery in this State and the schedules of premium rates pertaining thereto shall be filed with the Commissioner before being used.
(b) The Commissioner shall, within 30 days after the filing of any such policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders, disapprove any such form if the benefits provided are not reasonable in relation to the premium charged or if it contains provisions which are unjust, unfair, inequitable, misleading, deceptive or encourage misrepresentation of the coverage or are contrary to any provision of the Insurance Code or of any rule or regulation promulgated thereunder. If the Commissioner does not disapprove a filing within 30 days, it may be deemed approved.
(c) If the Commissioner disapproves the form in accordance with subsection (b) of this section, the Commissioner shall promptly notify the insurer in writing of the disapproval, and it is unlawful for the insurer to issue or use the form. In the notice, the Commissioner shall specify the reasons for disapproval and state that a hearing will be granted upon written request by the insurer.
(d) The Commissioner may withdraw approval of any approved form when the Commissioner would be required to disapprove the form if it were filed at the time of the action of withdrawal. The withdrawal shall be in writing and shall specify the reasons for the withdrawal and the effective date of the withdrawal. Any insurer adversely affected by such withdrawal may, within 30 days after receiving the written notification of the withdrawal, request a hearing to determine whether the withdrawal should be annulled, modified or confirmed. Unless the Commissioner, in writing, in the withdrawal or subsequent thereto grants an extension, the withdrawal shall, in the absence of a request for a hearing, become effective, prospectively and not retroactively, on the 91st day following the delivery of the notice of withdrawal, and, if request for hearing is filed, on the 91st day following delivery of written notice of the Commissioner's determination.
(e) Any hearing requested pursuant to subsections (c) and (d) of this section shall be noticed and conducted in accordance with the Delaware Administrative Procedures Act, Chapter 101 of Title 29.
(f) If a group policy of consumer credit insurance:
(1) Has been delivered in this State before November 20, 1996; or
(2) Has been or is delivered in another state before or after November 20, 1996, then the insurer shall be required to file only the group certificate and notice of proposed insurance delivered or issued for delivery in this State as specified in § 3706(c) and (e) of this title and such forms shall be approved by the Commissioner if they conform with the requirements specified in these subsections and if the schedules of premium rates applicable to the insurance evidenced by such certificate or notice are not in excess of the insurer's schedules of premium rates filed with the Commissioner; provided however, that the premium rate in effect on existing group policies may be continued until the 1st policy anniversary date following November 22, 1996, as provided in § 3713 of this title. However, all other forms specified in subsection (a) of this section shall also be filed as specified in this section unless the group policy has been or is delivered in another state which has adopted statutes, regulations or other provisions similar to this section. In that event, the forms should be filed for informational purposes. However, the insurer shall be prohibited from using any form filed for informational purposes if the Commissioner subsequently determines that the form is not in substantive compliance with the requirements of this section.
§ 3708 Premiums and refunds.
(a) Any insurer may revise its schedules of premium rates from time to time and shall file the revised schedules with the Commissioner. No insurer shall issue any consumer credit insurance policy for which the premium rate exceeds that determined by the schedules of the insurer as then on file with the Commissioner. The Commissioner shall have the authority to promulgate regulations to assure that the premium rates are reasonable in relation to the benefits provided. In determining whether the premium rates are reasonable in relation to the benefits provided, the Commissioner shall consider and provide for: actual and expected loss experience, general and administrative expenses, loss settlement and adjustment expenses, reasonable creditor compensation, investment income, the manner in which premiums are charged and other acquisition costs, reserves, taxes, regulatory license fees and fund assessments, reasonable insurer profit and other relevant data, consistent with generally accepted actuarial standards.
(b) Each individual policy or group certificate shall provide for a refund in the event of termination of the insurance prior to the scheduled maturity date of the insurance and upon notice to the insurer. The refund of an amount paid by the debtor for insurance shall be paid or credited promptly to the person entitled thereto; provided however, that the Commissioner shall prescribe a minimum refund and no refund which would be less than such minimum need be made. The formula to be used in computing such refund shall be filed with and approved by the Commissioner.
(c) If a creditor requires a debtor to make any payment for consumer credit insurance and an individual policy or group certificate of insurance is not issued, the creditor shall immediately give written notice to the debtor and shall promptly make an appropriate credit to the account or issue a refund.
(d) The amount charged to a debtor for any consumer credit insurance shall not exceed the premiums charged by the insurer, as computed at the time the charge to the debtor is determined.
(e) The insurance premium or other identifiable charge for credit life or credit accident and health insurance may be collected from the insured or included in the principal of any loan or other transaction at the time such transaction is completed.
(f) The premium or cost of credit life or credit accident and health insurance when issued through any creditor shall not be deemed interest or charges, consideration or an amount in excess of permitted charges in connection with the loan or other credit transaction, and any gain or advantage to the creditor arising out of the premium or commission or dividend from the issuance of such insurance shall not be deemed a violation of any other law, general or special, civil or criminal, of the State.
§ 3709 Issuance of policies.
All policies of consumer credit insurance shall be delivered or issued for delivery in this State only by an insurer authorized to engage in the business of insurance therein and shall be issued only through holders of licenses or authorizations issued by the Commissioner.
§ 3710 Claims.
(a) All claims shall be promptly reported to the insurer or its designated claim representative and the insurer shall maintain adequate claim files. All claims shall be settled as soon as possible and in accordance with the terms of the insurance contract.
(b) All claims shall be paid either by draft drawn upon the insurer, by electronic funds transfer or by check of the insurer to the order of the claimant to whom payment of the claim is due pursuant to the policy provisions or upon direction of such claimant to one specified.
(c) No plan or arrangement shall be used whereby any person, firm or corporation other than the insurer or its designated claim representative shall be authorized to settle or adjust claims. The creditor shall not be designated as claim representative for the insurer in adjusting claims; provided, that a group policyholder may, by arrangement with the group insurer, draw drafts, checks or electronic transfers in payment of claims due to the group policyholder subject to audit and review by the insurer.
§ 3711 Existing insurance — Choice of insurer.
When consumer credit insurance is required as additional security for any debt, the debtor shall, upon request to the creditor, have the option of furnishing the required amount of insurance through existing policies of insurance owned or controlled by the debtor or of procuring and furnishing the required coverage through any insurer authorized to transact any insurance business within this State.
§ 3712 Duties of an insurer.
Except as otherwise prohibited by law, duties imposed upon an insurer within this chapter may be carried out by a creditor if the creditor is acting as a common law or statutory agent on behalf of the insurer.
§ 3713 Enforcement; penalties.
(a) The Commissioner may, after notice and hearing, issue such rules and regulations as the Commissioner deems appropriate for the supervision of this chapter.
(b) Whenever the Commissioner finds that there has been a violation of this chapter or any rules or regulations issued pursuant thereto, and after written notice thereof and hearing given to the insurer or other person authorized or licensed by the Commissioner, the Commissioner may impose an administrative penalty in accordance with § 329 of this title. The Commissioner, in his or her discretion, may revoke or suspend the license or certificate of authority of the person, firm or corporation guilty of repeated wilful violations.
(c) Before the Commissioner may impose or order a penalty pursuant to this section, the violator shall be given notice of the violation and an opportunity to be heard at a public hearing. The procedures for such notice and hearing, and any appeal from the Commissioner's decision shall be the same as set forth in the Delaware Administrative Procedures Act, Chapter 101 of Title 29.
(d) The Commissioner may set forth by regulation prima facie reasonable premium rates, together with corresponding safe-harbor benefit provisions, which premium rates shall be conclusively presumed reasonable in relation to the benefits provided when used for policies containing such benefit provisions.