Chapter Ins 3

Ins 3.17 Note The 1985 Commissioners Individual Disability Tables A, 1986 Proceedings of the National Association of Insurance Commissioners, Vol. I, pgs. 574-589.

Ins 3.17 Note The 1985 Commissioners Individual Disability Tables B, 1985 Proceedings of the National Association of Insurance Commissioners, Vol. I, pgs. 486-540.

Ins 3.17 Note The 1956 Intercompany Hospital-Surgical Tables, 1957 Proceedings of the National Association of Insurance Commissioners, Vol. I, pgs. 83-85.

Ins 3.17 Note The 1985 NAIC Cancer Claim Cost Tables, 1986 Proceedings of the National Association of Insurance Commissioners, Vol. I, pgs. 609-623.

Ins 3.17 Note The 1959 Accidental Death Benefits Table, Transactions of the Society of Actuaries, Vol. XI, pg. 754.

Ins 3.17 Note The 1987 Commissioners Group Disability Income Table, 1987 Proceedings of the National Association of Insurance Commissioners, Vol. II, pgs. 557-619.

Ins 3.17 Note Note: Reserves for waiver of premium. Waiver of premium reserves involve several special considerations. First, the disability valuation tables promulgated by the NAIC are based on exposures that include contracts on premium waiver as in-force contracts. Therefore, contract reserves based on these tables are not reserves on “active lives,” but rather reserves on contracts “in force.” This is true for the 1964 CDT and for both the 1985 CIDA and CIDB tables.

Ins 3.17 Note Accordingly, tabular reserves using any of these tables should value reserves on the following basis:

Ins 3.17 Note Claim reserves should include reserves for premiums expected to be waived, valuing as a minimum the valuation net premium being waived.

Ins 3.17 Note Premium reserves should include contracts on premium waiver as in-force contracts, valuing as a minimum the unearned modal valuation net premium being waived.

Ins 3.17 Note Contract reserves should include recognition of the waiver of premium benefit in addition to other contract benefits provided for, valuing as a minimum the valuation net premium to be waived.

Ins 3.17 Note If an insurer is, instead, valuing reserves on what is truly an active life table, or if a specific valuation table is not being used but the insurer’s gross premiums are calculated on a basis that includes in the projected exposure only those contracts for which premiums are being paid, then it may not be necessary to provide specifically for waiver of premium reserves. Any insurer using the true “active life” basis should carefully consider, however, whether or not additional liability should be recognized on account of premiums waived during periods of disability or during claim continuation.

Ins 3.18 Ins 3.18 Total consideration for accident and sickness insurance policies. The total consideration charged for accident and sickness insurance policies must include policy and other fees. Such total consideration charged must be stated in the policy, and shall be subject to the reserve requirements of ch. 623, Stats., and s. Ins 3.17, and must be the basis for computing the amount to be refunded in the event of cancellation of the policy.

Ins 3.18 History History: Cr. Register, May, 1959, No. 41, eff. 6-1-59; emerg. am. eff. 6-22-76; am. Register, September, 1976, No. 249, eff. 10-1-76.

Ins 3.19 Ins 3.19 Group accident and sickness insurance insuring debtors of a creditor.

Ins 3.19(1) (1) This rule implements and interprets ss. 204.321 (1) (d) and 206.60 (2), 1973 Stats., with regard to issuance of a group policy of accident and sickness insurance issued to a creditor to insure debtors of a creditor.

Ins 3.19(2) (2) A group accident and sickness insurance policy may be issued to a creditor to insure debtors of the creditor if the class or classes of insured debtors meet the requirements of s. 206.60 (2) (a) and (c), 1973 Stats., and such a policy shall be subject to the requirements of such paragraphs in addition to other requirements applicable to group accident and sickness insurance policies.

Ins 3.19 History History: Cr. Register, November, 1959, No. 47, eff. 12-1-59; am. Register, September, 1963, No. 93, eff. 10-1-63; r. (3), Register, February, 1973, No. 206, eff. 3-1-73; emerg. am. (1) and (2), eff. 6-22-76; am. (1) and (2), Register, September, 1976, No. 249, eff. 10-1-76.

Ins 3.20 Ins 3.20 Substandard risk automobile physical damage insurance for financed vehicles.

Ins 3.20(1) (1) Purpose. In accordance with s. 625.34, Stats., this rule is to accomplish the purpose and enforce the provisions of ch. 625, Stats., in relation to automobile physical damage insurance for substandard risks.

Ins 3.20(2) (2) Scope. This rule applies to any automobile physical damage insurance policy procured or delivered by a finance company.

Ins 3.20(3) (3) Definitions.

Ins 3.20(3)(a) (a) “Substandard risk” means an applicant for insurance who presents a greater exposure to loss than that contemplated by commonly used rate classifications as evidenced by one or more of the following conditions:

Ins 3.20(3)(a)1. 1. Record of traffic accidents.

Ins 3.20(3)(a)2. 2. Record of traffic law violations.

Ins 3.20(3)(a)3. 3. Undesirable occupational circumstances.

Ins 3.20(3)(a)4. 4. Undesirable moral characteristics.

Ins 3.20(3)(b) (b) “Substandard risk rate” means a rate or premium charge that reflects the greater than normal exposure to loss which is assumed by an insurer writing insurance for a substandard risk.

Ins 3.20(4) (4) Rates for substandard risks.

Ins 3.20(4)(a) (a) Any increased rate charged for substandard risks shall not be excessive, inadequate, or unfairly discriminatory.

Ins 3.20(4)(b) (b) It shall be unfairly discriminatory to charge a rate or premium that does not reasonably measure the variation between risks and each risk’s exposure to loss.

Ins 3.20(4)(c) (c) Classification rates filed for substandard risks may not exceed 150% of the rate level generally in use for normal risks unless the filing also provides for the modification of classification rates in accordance with a schedule which establishes standards for measuring variation in hazards or expense provisions or both.

Ins 3.20(5) (5) Insurance coverage.

Ins 3.20(5)(a) (a) The automobile physical damage insurance afforded shall be substantially that customarily in use for normal business.

Ins 3.20(5)(b) (b) The applicant shall not be required to purchase more coverage than is customarily necessary to protect the interests of the mortgagee. The issuance of a policy shall not be made contingent on the acceptance by the applicant of unwanted or excessively broad coverages.

Ins 3.20(5)(c) (c) Single interest coverage may be issued only when double interest coverage is not obtainable. The applicant must be given the opportunity to procure insurance, and if he or she can procure same within 25 days there shall be no charge for the single interest coverage.

Ins 3.20(6) (6) Policy forms. The purchaser must be furnished with a complete policy form clearly setting forth the nature and extent of all coverages and premiums charged therefor.

Ins 3.20(7) (7) Rating statement. No policy written on the basis of a sub-standard risk rate schedule shall be issued unless it contains a statement printed in bold-faced type, preferably in a contrasting color, reading substantially as follows: This policy has been rated in accordance with a special rating schedule filed with the commissioner of insurance providing for higher premium charges than those generally applicable for average risks. If the coverage or premium is not satisfactory, you may secure your own insurance.

Ins 3.20 History History: Cr. Register, March, 1960, No. 51, eff. 4-1-60; emerg. am. (1), eff. 6-22-76; am. (1), Register, September, 1976, No. 249, eff. 10-1-76; correction in (1) and (5) (c) made under s. 13.93 (2m) (b) 5. and 7., Stats., Register, April, 1992, No. 436.

Ins 3.23 Ins 3.23 Franchise accident and sickness insurance.

Ins 3.23(1) (1) Franchise group headquarters. A franchise group described in s. 600.03 (22), Stats., need not have its headquarters or other executive offices domiciled in Wisconsin.

Ins 3.23(2) (2) Accounting. All premiums paid in connection with franchise accident and sickness insurance on Wisconsin residents shall be reported for annual statement purposes as Wisconsin business and shall be subject to the applicable Wisconsin premium tax.

Ins 3.23 History History: Cr. Register, May, 1964, No. 101, eff. 6-1-64; emerg. am. (1) eff. 6-22-76; am. (1), Register, September, 1976, No. 249, eff. 10-1-76; correction in (1) made under s. 13.93 (2m) (b) 7., Stats., Register, April, 1992, No. 436.

Ins 3.25 Ins 3.25 Credit life insurance and credit accident and sickness insurance.

Ins 3.25(1) (1) Purpose. The purpose of this section is to assist in the maintenance of a fair and equitable credit insurance market and to ensure that policyholders, claimants and insurers are treated fairly and equitably by providing a system of rate, policy form and operating standards for the transaction of credit life insurance and credit accident and sickness insurance. This section interprets and implements ss. 601.01, 601.415 (9), 601.42, 623.06, 625.11, 625.12, 625.34, 631.20, 632.44 (3) and 632.60, Stats., and chs. 421, 422 and 424, Stats.

Ins 3.25(2) (2) Scope.

Ins 3.25(2)(a) (a) This section shall apply to the transaction of credit life insurance as defined in s. Ins 6.75 (1) (a) 1. and s. 632.44, Stats., and subject to ch. 424, Stats., and to the transaction of credit accident and sickness insurance as defined in s. Ins 6.75 (1) (c) 1. and (2) (c) 1. and subject to ch. 424, Stats.

Ins 3.25(2)(b) (b) This rule shall be the basis for review of all policy forms, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders and the schedules of premium rates to be used in Wisconsin on or after the effective date of the rule for credit life and credit accident and sickness insurance.

Ins 3.25(3) (3) Definitions. In this section:

Ins 3.25(3)(a) (a) “Case” means, for credit life insurance, all the credit life insurance of a creditor and, for credit accident and sickness insurance, all of each category of credit accident and sickness insurance of a creditor, as specified in Appendix B, unless some reasonable combination of these categories is approved by the commissioner.

Ins 3.25(3)(b) (b) “Case rate” means the maximum premium rate or schedule of premium rates permitted to be charged with respect to the coverage of a creditor. Unless a higher premium rate or schedule of premium rates is approved by the commissioner, the case rate is the prima facie premium rate or schedule of premium rates.

Ins 3.25(3)(c) (c) “Creditor” has the meaning set forth in s. 421.301 (16), Stats.

Ins 3.25(3)(d) (d) “Experience period” means a time period of consecutive calendar years ending with the most recent full calendar year prior to the date of determination of a case rate based on such experience period. The number of years shall be not less than one nor more than three; provided, however, that if the number of years is less than three, the life years exposure in the experience period shall be not less than ten thousand for life insurance and not less than one thousand for accident and sickness insurance.

Ins 3.25(3)(e) (e) “Incurred claims” means claims paid during the experience period plus claim reserve at the end of the experience period minus claim reserve at the beginning of the experience period.

Ins 3.25(3)(f) (f) “Life years exposure” means the average number of group certificates or individual policies in force during an experience period, without regard to multiple coverage, times the number of years in the experience period.

Ins 3.25(3)(g) (g) “Prima facie earned premium” means the premium which would have been earned during the experience period if the prima facie premium rate in effect at the end of the experience period had always been charged. The method of calculation shall be that specified in sub. (13).

Ins 3.25(3)(h) (h) “Prima facie loss ratio” means incurred claims divided by prima facie earned premium.

Ins 3.25(4) (4) Types of credit life insurance or credit accident and sickness insurance. No credit life insurance or credit accident and sickness insurance policies shall be issued except:

Ins 3.25(4)(a) (a) Individual policies of life insurance issued to debtors on a nonrenewable, nonconvertible term plan;

Ins 3.25(4)(b) (b) Individual policies of accident and sickness insurance issued to debtors on a term plan or disability benefit provisions in individual policies of credit life insurance;

Ins 3.25(4)(c) (c) Group policies of life insurance issued to creditors providing insurance upon the lives of debtors on a term plan;

Ins 3.25(4)(d) (d) Group policies of accident and sickness insurance issued to creditors on a term plan insuring debtors or disability benefit provisions in group credit life insurance policies.

Ins 3.25(5) (5) Amount of credit life and credit accident and sickness insurance. The amount of credit life insurance and credit accident and sickness insurance shall not exceed the amounts specified in s. 424.208, Stats.

Ins 3.25(6) (6) Term of credit life insurance and credit accident and sickness insurance.

Ins 3.25(6)(a) (a) The term of any credit life insurance or credit accident and sickness insurance shall, subject to acceptance by the insurer, commence on the date when the debtor becomes obligated to the creditor, except that, where a group policy provides coverage with respect to existing obligations, the insurance on a debtor with respect to such indebtedness shall commence on the effective date of the policy.

Ins 3.25(6)(b) (b) Where evidence of 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 insurance may commence on the date on which the insurance company determines the evidence to be satisfactory, and in such event there shall be an appropriate refund or adjustment of any charge to the debtor for insurance. The term of this insurance shall not extend more than 15 days beyond the scheduled maturity date of indebtedness unless it is extended without additional cost to the debtor or as an incident to a deferral, refinancing or consolidation agreement.

Ins 3.25(6)(c) (c) If the indebtedness is discharged due to renewal or refinancing prior to the scheduled maturity date, the insurance in force shall be terminated before any new insurance is issued in connection with the renewed or refinanced indebtedness. In any renewal or refinancing of the indebtedness, the effective date of the coverage of any policy provision shall be deemed to be the first date on which the debtor became insured under the policy covering the indebtedness which was renewed or refinanced. However, this does not apply to an amount or term of indebtedness, exclusive of refinancing charges, in excess of the original indebtedness outstanding at the time of refinancing.

Ins 3.25(6)(d) (d) In all cases of termination prior to scheduled maturity, a refund shall be paid or credited as provided in sub. (9).

Ins 3.25(7) (7) Provisions of policies and certificates of insurance; disclosure to debtors.

Ins 3.25(7)(a) (a) All credit life insurance and credit accident and sickness insurance shall be evidenced by an individual policy, or in the case of group insurance, by a certificate of insurance. The individual policy or group certificate of insurance shall be delivered to the debtor.

Ins 3.25(7)(b) (b) Each individual policy or group certificate of credit life insurance or credit accident and sickness insurance shall, in addition to other requirements of the law, set forth:

Ins 3.25(7)(b)1. 1. The name and home office address of the insurer;

Ins 3.25(7)(b)2. 2. The name or names of the debtor or, in the case of a certificate under a group policy, the identity of the debtor;

Ins 3.25(7)(b)3. 3. The premium or charge, if any, to be paid by the debtor. Premiums for credit life insurance and for credit accident and sickness insurance shall be shown separately;

Ins 3.25(7)(b)4. 4. A description of the coverage including the amount and term of coverage, and any exceptions, limitations and restrictions;

Ins 3.25(7)(b)5. 5. A provision that the benefits shall be paid to the creditor to reduce or extinguish the unpaid indebtedness and that whenever the amount of insurance exceeds the unpaid indebtedness, any excess shall be payable to a beneficiary, other than the creditor named by the debtor, or to the debtor’s estate, and

Ins 3.25(7)(b)6. 6. A provision that the insurance on any debtor will be cancelled and a refund made if the indebtedness is terminated through prepayment or otherwise, in accordance with sub. (9).

Ins 3.25(7)(c) (c) The individual policy or group certificate of insurance shall be delivered to the insured debtor at the time the indebtedness is incurred except as provided in par. (d);

Ins 3.25(7)(d) (d) If the individual policy or group certificate of insurance is not delivered to the debtor at the time the indebtedness is incurred, a copy of the application for the policy or a notice of proposed insurance shall:

Ins 3.25(7)(d)1. 1. Be delivered to the debtor at the time the indebtedness is incurred;

Ins 3.25(7)(d)2. 2. Be signed by the debtor;

Ins 3.25(7)(d)3. 3. Set forth the name and home office address of the insurer;

Ins 3.25(7)(d)4. 4. Set forth the name or names of the debtor;

Ins 3.25(7)(d)5. 5. Set forth the premium or amount of payment by the debtor, if any, separately for credit life insurance and credit accident and sickness insurance; and

Ins 3.25(7)(d)6. 6. Set forth the amount, term and a brief description of the coverage provided including all exclusions and exceptions.

Ins 3.25(7)(e) (e) The copy of the application or notice of proposed insurance shall also refer exclusively to insurance coverage, and the copy or notice shall be separate and apart from the loan, sale or other credit statement of account, instrument or agreement, unless the information required by par. (d) is prominently set forth in the loan, sale or other credit statement of account, instrument or agreement. Upon acceptance of the insurance by the insurer and within 30 days of the date upon which the indebtedness is incurred, 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 sub. (6).

Ins 3.25(7)(f) (f) If the named insurer does not accept the risk, the debtor shall receive a policy or certificate of insurance from the substituted insurer, if any, including the information required by par. (b). If the amount of premium is less than that set forth in the notice of proposed insurance an appropriate refund shall be made.

Ins 3.25(7)(g) (g) If a contract of insurance provides for a limitation in the amount of coverage related to insurance provided by other contracts in force on the debtor, such limitation shall be explained to the debtor at the time the indebtedness is incurred and shall be acknowledged in writing by the debtor in an instrument separate from the individual policy or group certificate. Alternatively, the individual policy or group certificate shall include a brief description or separate statement referring to the limitation in the amount of coverage. The brief description or separate statement, shall be printed on the first page of the individual policy or group certificate in type more prominent than that used in the text of the policy or certificate and shall indicate the limitation clearly.

Ins 3.25(7)(h) (h) If a contract of insurance provides for a limitation of coverage related to the age of the debtor, such limitation shall be explained to the debtor at the time the indebtedness is incurred and shall be acknowledged in writing in an instrument separate from the individual policy or group certificate. Alternatively, the individual policy or group certificate shall include a brief description or separate statement referring to the age limitation. The brief description or separate statement, shall be printed on the first page of the individual policy or group certificate in type more prominent than that used in the text of the policy or certificate and shall indicate the limitation clearly.