Chapter 3901-1 General Provisions

3901-1-01 Public notice by publication.

(A) Purpose

This rule provides for the giving of proper notice by publication as required by the Administrative Procedures Act, Chapter 119, Revised Code of Ohio; various sections of Title 39, the Insurance Code; and such other miscellaneous sections of the Revised Code concerned with promulgation to the public of such insurance matters as are of widespread public interest and which do not set forth with particularity the means, content and frequency of notice. Any and all existing Department of Insurance rules concerning notice by publication are hereby rescinded, including an unnumbered rule effective September 10, 1956.

(B) Public Notice of Department of Insurance Proposed Rules

(1) Public notice of the proposed adoption, amendment or rescission of any rule by the Superintendent of Insurance, in accord with sections 119.01 through 119.13, inclusive, Revised Code of Ohio, shall be given by publication in a newspaper of general circulation of not less than 10,000 in Cuyahoga, Franklin, Hamilton, and Lucas Counties. Such notice shall be published at least once not less than thirty days prior to the date set for a hearing on the proposed rule, and shall be in full conformity with section 119.03, Revised Code.

(2) Notwithstanding subsection (1) immediately preceding, public notice of the proposed adoption, amendment or rescission of any rule relating to statistical plans, the reporting of statistical information or the designation of statistical agents pursuant to sections 3935.10 and 3937.12, Revised Code, shall be given by publication at least once in a newspaper published in Franklin County, and having a circulation of not less than 10,000, not less than thirty days prior to the date set for hearing on such proposal.

Whenever various other sections of Title 39, Insurance, or miscellaneous sections in other chapters of the Revised Code of Ohio require public notice to be given by the Superintendent of Insurance, and where the method and content of notice are not set forth with particularity, such notice shall be made in accord with subsection (B)(1) hereof.

(D) Public Notice by Insurance Industry

(1) Whenever an insurance company or any individual or firm connected therewith, subject to the regulation and jurisdiction of the Department of Insurance, are required to give public notice by any section of the Revised Code of Ohio, in which the method and content of notice are not set forth with particularity, such public notice shall be given in accord with subsection (B)(1) hereof.

(2) Such public notice shall include:

(a) A synopsis or general statement of the subject matter involved.

(b) An indication of the company’s position, or action to be taken, regarding the subject of notice.

(E) Discretion to Vary Publication

Whenever the Superintendent of Insurance determines that the subject matter of public notice is of an unusual nature and appropriate for more widespread publication, he may direct that such notice be also made in newspapers of general circulation of not less than 10,000 in one or more of the following counties: Mahoning, Montgomery, Summit and Athens. Whenever the subject matter of public notice is of a regional nature, the Superintendent of Insurance may direct such special publication as appropriate. In any case, the Superintendent of Insurance may direct that publication be made more than once, as frequently as may be appropriate. In addition to the public notice provided by this rule, the Superintendent of Insurance may give, or order, such other means of notice as he deems necessary or appropriate.

(F) Effective Date

These rules shall take effect the 15th day of August, 1966.

R.C. 119.032 review dates: 12/22/2004 and 12/22/2009

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 119.01 through 119.13, Title 39 and other Revised Code sections concerning notice

Prior Effective Dates: (Former IN-1-01), 8/15/1966

3901-1-04 Provider discounts.

(A) Purpose

This rule sets the requirements that third party payers shall follow if the third party payer receives any discount from billed charges from a health care provider.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent of insurance under section 3901.041 of the Revised Code, general rule making authority; and sections 3901.19 to 3901.22 of the Revised Code, the unfair and deceptive acts statute.

(1) “Discount” means any negotiated reduction or variation from the schedule of billed charges (including capitation) that a health care provider otherwise would require a patient and/or the patient’s third party payer to pay to that health care provider.

(2) “Billed charges” means the non-discounted schedule of charges for services that the health care provider would use to invoice a patient for services rendered.

(3) “Third party payer” means any of the following:

(a) An insurance company;

(b) A preferred provider organization;

(d) An employer;

(e) An administrator subject to sections 3959.01 to 3959.16 of the Revised Code;

(f) A multiple employer welfare arrangement subject to sections 1739.01 to 1739.99 of the Revised Code;

(g) Any other person that is obligated pursuant to a benefits contract to reimburse for covered health care services to beneficiaries under such contract, except that “third party payer” does not include a health insuring corporation licensed pursuant to Chapter 1751. of the Revised Code.

(4) “Reasonable cash value” means the amount the third party payer would reimburse the patient or health care provider in the absence of a capitation agreement.

(D) Prohibited activity

No third party payer that has a negotiated discount with a health care provider, shall do the following:

(1) Fail to disclose the existence of such discount to any policyholder, certificate holder, subscriber or enrollee who has purchased health care coverage from the third party payer. Such disclosure shall be contained in the body of the insurance contract, and the certificate if the contract is a group insurance program. Only disclosure of the existence of such discount is required, disclosure of the extent of the discount is not required.

(2) Fail to calculate any annual or lifetime maximums only on the basis of actual payments made to non-capitated health care providers. For capitated health care providers the reasonable cash value of the services provided shall be used to calculate annual or lifetime maximums.

(3) Fail to maintain adequate records of the compliance with this rule.

(E) Penalties

Failure to comply with the requirements of paragraph (D) of this rule is an unfair and deceptive practice within the meaning of section 3901.21 of the Revised Code.

(F) Severability

If any section, term or provision of this rule is judged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

R.C. 119.032 review dates: 12/23/2003 and 12/23/2008

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.19-3901.22

Prior Effective Dates: 1/3/1999

3901-1-05 Insider trading -- instructions and forms.

(A) Purpose

This rule is issued by the superintendent of insurance pursuant to division (H) of section 3901.31 of the Revised Code, which empowers the superintendent to adopt, amend, and rescind rules, pursuant to Chapter 119. of the Revised Code, which will enable the superintendent to carry out the duties imposed by section 3901.31 of the Revised Code. Division (A) of section 3901.31 of the Revised Code requires every person who is directly or indirectly the beneficial owner of more than ten per cent of any class of any equity security of a domestic stock insurance company or who is a director or officer of such company to file with the superintendent of insurance on or before January 31, 1966, or within ten days after the person becomes such beneficial owner, director, or officer, a statement in such form as the superintendent of insurance may prescribe of the amount of all equity securities of such company of which the person is the beneficial owner, and within ten days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, to file with the superintendent of insurance a statement, in such form as the superintendent of insurance may prescribe, indicating the person’s ownership at the close of the calendar month and such changes in the person’s ownership as have occurred during such calendar month. The purpose of this rule is to promulgate procedures and forms to be adhered to in filing initial statements of changes in beneficial ownership of any equity security. Effective April 4, 1985, section 3901.31(A) of the Revised Code was amended to exclude from application of this filing requirement domestic stock insurance companies which are wholly owned subsidiaries of an insurance holding company system.

(B) Filing of statements

(1) Initial statements of beneficial ownership of equity securities shall be filed on Form I.S.S., as set forth in paragraph (C)(9) of this rule. Statements of changes in such beneficial ownership shall be filed on Form C.S.S., as set forth in paragraph (D)(11) of this rule. All such statements shall be prepared in accordance with the requirements of the applicable form and filed as required.

(2) Form I.S.S.

(a) A statement on Form I.S.S. shall be filed by every person who is directly or indirectly the beneficial owner of more than ten per cent of any class of equity security of a domestic stock insurance company or who is a director or officer of such company.

(b) When section 3901.31 of the Revised Code became law, persons who held any of the relationships specified in paragraph (B)(2) of this rule were required to file a statement on Form I.S.S. on or before January 31, 1966. Persons who subsequently assume any of the specified relationships are required to file a statement within ten days after assuming such relationship.

(3) Form C.S.S.

(a) A statement on Form C.S.S. shall be filed by every person who is directly or indirectly the beneficial owner of more than ten per cent of any class of equity security of a domestic stock insurance company or who is a director or officer of such company, who has filed a Form I.S.S. with the department, and who has during any month had any change in his beneficial ownership of any class of equity security of such company. Any beneficial owner, director, or officer who is required to file a statement on Form C.S.S. with respect to any change in his beneficial ownership of equity securities which occurs within six months after he became a beneficial owner, director, or officer of such company shall include in the first such statement the information called for by Form C.S.S. with respect to all changes in his beneficial ownership of equity securities of such company which occurred within six months prior to the filing of such statement.

(b) A statement on Form C.S.S. shall be filed by any person who has ceased to be such beneficial owner, director, or officer of a domestic stock insurance company with respect to any change in his beneficial ownership of equity securities of such company which occurs on or after the date on which he ceased to be such beneficial owner, director, or officer if such change occurs within six months after any change in his beneficial ownership of such securities prior to such date.

(c) Statements on Form C.S.S. which are required to be filed shall be filed on or before the tenth day after the end of each month in which any change in beneficial ownership has occurred. A separate statement shall be filed with respect to the securities of each domestic stock insurance company.

(4) Any person who has ceased to be a beneficial owner, director, or officer of a domestic stock insurance company shall give written notice to the superintendent of insurance of the date on which he ceased to be such beneficial owner, director, or officer within thirty days after said date.

(1) Where statements are to be filed

(a) One signed, sworn to copy of each statement shall be filed with the Ohio department of insurance.

(b) A statement is not deemed to have been filed in the office of the superintendent of insurance until it has actually been received by the department.

(2) Relationship of reporting person to company.

Indicate clearly the relationship of the reporting person to the company; for example, “director,” “director and vice president,” “beneficial owner of more than ten per cent of the company’s common stock,” etc.

(3) Dates as of which beneficial ownership is to be given.

The information as to beneficial ownership of securities shall be given as of the date on which the event occurred which requires the filing of a statement on this form; for example, when the person whose ownership is reported became a director or officer of the company or a beneficial owner of more than ten per cent of the company’s equity securities.

(4) Title of security

The statement of the title of a security shall be such as clearly to identify the security even though there may be only one class; for example, “Class A Common,” “5% Debentures Due 1965,” etc.

(5) Nature of ownership.

Under “nature of ownership,” state whether ownership of the securities is “direct” or “indirect.” If the ownership is indirect, i.e., through a partnership, corporation, trust or other entity, indicate in a footnote, or other appropriate manner, the name or identity of the medium through which the securities are indirectly owned. The fact that securities are held in the name of a broker or other nominee does not, of itself constitute indirect ownership. Securities owned indirectly shall be reported on separate lines from those owned directly and also from those owned through a different type of indirect ownership.

(6) Statement of amount owned.

In stating the amount of securities beneficially owned, give the face amount of debt securities or the number of shares or other units of other securities. In the case of securities owned indirectly, the entire amount of securities owned by the partnership, corporation, trust or other entity, shall be stated. The person whose ownership is reported may, if he so desires, also indicate in a footnote, or other appropriate manner, the extent of his interest in the partnership, corporation, trust or other entity.

(7) Inclusion of additional information.

A statement may include any additional information or explanation deemed relevant by the person filing statement.

(8) Signature.

(a) If the statement is filed for a corporation, partnership, trust, etc., the name of the organization shall appear over the signature of the officer or other person authorized to sign the statement. If the statement is filed for an individual, it shall be signed by him or specifically on his behalf by a person authorized to sign for him.

(b) In those cases where the statement is signed by someone other than the person whose ownership is being reported, documentary evidence of the signing authority shall be filed with the statement.

(9) Form I.S.S.

STATE OF IHIO DEPARTMENT OF INSURANCE

Form I.S.S.

INITIAL STATEMENT OF BENEFICIAL OWNERSHIP OF EQUITY SECURITIES

Filed Pursuant to Section 3901.31, Ohio Revised Code

Name of insurer__________________________________________________

Name of person whose Ownership is reported____________________________________________

Business address of such person__________________________________ (Street,City,State,Zip Code)

Relationship of such person to company named above___________________________________________

Date of event which requires the filing of this statement_____________________________________

SECURITIES BENEFICIALLY OWNED

Title of Security Nature of Ownership Amount Owned Beneficially ________________________________________________

Remarks: (For Additional Space – Use Reverse Side)

I affirm under the penalty of perjury that the forging is full, true and correct.

___________________________________ Signature

______________________________ Date of Statement

Subscribed and sworn to before me this___________day of________________, 20_______

____________________________ Notary Public

(D) Instruction – Form C.S.S.: Statement of changes in beneficial ownership of equity securities

(1) Where statements are to be filed.

(a) One signed, sworn to copy of each statement shall be filed with the Ohio department of insurance.

(b) A statement is not deemed to have been filed in the office of the superintendent of insurance until it has actually been received by the department.

(2) Relationship of reporting person to company.

(3) Transactions and holdings to be reported.

Every transaction shall be reported even though purchases and sales during the month are equal or the change involves only the nature of ownership; for example, from direct or indirect ownership. Beneficial ownership at the end of the month of all classes of securities required to be reported shall be shown even though there has been no change during the month in the ownership of securities of one or more classes.

(4) Title of security.

The statement of the title of the security shall be such as to clearly identify the security even though there may be only one class; for example, “Class A Common,” “5% Debentures Due 1965,” etc.

(5) Date of transaction.

The exact date (month, day and year) of each transaction shall be stated opposite the amount involved in the transactions.

(6) Statement of amounts of securities.

In stating the amount of the securities acquired, disposed of, or beneficially owned, give the face stated. The person whose ownership is reported may, if he so desires, also indicate in a footnote, or other appropriate manner, the extent of his interest in the transaction or holdings of the partnership, corporation, trust or other entity.

(7) Nature of ownership.

Under “nature of ownership,” state whether ownership of the securities is “direct” or “indirect.” If the ownership is indirectly, i.e., through a partnership, corporation, trust or other entity, indicate in a footnote, or other appropriate manner, the name or identity of the medium through which the securities are indirectly owned. The fact that securities are held in the name of the broker or other nominee does not, of itself, constitute indirect ownership. Securities owned indirectly shall be reported on separate lines from securities owned directly and from securities owned through a different type of indirect ownership.

(8) Character of transaction.

If the transaction was with the issuer of the securities, so state. If it involved the purchase of securities through the exercise of options, so state and give the exercise price per share. If any other purchase or sale was effected otherwise than in the open market, the fact shall be indicated. If the transaction was not a purchase or sale, indicate its character; for example, gift, stock dividend, etc., as the case may be. The foregoing information may be appropriately set forth in the table or under “remarks” at the end of the table.

(9) Inclusion of additional information.

A statement may include any additional information or explanation deemed relevant by the person filing the statement.

(10) Signature.

(b) In those cases where the statement is signed by someone other than the person whose partnership is being reported, documentary evidence of the signing authority shall be filed with the statement.

(11) Form C.S.S.

State of Ohio

DEPARTMENT OF INSURANCE

Form C.S.S.

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF EQUITY SECURITIES

Filed Pursuant to Section 3901.31, Ohio Revised Code

Name of insurer_______________________________________________________

Name of person whose Ownership is reported_________________________________________________

Business address of such person_______________________________________ (Street,City,State,Zip Code)

Relationship of such person to company named above________________________________________________

Statement for Calendar Month of ________________, 20_____

Changes During Month and Month-End Ownership

Title of Security Date of Transaction Amount Bought or Otherwise Acquired Amount Sold or Otherwise Disposed of Nature of Ownership Amount Owned Beneficially at end of Month

Remarks: (For Additional Space — Use Reverse Side)

I affirm under the penalty of perjury that the foregoing is full, true, and correct.

______________________________________________ Signature

_______________________________________ Date of Statement

Subscribed and sworn to before me this_____________day of____________________, 20_______

______________________________ Notary Public

(E) Failure to file

Division (B) of section 3901.99 of the Revised Code provides that “Whoever violates any law relating to the superintendent of insurance, or any law of this state, relating to insurance as defined in division (A)(1) of section 3901.04 of the “Revised Code for the violation of which no penalty is otherwise provided in the Revised Code, shall be fined not more than twenty-five thousand dollars, imprisoned not more than six months, or both.”

HISTORY: Eff 3-20-72; 12-20-76; 8-20-94; 3-21-05

Promulgated Under: 119.03

Statutory Authority: 3901.31(H), 3901.041

Rule Amplifies: 3901.31

119.032 Review Date: 12/22/2004 and 12/22/2009

3901-1-07 Unfair trade practices.

(A) Authority

Section 3901.041 of the Ohio Revised Code provides that the Superintendent of Insurance shall adopt, amend, and rescind rules and make adjudications necessary to discharge his duties and exercise his powers under Title 39 of the Revised Code.

(B) Purpose

Sections 3901.20 and 3901.21 of the Ohio Revised Code respectively prohibit unfair or deceptive practices in the business of insurance and define certain acts or practices as unfair or deceptive. Section 3901.21 also provides that the enumeration of specific unfair or deceptive acts or practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the Superintendent of Insurance to adopt rules to implement that Section. The purpose of this Rule is to define certain additional unfair trade practices and to set forth required procedures in connection therewith.

It shall be deemed an unfair or deceptive practice to commit or perform with such frequency as to indicate a general business practice any of the following:

(1) knowingly mispresenting to claimants pertinent facts or policy provisions relating to coverage at issue;

(a) misrepresenting a pertinent policy provision by making any payment, settlement, or offer of first party benefits, which, without explanation, does not include all amounts which should be included according to the claim filed by the first party claimant and investigated by the insurer;

(b) denying a claim on the grounds of a specific policy provision, condition, or exclusion without reference to such provision, condition, or exclusion;

(2) failing to acknowledge pertinent communications with respect to claims arising under insurance policies in writing, or by other means so long as an appropriate notation is made in the claim file of the insurer, within fifteen (15) days of receiving notice of a claim in writing or otherwise;

(3) failing to make an appropriate reply within twenty-one days of all other pertinent communications and/or any inquiries of the Department of Insurance respecting a claim;

(4) failing to adopt and implement reasonable procedures to commence an investigation of any claim filed by either a first party or third party claimant, or by such claimant’s authorized representative, within twenty-one days of receipt of notice of claim;

(5) failing to mail or furnish claimant or the claimant’s authorized representative, a notification of all items, statements and forms, if any, which the insurer reasonably believes will be required of such claimant, within fifteen days of receiving notice of claim, unless the insurer, based on the information then in its possession does not yet know all such requirements, then such notification shall be sent, within a reasonable time;

(6) not offering first party or third party claimants, or their authorized representatives who have made claims which are fair and reasonable and in which liability has become reasonably clear, amounts which are fair and reasonable as shown by the insurer’s investigation of the claim, providing the amounts so offered are within policy limits and in accordance with the policy provisions;

(7) compelling insureds to institute suits to recover amounts due under its policies by offering substantially less then the amounts ultimately recovered in suits brought by them when such insureds have made claims for amounts reasonably similar to the amounts ultimately recovered;

(8) making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;

(9) attempting settlement or compromise of claims on the basis of applications which were altered without notice to, or knowledge, or consent of insureds;

(10) attempting to settle or compromise claims for less than the amount which the insureds had been led reasonably to believe they were entitled to, by written or printed advertising material accompanying or made part of an application;

(11) attempting to delay the investigation or payment of claims by requiring an insured and his physician to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;

(12) failing to advise the first party claimant or the claimant’s authorized representative, in writing or by other means so long as an appropriate notation is made in the claim file of the insurer, of the acceptance or rejection of the claim, within twenty-one days after receipt by the insurer of a properly executed proof of loss;

(a) failing to notify such claimant or the claimant’s authorized representative, within twenty-one days after receipt of such proof of loss, that the insurer needs more time to determine whether the claim should be accepted or rejected;

(b) failing to send a letter to such claimant or, the claimant’s authorized representative, stating the need for further time to investigate the claim, if such claim remains unsettled ninety days from the date of the initial letter setting forth the need for further time to investigate;

(c) failing to send to such claimant or authorized representative every ninety days after the first ninety-day claim investigation period, a letter setting forth the reasons additional time is needed for investigation, unless the delay is caused by factors beyond the insurer’s control;

(13) failing to advise such claimant or claimant’s authorized representative, of the amount offered, if such claim is accepted in whole or in part;

(14) refusing payments of claims solely on the basis of the insured’s request to do so without making an independent evaluation of the insured’s liability based upon all available information;

(15) failing to adopt and implement reasonable standards for the proper handling of written communications, primarily expressing grievances, received by the insurer from insureds or claimants;

(16) failing to pay any amount finally agreed upon in settlement of all or part of any claim or authorized repairs to be made upon final agreement not later than five days from the receipt of such agreement by the insurer at the place from which the payment or authorization is to be made or from the date of the performance by the claimant of any condition set by such agreement, whichever is later.

(17) For purposes of this section, the following definitions shall apply;

(a) “Investigation” shall mean all activities of the company related directly or indirectly to the determining of liabilities under the coverages afforded by the policy. This shall include, but not be limited to, a bona fide effort to contact all insureds and claimants within a reasonable period after notification of loss. Evidence of a bona fide effort must be maintained in the file. The investigation shall be deemed concluded upon the company’s affirmation or denial of liability.

(b) “Notice of Claim” as applied to an insurer shall include notification given to an agent of an insurer.

(c) “Settlement of claims” shall mean all activities of the company related directly or indirectly to the determination of the extent of damages due under coverages afforded by the policy. This shall include, but not be limited to, the requiring or preparing of repair estimates.

(d) “Days” means calendar days. However, when the last day of a time limit stated in this rule falls on a saturday, sunday or holiday, the time limit is extended to the next immediate following day that is not a saturday, sunday or holiday.

(D) Severability

If any section, term, or provision of this Rule be adjudged invalid for any reason, such judgment shall not affect, impair, or invalidate any other section, term, or provision of this Rule, but the remaining sections, terms, and provisions shall be in and continue in full force and effect.

Effective: 04/05/2007

R.C. 119.032 review dates: 12/29/2006 and 12/30/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.20, 3901.21

Prior Effective Dates: 04/01/1975

3901-1-08 Unfair and deceptive military sales practices.

(A) Authority. This rule is adopted under the authority of the superintendent of insurance pursuant to section 3901.041 of the Revised Code.

(B) Purpose. Sections 3901.20 and 3901.21 of the Revised Code, respectively, prohibit unfair or deceptive trade practices in the business of insurance and define certain acts or practices as unfair or deceptive. Section 3901.21 of the Revised Code also provides that the enumeration of specific unfair or deceptive acts or practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the superintendent of insurance to adopt rules to implement that section. The purpose of this rule is to further define unfair trade practices to include dishonest and predatory practices involving the sale of certain life insurance products to active duty members of the United States armed forces and their families and to set acceptable standards for such sales.

(C) No private cause of action. Nothing herein shall be construed to create or imply a private cause of action for a violation of this rule.

(D) Application. This rule applies to the solicitations and sales of life insurance and annuity products by insurers and insurance agents to active duty members of the United States armed forces and their families. This rule applies in addition to other statutes and rules governing the sale and solicitations of life insurance and annuity products.

(E) Exemptions.

(1) This rule shall not apply to solicitations or sales involving:

(a) Credit insurance;

(b) Group life insurance or group annuities where there is no in-person, face-to-face solicitation of individuals by an insurance agent or where the contract or certificate does not include a side fund;

(c) An application to the existing insurer that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised; or, when the existing policy or contract is being replaced by the same insurer pursuant to a program filed with and approved by the superintendent; or, when a term conversion privilege is exercised among corporate affiliates;

(d) Individual stand-alone health policies, including disability income policies;

(e) Contracts offered by “Servicemembers’ Group Life Insurance” (SGLI) or “Veterans’ Group Life Insurance” (VGLI), as authorized by 38 U.S.C. sections 1965 to 1979;

(f) Life insurance contracts offered through or by a non-profit military association, qualifying under section 501(c)(23) of the “Internal Revenue Code” (IRC), and which are not underwritten by an insurer; or

(g) Contracts used to fund:

(i) An employee pension or welfare benefit plan that is covered by the “Employee Retirement and Income Security Act” (ERISA);

(ii) A plan described by section 401(a), 401(k), 403(b), 408(k) or 408(p) of the IRC, as amended, if established or maintained by an employer;

(iii) A government or church plan defined in section 414 of the IRC, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under section 457 of the IRC;

(iv) A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;

(v) Settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process; or

(vi) Prearranged funeral contracts.

(2) Nothing herein shall be construed to abrogate the ability of nonprofit organizations (and/or other organizations) to educate members of the “United States Armed Forces” in accordance with “Department of Defense DoD Instruction 1344.07 – Personal Commercial Solicitation on DoD Installations” or successor directive.

(3) For purposes of this rule, general advertisements, direct mail and internet marketing shall not constitute “solicitation.” Telephone marketing shall not constitute “solicitation” provided the caller explicitly and conspicuously discloses that the product concerned is life insurance and makes no statements that avoid a clear and unequivocal statement that life insurance is the subject matter of the solicitation. However, nothing in this subdivision shall be construed to exempt an insurer or insurance agent from this rule in any in-person, face-to-face meeting established as a result of the “solicitation” exemptions identified in this subdivision.

(F) Definitions.

(1) “Active duty” means full-time duty in the active military service of the United States and includes members of the reserve component (national guard and reserve) while serving under published orders for active duty or full-time training and all service in the uniformed services under the “Uniformed Services Employment and Reemployment Rights Act” (USERRA). The term does not include members of the reserve component who are performing active duty or active duty for training under military calls or orders specifying periods of fewer than thirty-one calendar days.

(2) “Department of Defense (DoD) Personnel” means all active duty service members and all civilian employees, including nonappropriated fund employees and special government employees, of the “Department of Defense.”

(3) “Door to door” means a solicitation or sales method whereby an insurance agent proceeds randomly or selectively from household to household without prior specific appointment.

(4) “General advertisement” means an advertisement having as its sole purpose the promotion of the reader’s or viewer’s interest in the concept of insurance, or the promotion of the insurer or the insurance agent.

(5) “Insurer” means an insurance company required to be licensed under the laws of this state to provide life insurance products, including annuities.

(6) “Insurance agent” means a person required to be licensed under the laws of this state to sell, solicit or negotiate life insurance, including annuities.

(7) “Known” or “Knowingly” means, depending on its use herein, the insurance agent or insurer had actual awareness, or in the exercise of ordinary care should have known, at the time of the act or practice complained of, that the person solicited:

(a) Is a service member; or

(b) Is a service member with a pay grade of E-4 or below.

(8) “Life insurance” means insurance coverage on human lives including benefits of endowment and annuities, and may include benefits in the event of death or dismemberment by accident and benefits for disability income and, unless otherwise specifically excluded, includes individually issued annuities.

(9) “Military installation” means any state or federally owned, leased, or operated base, reservation, post, camp, building, or other facility to which service members are assigned for duty, including barracks, transient housing, and family quarters.

(10) “MyPay” is a “Defense Finance and Accounting Service” (DFAS) web-based system that enables service members to process certain discretionary pay transactions or provide updates to personal information data elements without using paper forms.

(11) “Service in the uniformed services” and “uniformed services” have the same meanings as in the “Uniformed Services Employment and Reemployment Rights Act of 1994,” 108 Stat. 3149, 38 U.S.C. �4303, as amended, June 5, 2001.

(12) “Service member” means any active duty officer (commissioned and warrant) or enlisted member of the United States armed forces.

(13) “Side fund” means a fund or reserve that is part of or otherwise attached to a life insurance policy (excluding individually issued annuities) by rider, endorsement or other mechanism, which accumulates premium or deposits, with interest, or by other means. The term does not include:

(a) Accumulated value or cash value or secondary guarantees provided by a universal life policy;

(b) Cash values provided by a whole life policy which are subject to standard nonforfeiture laws for life insurance; or

(i) Contains only premiums paid in advance that accumulate at interest;

(ii) Imposes no penalty for withdrawal;

(iii) Does not permit funding beyond future required premiums;

(iv) Is not marketed or intended as an investment; and

(v) Does not carry a commission, either paid or calculated.

(14) “Specific appointment” means a prearranged appointment agreed upon by both parties and definite as to place and time.

(15) “United States Armed Forces” means all components of the army, navy, air force, marine corps, and coast guard.

(G) Practices declared false, misleading, deceptive or unfair on a military installation.

(1) The following acts or practices, when committed on a military installation by an insurer or insurance agent with respect to the in-person, face-to-face solicitation of life insurance, are declared to be false, misleading, deceptive or unfair:

(a) Knowingly soliciting the purchase of any life insurance product “door to door” or without first establishing a specific appointment for each meeting with the prospective purchaser.

(b) Soliciting service members in a group or “mass” audience or in a “captive” audience where attendance is not voluntary.

(d) Making appointments with or soliciting service members in barracks, day rooms, unit areas, or transient personnel housing or other areas where the installation commander has prohibited solicitation.

(e) Soliciting the sale of life insurance without first obtaining permission from the installation commander or the commander’s designee.

(f) Posting unauthorized bulletins, notices or advertisements.

(g) Failing to present “DD Form 2885, Personal Commercial Solicitation Evaluation,” to service members solicited or encouraging service members solicited not to complete or submit a “DD Form 2885.”

(h) Knowingly accepting an application for life insurance or issuing a policy of life insurance on the life of an enlisted member of the United States armed forces without first obtaining, for the insurer’s files, a completed copy of any required form which confirms that the applicant has received counseling or fulfilled any other similar requirement for the sale of life insurance established by rules or directives of the “DoD” or the rules or directives of any branch of the armed forces.

(2) The following acts or practices when committed on a military installation by an insurer or insurance agent constitute corrupt practices, improper influences or inducements and are declared to be false, misleading, deceptive or unfair:

(a) Using “DoD” personnel, directly or indirectly, as a representative or agent in any official or business capacity, with or without compensation, with respect to the solicitation or sale of life insurance to service members.

(b) Using an insurance agent to participate in any United States armed forces sponsored education or orientation program.

(H) Practices declared false, misleading, deceptive or unfair regardless of location.

(1) The following acts or practices by an insurer or insurance agent constitute corrupt practices, improper influences or inducements and are declared to be false, misleading, deceptive or unfair:

(a) Submitting, processing or assisting in the submission or processing of any allotment form or similar device used by the United States armed forces to direct a service member’s pay to a third party for the purchase of life insurance. The foregoing includes, but is not limited to, using or assisting in using a service member’s “MyPay” account or other similar internet or electronic medium for such purposes. This paragraph does not prohibit assisting a service member by providing insurer or premium information necessary to complete any allotment form.

(b) Knowingly receiving funds from a service member for the payment of premium from a depository institution with which the service member has no formal banking relationship. For purposes of this rule, a “formal banking relationship” is established when the depository institution:

(i) Provides the service member a deposit agreement and periodic statements and makes the disclosures required by the “Truth in Savings Act,” 12 U.S.C. sectionso 4301 to 4313 (1992) and the rules promulgated thereunder; and

(ii) Permits the service member to make deposits and withdrawals unrelated to the payment or processing of insurance premiums.

(c) Employing any device or method or entering into any agreement whereby funds received from a service member by allotment for the payment of insurance premiums are identified on the service member’s “Leave and Earnings Statement” or equivalent or successor form as “savings” or “checking” and where the service member has no formal banking relationship as defined in paragraph (H)(1)(b) of this rule.

(d) Entering into any agreement with a depository institution for the purpose of receiving funds from a service member whereby the depository institution, with or without compensation, agrees to accept direct deposits from a service member with whom it has no formal banking relationship as defined in paragraph (H)(1)(b) of this rule.

(e) Using “DoD” personnel, directly or indirectly, as a representative or agent in any official or unofficial capacity with or without compensation with respect to the solicitation or sale of life insurance to service members who are junior in rank or grade, or to the family members of such personnel.

(f) Offering or giving anything of value, directly or indirectly, to “DoD” personnel to procure their assistance in encouraging, assisting or facilitating the solicitation or sale of life insurance to another service member.

(g) Knowingly offering or giving anything of value to a service member with a pay grade of E-4 or below for his or her attendance to any event where an application for life insurance is solicited.

(h) Advising a service member with a pay grade of E-4 or below to change his or her income tax withholding or State of legal residence for the sole purpose of increasing disposable income to purchase life insurance.

(2) The following acts or practices by an insurer or insurance agent lead to confusion regarding source, sponsorship, approval or affiliation and are declared to be false, misleading, deceptive or unfair:

(a) Making any representation, or using any device, title, descriptive name or identifier that has the tendency or capacity to confuse or mislead a service member into believing that the insurer, insurance agent or product offered is affiliated, connected or associated with, endorsed, sponsored, sanctioned or recommended by the U.S. government, the “United States Armed Forces,” or any state or federal agency or government entity. Examples of prohibited insurance agent titles include, but are not limited to, “Battalion Insurance Counselor,” “Unit Insurance Advisor,” “Servicemen’s Group Life Insurance Conversion Consultant” or “Veteran’s Benefits Counselor.”

Nothing herein shall be construed to prohibit a person from using a professional designation awarded after the successful completion of a course of instruction in the business of insurance by an accredited institution of higher learning. Such designations include, but are not limited to, “Chartered Life Underwriter” (CLU), “Chartered Financial Consultant” (ChFC), “Certified Financial Planner” (CFP), “Master of Science In Financial Services” (MSFS), or “Masters of Science Financial Planning” (MS).

(b) Soliciting the purchase of any life insurance product through the use of or in conjunction with any third party organization that promotes the welfare of or assists members of the United States armed forces in a manner that has the tendency or capacity to confuse or mislead a service member into believing that either the insurer, insurance agent or insurance product is affiliated, connected or associated with, endorsed, sponsored, sanctioned or recommended by the U.S. government, or the United States armed forces.

(3) The following acts or practices by an insurer or insurance agent lead to confusion regarding premiums, costs or investment returns and are declared to be false, misleading, deceptive or unfair:

(a) Using or describing the credited interest rate on a life insurance policy in a manner that implies that the credited interest rate is a net return on premium paid.

(b) Excluding individually issued annuities, misrepresenting the mortality costs of a life insurance product, including stating or implying that the product “costs nothing” or is “free.”

(4) The following acts or practices by an insurer or insurance agent regarding SGLI or VGLI are declared to be false, misleading, deceptive or unfair:

(a) Making any representation regarding the availability, suitability, amount, cost, exclusions or limitations to coverage provided to a service member or dependents by SGLI or VGLI, which is false, misleading or deceptive.

(b) Making any representation regarding conversion requirements, including the costs of coverage, or exclusions or limitations to coverage of SGLI or VGLI to private insurers, which is false, misleading or deceptive.

(c) Suggesting, recommending or encouraging a service member to cancel or terminate his or her SGLI policy or issuing a life insurance policy which replaces an existing SGLI policy unless the replacement shall take effect upon or after the service member’s separation from the United States armed forces.

(5) The following acts or practices by an insurer and or insurance agent regarding disclosure are declared to be false, misleading, deceptive or unfair:

(a) Deploying, using or contracting for any lead generating materials designed exclusively for use with service members that do not clearly and conspicuously disclose that the recipient will be contacted by an insurance agent, if that is the case, for the purpose of soliciting the purchase of life insurance.

(b) Failing to disclose that a solicitation for the sale of life insurance will be made when establishing a specific appointment for an in-person, face-to-face meeting with a prospective purchaser.

(c) Excluding individually issued annuities, failing to clearly and conspicuously disclose the fact that the product being sold is life insurance.

(d) Failing to make, at the time of sale or offer to an individual known to be a service member, the written disclosures required by Section 10 of the “Military Personnel Financial Services Protection Act,” Pub. L. No. 109-290, p.16 or as amended.

(e) Excluding individually issued annuities, when the sale is conducted in-person face-to-face with an individual known to be a service member, failing to provide the applicant at the time the application is taken:

(i) An explanation of any free look period with instructions on how to cancel if a policy is issued; and

(ii) Either a copy of the application or a written disclosure. The copy of the application or the written disclosure shall clearly and concisely set out the type of life insurance, the death benefit applied for and its expected first year cost. A basic illustration that meets the requirements of rule 3901-4-04 of the Administrative Code shall be deemed sufficient to meet this requirement for a written disclosure.

(6) The following acts or practices by an insurer or insurance agent with respect to the sale of certain life insurance products are declared to be false, misleading, deceptive or unfair:

(a) Excluding individually issued annuities, recommending the purchase of any life insurance product, which includes a side fund, to a service member in pay grades E-4 and below unless the insurer has reasonable grounds for believing that the life insurance death benefit, standing alone, is suitable.

(b) Offering for sale or selling a life insurance product, which includes a side fund, to a service member in pay grades E-4 and below who is currently enrolled in SGLI, is presumed unsuitable unless, after the completion of a needs assessment, the insurer demonstrates that the applicant’s SGLI death benefit, together with any other military survivor benefits, savings and investments, survivor income, and other life insurance, are insufficient to meet the applicant’s insurable needs for life insurance.

(i) “Insurable needs” are the risks associated with premature death taking into consideration the financial obligations and immediate and future cash needs of the applicant’s estate and/or survivors or dependents.

(ii) “Other military survivor benefits” include, but are not limited to: the “Death Gratuity,” “Funeral Reimbursement,” “Transition Assistance,” “Survivor and Dependents’ Educational Assistance,” “Dependency and Indemnity Compensation,” TRICARE healthcare benefits, “Survivor Housing Benefits and Allowances,” “Federal Income Tax Forgiveness,” and “Social Security Survivor Benefits.”

(c) Excluding individually issued annuities, offering for sale or selling any life insurance contract which includes a side fund:

(i) Unless interest credited accrues from the date of deposit to the date of withdrawal and permits withdrawals without limit or penalty;

(ii) Unless the applicant has been provided with a schedule of effective rates of return based upon cash flows of the combined product. For this disclosure, the effective rate of return will consider all premiums and cash contributions made by the policyholder and all cash accumulations and cash surrender values available to the policyholder in addition to life insurance coverage. This schedule will be provided for at least each policy year from one to ten and for every fifth policy year thereafter, ending at age one hundred, policy maturity or final expiration; and

(iii) Which, by default, diverts or transfers funds accumulated in the side fund to pay, reduce or offset any premiums due.

(d) Excluding individually issued annuities, offering for sale or selling any life insurance contract which, after considering all policy benefits, including but not limited to endowment, return of premium or persistency, does not comply with standard nonforfeiture law for life insurance.

(e) Selling any life insurance product to an individual known to be a service member that excludes coverage if the insured’s death is related to war, declared or undeclared, or any act related to military service except for an accidental death coverage, e.g., double indemnity, which may be excluded.

(I) Severability.

If any provision of these sections or the application thereof to any person or circumstance is held invalid for any reason, the invalidity shall not affect the other provisions or any other application of these sections which can be given effect without the invalid provisions or application. To this end all provisions of this rule are declared to be severable.

Effective: 09/01/2007

R.C. 119.032 review dates: 12/31/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.20 and 3901.21

3901-1-10 Appointment of insurance agents.

(A) Purpose

This rule clarifies certain administrative policies and procedures pertaining to agent appointment processes.

(B) Appointment of corporations, limited liability companies and partnerships.

(1) When a corporation or limited liability company is appointed with an insurance company other than life, every natural person active as an agent in such agency shall be appointed with such company; provided however, that the superintendent of insurance may waive this requirement if he is satisfied that the kind of insurance being written by such company is so specialized that only a certain agent or agents in such agency need be so appointed, but any such request for waiver and any approval thereof shall be in writing. When a corporation or limited liability company is appointed with a life insurance company, at least one natural person active as an agent in such agency shall be appointed with such company.

(2) Every natural person active as an agent in an agency that is a partnership and is appointed with an insurance company other than life shall be appointed with such company; provided however, that the superintendent of insurance may waive this requirement if he is satisfied that the kind of insurance being written by such company is so specialized that only a certain agent or agents in such agency need be so appointed, but any such request for waiver and any approval thereof shall be in writing.

In light of the various methods and frequent complexity of insurance bookkeeping practices and sales compensation agreements, which vary considerably among insurance companies, and in recognition of certain accounting irregularities occurring in the collection of so-called “industrial” accounts, indebtedness by a person to an insurance company or agency, or otherwise, shall not be material to such person’s suitability to act as an agent or solicitor unless there is evidence that such indebtedness arises from or is closely related to the alleged commission of larceny, embezzlement, fraud, misrepresentation, conversion, or other culpable misappropriation or wrongful conduct.

(D) Suspension, revocation, or refusal to renew

The superintendent of insurance may suspend, revoke, or refuse to renew the certificate of authority of any insurance company or the license of any insurance agent or solicitor found to be in violation of the provisions set forth in this rule pursuant to the Administrative Procedure Act. Such suspension, revocation, or refusal to renew shall be in addition to such other penalties as may be contained in the Revised Code or in the other department of insurance rules.

(E) Severability

Each paragraph of this rule and every part of each paragraph is an independent paragraph and part of a paragraph, and the holding of any paragraph or a part thereof to be unconstitutional, void, or ineffective for any cause does not affect the validity or constitutionality of any other paragraph or part thereof.

R.C. 119.032 review dates: 12/29/2006 and 12/29/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3905.20(C)

Rule Amplifies: 3905.02, 3905.20

Prior Effective Dates: 1/3/03

3901-1-11 Lead fees and computer services. [Rescinded]

Rescinded eff 4-5-07

3901-1-13 Mortgage guaranty insurance.

(A) Purpose

This rule is issued pursuant to section 3901.041 of the Revised Code. Its purpose is to implement division (A)(24) of section 3929.01 of the Revised Code, as it pertains to the writing and servicing of that kind of insurance known as mortgage guaranty insurance as hereinafter defined.

(B) Definitions

The definitions set forth below shall govern the construction of the terms used in this rule:

(1) “Mortgage guaranty insurance” is:

(a) Insurance against financial loss by reason of nonpayment of principal, interest or other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust, or other instrument constituting a lien or charge on real estate, provided the improvement on such real estate is a residential building or a condominium unit or buildings designed for occupancy by not more than four families; or

(b) Insurance against financial loss by reason of nonpayment of principal, interest or other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust or other instrument constituting a lien or charge on real estate, providing the improvement on such real estate is a building or buildings designed for occupancy by five or more families or designed to be occupied for industrial or commercial purposes; or

(c) Insurance against financial loss by reason of nonpayment of rent or other sums agreed to be paid under the terms of a written lease for the possession, use or occupancy of real estate, provided the improvement on such real estate is a building or buildings designed to be occupied for industrial or commercial purposes.

(2) “Authorized real estate security” for the purpose of this rule means a note, bond or other evidence of indebtedness, not exceeding one-hundred and three per cent of the lower of the fair value as fixed by appraisal or purchase price of the real estate, secured by a mortgage, deed of trust, or other instrument which constitutes, or is equivalent to, a first lien or charge on real estate, provided:

(a) Any percentage in excess of one-hundred per cent is used only for closing costs.

(b) The real estate loan secured in such manner is one of a type which:

(i) A bank;

(ii) A building and loan association, federal savings and loan, or a service corporation of either, or

(iii) An insurance company, which is supervised and regulated by a department of the state of Ohio or an agency of the federal government, is authorized to make, or would be authorized to make, disregarding any requirement applicable to such an institution that the amount of the loan not to exceed a certain percentage of the value of the real estate.

(c) The improvement on such real estate is a building or buildings designed for occupancy as specified by paragraphs (B)(1)(a) and (B)(1)(b) of this rule.

(d) The lien on such real estate may be subject to and subordinate to the following:

(i) The lien on any public bond, assessment or tax, when no installment, call or payment of or under such bond, assessment or tax is delinquent.

(ii) Outstanding mineral, oil, water or timber rights, rights-of-way, easements or rights-of-way of support, sewer rights, building restrictions or other restrictions or covenants, conditions or regulations of use, or outstanding leases upon such real property under which rents or profits are reserved to the owner thereof.

(3) “Contingency reserve” means an additional premium reserve established to protect policyholders against the effect of adverse economic cycles.

A mortgage guaranty insurance company shall not transact the business of mortgage guaranty insurance in the state of Ohio unless: if a stock insurance company, it has capital and surplus in the aggregate amount of not less than two million five hundred thousand dollars, which aggregate shall include paid-in capital of not less than one million and contributed surplus of not less than one million or if a mutual insurance company, a minimum surplus of two million five hundred thousand dollars.

(D) Limitations and restrictions on transacting business

(1) Mortgage guaranty insurance may be transacted in this state by insurers fulfilling the requirements of paragraph (D)(6) of this rule and holding a certificate of authority for the transaction of such insurance pursuant to Title XXXIX of the Revised Code and shall be written only to insure loans secured by authorized real estate securities as defined in paragraph (B)(2) of this rule.

(2) Geographic concentration

(a) A mortgage guaranty insurance company shall not insure loans secured by a single risk in excess of ten per cent of the company’s aggregate capital, surplus and contingency reserve.

(b) No mortgage guaranty insurance company shall have more than twenty per cent of its total insurance in force in any one standard metropolitan statistical areas (“SMSA”) as defined by the United States department of commerce.

(3) Advertising

No mortgage guaranty insurance company or any agent or representative of a mortgage guaranty insurance company shall prepare or distribute or assist in preparing or distributing any brochure, pamphlet, report or any form of advertising to the effect that the real estate investments of any financial institution are “insured investments,” unless the brochure, pamphlet, report or advertising clearly states that the loans are insured by mortgage guaranty insurance companies authorized to transact the business of mortgage guaranty insurance in the state of Ohio or are insured by an agency of the federal government, as the case may be.

(4) Investment limitation

A mortgage guaranty insurance company shall not invest in notes or other evidences of indebtedness secured by a mortgage or other lien upon real property. This section shall not apply to obligations secured by real property or contracts for the sale of real property, which obligations or contracts of sale are acquired in the course of the good faith settlement of claims under policies of insurance issued by the mortgage guaranty insurance company, or in the good faith disposition of real property so acquired.

(5) Coverage limitation

A mortgage guaranty insurance company shall limit its coverage, with respect to any one authorized real estate security, net of reinsurance, ceded to a reinsurer unaffiliated with the company or an affiliated reinsurer which does not own, and is not owned by, in whole or in part, the ceding mortgage guaranty insurer, to a maximum of twenty-five per cent of the entire indebtedness to the insured under that authorized real estate security. In lieu thereof, a mortgage guaranty insurance company may elect to pay the entire indebtedness to the insured and acquire title to the authorized real estate security.

(6) Mortgage guaranty insurance as monoline

(a) A mortgage guaranty insurance company which anywhere transacts any class of insurance other than mortgage guaranty insurance is not eligible to transact mortgage guaranty insurance in the state of Ohio.

(b) A mortgage guaranty insurance company which anywhere transacts the classes of insurance defined in paragraph (B)(1)(b) or (B)(1)(c) may not transact in the state of Ohio the class of mortgage guaranty insurance defined in paragraph (B)(1)(a), provided, however, a mortgage guaranty insurance company which transacts a class of insurance defined in paragraph (B)(1)(a) may write up to five per cent of its insurance in force on residential property designed for occupancy by five or more families.

(7) Underwriting discrimination

(a) Nothing in this rule shall be construed as limiting the right of any mortgage guaranty insurance company to impose reasonable requirements upon the lender with regard to the terms of any note or bond or other evidence of indebtedness secured by a mortgage or deed of trust, such as requiring a stipulated down payment by the borrower.

(b) No mortgage guaranty insurance company may discriminate in the issuance or extension of mortgage guaranty insurance on the basis of sex, marital status, race, color, creed, national origin, physical handicap or mental handicap.

(c) No policy of mortgage guaranty insurance, excluding policies of reinsurance, shall be written unless and until the insurer itself or the lender, in compliance with underwriting directives from the insurer and subject to periodic underwriting audits by the insurer, shall have conducted a reasonable and thorough examination of the evidence supporting credit worthiness of the borrower and the appraisal report reflecting market evaluation of the property and shall have determined that prudent underwriting standards have been met.

(8) Policy forms and premium rates filed

(a) All policy forms and endorsements, and rates to be charged and the premium including all modifications of rates and premiums to be paid by the policyholder shall be filed with and subject to the provisions of sections 3937.01 to 3937.18 of the Revised Code. With respect to owner-occupied, single-family dwellings or owner-occupied two family dwellings, the mortgage guaranty insurance policy shall provide that the borrower shall not be liable to the insurance company for any deficiency arising from a foreclosure sale.

(b) Every mortgage guaranty insurance company shall adopt, print and make available a schedule of premium charges for mortgage guaranty insurance policies. Premium charges made in conformity with the provisions of this rule shall not be deemed to be of interest or other charges under any other provision of law limiting interest or other charges in connection with mortgage loans. The schedule shall show the entire amount of premium charge for each type of mortgage guaranty insurance policy issued by the insurance company.

(9) Outstanding total liability

A mortgage guaranty insurance company shall not at any time have outstanding a total liability, net or reinsurance, under its aggregate mortgage guaranty insurance policies exceeding twenty-five times its capital, surplus and contingency reserve. In the event that any mortgage guaranty insurance company has outstanding total liability exceeding twenty-five times its capital, surplus and contingency reserve, it shall cease transacting new mortgage guaranty business until such time as its total liability no longer exceeds twenty-five times its capital, surplus and contingency reserve.

(10) High risk underwriting

Any mortgage guaranty insurance company which receives five per cent or more of its net annual premium from policies written to insure loans secured by authorized real estate securities having a greater than ninety-five per cent loan-to-value ratio shall notify the superintendent within thirty days. The superintendent may, if he finds that further underwriting of loans having a greater than ninety-five per cent loan-to-value ratio would have an adverse impact on the solvency of the company, prohibit the company from further underwriting such loans.

(E) Rebates, commissions, charges and conflict of interest

(1) Rebates, commissions and charges

(a) A mortgage guaranty insurance company shall not pay or cause to be paid either directly or indirectly, to any owner, purchaser, lessor, lessee, mortgagee or prospective mortgagee of the real property which secures the authorized real estate security or which is the fee of an insured lease, or any interest therein, or any person who is acting as an agent, representative, attorney or employee of such owner, purchaser or mortgagee, any commission, or any part of its premium charges or any other consideration as an inducement for or as compensation on any mortgage guaranty insurance business.

(b) In connection with the placement of any mortgage guaranty insurance, a mortgage guaranty insurance company shall not cause or permit any commission, fee, remuneration, or other compensation to be paid to, or received by, any insured lender or lessor; any subsidiary or affiliate of any insured; any officer, director or employee of any insured or any member of their immediate family; any corporation, partnership, trust, trade association in which any insured or any such officer, director, or employee or member of their immediate family has a financial interest; or any designee, trust, nominee, or other agent or representative of any of the foregoing.

(c) No mortgage guaranty insurance company shall make any rebate of any portion of the premium charge shown by the schedule required by paragraph (D)(8)(b) of this rule. No mortgage guaranty insurance company shall quote any rate or premium charge to any person which is different than that currently available to others for the same type of coverage. The amount by which any premium charge is less than that called for by the current schedule of premium charges is an unlawful rebate.

(2) Conflict of interest

(a) If a member of a holding company system, a mortgage guaranty insurance company licensed to transact business in this state shall not knowingly underwrite mortgage guaranty insurance on mortgages originated by the holding company system or an affiliate or on mortgages originated by any mortgage lender to which credit is extended, directly or indirectly, by the holding company system or any affiliate unless such insurance is underwritten on the same basis, for the same consideration and subject to the same insurability requirements as insurance provided to nonaffiliated lenders.

(i) Any mortgage guaranty insurance company which receives, in the aggregate, twenty percent of more of its net annual premium from policies written to insure mortgages originated by affiliates in the holding company system shall, concurrent with the filing of its annual statement, notify the superintendent of that fact.

(ii) The superintendent may, if he finds that further underwriting of policies issued on said loans would have an adverse impact on the solvency of the company, prohibit the mortgage guaranty insurance company for further underwriting such loans.

(b) A mortgage guaranty insurance company, the holding company system of which it is a part or any affiliate shall not pay any commission, remuneration, rebates or engage in activities proscribed in paragraph (E)(1) of this rule.

(F) Reserves

(1) Unearned premium reserves

A mortgage guaranty insurance company shall compute and maintain an unearned premium reserve as required by the superintendent of insurance.

(2) Loss reserve

A mortgage guaranty insurance company shall compute and maintain adequate case basis and other loss reserves which accurately reflect loss frequency and loss severity and shall include components for claims reported and unpaid, and for claims incurred but not reported, including estimated losses on:

(a) Insured loans which have resulted in the conveyance of property which remains unsold;

(b) Insured loans in the process of foreclosure;

(c) Insured loans in default for four months or for any lesser period which is defined as default for such purposes in the policy provisions; and

(d) Insured leases in default for four months or for any lesser period which is defined as default for such purposes in policy provisions.

(3) Contingency reserve

Each mortgage guaranty insurance company shall establish a contingency reserve out of net premiums remaining (gross premiums less premiums returned to policyholders net of reinsurance) after establishment of the unearned premium reserve. The mortgage guaranty insurance company shall contribute to the contingency reserve an amount equal to fifty per cent of such remaining earned premiums. Contributions to the contingency reserve made during each calendar year shall be maintained for a period of one hundred twenty months, except that withdrawals may be made by the company in any year in which the actual incurred losses exceed thirty-five per cent of the corresponding earned premiums, and no such releases shall be made without prior approval by the superintendent of the insurance company’s state of domicile. If the coverage provided in this rule exceeds the limitations set forth herein, the superintendent of insurance shall establish a rate formula factor that will produce a contingency reserve adequate for the added risk assumed. The face amount of an insured mortgage shall be computed before any reduction by the mortgage guaranty insurance company’s election to limit its coverage to a portion of the entire indebtedness.

(G) Reinsurance

Whenever a mortgage guaranty insurance company obtains reinsurance from an insurance company which is properly licensed to provide such reinsurance or from an appropriate governmental agency, the mortgage guaranty insurer and the reinsurer shall establish and maintain the reserves required in this rule in appropriate proportions in relation to the risk retained by the original insurer and ceded to the assuming reinsurer so that the total reserves established shall not be less than the reserves required by this rule.

(H) Miscellaneous

(1) Whenever the laws of any other jurisdiction in which a mortgage guaranty insurance company subject to the requirement of this rule is also licensed to transact mortgage guaranty insurance require a larger unearned premium reserve or contingency reserve in the aggregate than that set forth herein, the establishment of such larger unearned premium reserve or contingency reserve in the aggregate shall be deemed to be in compliance with this rule.

(2) Unearned premium reserves and contingency reserves shall be computed and maintained on risks insured after the effective date of this rule as required by paragraphs (F)(1) and (F)(3) of this rule. Unearned premium reserves and contingency reserves on risks insured before the effective date of this rule may be computed and maintained as required previously.

(I) Severability

If any provision of this rule or the application thereof to any person or situation is held invalid, such invalidity shall not affect any other provision or application of the rule which can be given effect without the invalid provision or application and to this end the provisions of this rule are declared to be severable.

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3929.01

Prior Effective Dates: 6/6/1978, 8/11/1994, 6/1/2001

3901-1-14 Credit life and credit accident health insurance.

(A) Applicability

This rule is issued pursuant to Chapter 3918. of the Revised Code regulating credit life insurance and credit accident and health insurance and is applicable to all policies, riders, applications for insurance, notices of proposed insurance, certificates of insurance and endorsements providing credit life insurance and credit accident and health insurance issued or renewed on or after November 1, 1983 in the state of Ohio.

Certificates, notices of proposed insurance and premium rates applicable in connection with existing group policies of credit insurance shall be conformed to the requirements of this rule not later than the anniversary date of the group policy next following the effective date of this rule.

No existing group credit life or group credit accident and health policy presently in force in Ohio will be rewritten or redated so as to delay or avoid the effect of this rule.

Any policy issued to replace an existing policy of credit insurance or any amendment to any existing policy of credit insurance shall be ignored for the purpose of determining the anniversary if such change is made after July 1, 1983.

(B) Filing and approval, disclosure

Section 3918.07 of the Revised Code provides that all policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders providing coverage on residents of Ohio shall be filed with the superintendent of insurance and that he may disapprove any such form.

(1) No individual or group policy of credit life insurance or credit accident and health insurance shall be issued for delivery in this state, and no application, binder, endorsement, rider, certificate of group insurance, notice of proposed insurance, or other form pertaining to credit life insurance or credit accident and health insurance under such policy shall be issued for delivery or used in this state, on or after the effective date of this rule unless such forms and the premium rates and refund formulas therefor have been filed with the superintendent of insurance and approved prior to such issuance or use and have not been subsequently disapproved in accordance with division (B) of section 3918.07 of the Revised Code.

(2) If a group policy of credit life insurance or credit accident and health insurance:

(a) Has been delivered in this state before the effective date of this rule, or

(b) Delivered in another state before or after the effective date of this rule-

The insurer shall be required to file only the group certificate and notice of proposed insurance as specified in divisions (B) and (D) of section 3918.06 of the Revised Code and such forms shall be approved by the superintendent if they conform with the requirements of Chapter 3918. of the Revised Code and this rule, and if the schedules of premium rates applicable to the insurance evidenced by such certificate or notice are not in excess of the standards set forth in this rule. Provided, however, the premium rate in effect on existing group policies may be continued until the first policy anniversary date following the effective date of this rule.

(3) Division (D) of section 3918.06 of the Revised Code provides that the copy of the application for, or notice of, proposed insurance shall be separate and apart from the credit instrument unless the information required “is prominently set forth therein.” The copy of the application for, or notice of, proposed insurance shall be deemed to be prominently set forth in the credit instrument if set forth in a separate provision on the face or reverse in type at least equal in size and prominence to the type used for the other provisions; provided that if the same is set forth on the reverse of the credit instrument, reference shall be made on the face of the instrument and provided further that the name of the debtor proposed for insurance, any figures relating to the amount and term of coverage, and the rate of amount of payment for insurance by the debtor need not be contained in a separate provision of the instrument, but may be set forth elsewhere in the instrument.

(4)(a) The disclosure required by paragraph (B)(3) of this rule shall be made to the debtor at the time of the debtor’s application for credit life or credit accident and health insurance (excluding non-contributory insurance) in connection with a credit transaction, and before the debtor becomes obligated to purchase such insurance.

(b) The form(s) containing the disclosure shall be filed with the superintendent of insurance and the disclosure language shall be subject to disapproval pursuant to section 3918.07 of the Revised Code.

(5) If a creditor makes available to the debtors, more than one plan of credit life insurance or more than one plan of credit accident and health insurance, all debtors must be informed of all such plans applicable to the type of loan.

Where rate filings are made in accordance with the premium rate standards, outlined in this paragraph of this rule, the filed rates shall prima facie be deemed, not to be excessive in relation to the benefits provided.

(1) Standards for premium rates for credit life insurance

(a) Monthly premium rate:

It is presumed that the premium rate for credit life insurance, for which premiums are paid monthly on outstanding balances, is not excessive in relation to the benefits provided if the monthly premium rate for such coverage does not exceed 0.846 dollars per one thousand dollars of outstanding balance of insured indebtedness.

(b) Prima facie single premium rate for decreasing term credit life insurance:

It is presumed that the single premium rate for decreasing term credit life insurance for which premiums are paid in one sum for the entire duration of indebtedness, is not excessive in relation to the benefits provided if the single premium rate for such insurance does not exceed a rate of fifty-five cents per one hundred dollars repayable in twelve substantially equal monthly installments and, for other repayment periods, the equivalent single premium rates calculated according to the formula SPn=(n + 1)/20 times the monthly outstanding balance premium rate standard from paragraph (C)(1)(a) of this rule, where “n” is equal to the number of monthly payments, and “SPn” is the single premium rate per one hundred dollars repayable in “n” monthly installments.

(c) As an alternative to the standards set forth above, an insurer may, where age data applicable to the insured persons are available, determine premium rates based on such age data and computed in a manner consistent herewith, subject to approval pursuant to section 3918.07 of the Revised Code.

(d) Standards for premium rates for indebtedness repayable in installments other than as indicated in paragraph (C)(1) of this rule shall be the equivalent of these standards.

(e) Other additional benefits to policyholders and their debtors, (i.e. dismemberment, partial disability, total and permanent disability, and suicide) may be provided by the insurance carriers if they so desire, but in no event may the charge for such coverage be passed on to the debtor so as to increase the total rate to exceed the rate established by this rule. If a suicide exclusion is utilized, such exclusion cannot be effective for more than six months following the effective date of coverage for that insured person.

(f) The foregoing rate standards may be used for credit life insurance with or without age limitations. If an age limitation is provided, it may not be more restrictive than to exclude from coverage any debtor who has attained age sixty-five at incurral of indebtedness, or who will have attained age sixty-six at maturity of the indebtedness.

(g) A policy provision that restricts coverage based on age in accordance with paragraph (C)(1)(c) or (C)(1)(f) of this rule shall, in the absence of misstatement, be valid only for the first sixty days of coverage. During the first sixty days of coverage the insurer shall have the right to cancel or restructure coverage that would otherwise provide benefits in excess of policy age restrictions.

(h) These standards are applicable to the type of decreasing term credit life insurance contract customarily offered for sale protecting credit obligations repayable in substantially equal installments. Standards for premium rates in the case of forms which vary in any material respect from this standard type of credit insurance contract may reflect such variations to the extent that there is a measurable difference in the claims cost of the coverage provided and must receive approval pursuant to section 3918.07 of the Revised Code on a case basis.

(i) Premium rates for joint credit life insurance shall not exceed one and three-quarters times the applicable single credit life rate.

(j) Amount of credit life insurance:

(i) In connection with loans or other credit transactions of sixty months or less, the amount of credit life insurance shall not exceed the scheduled or actual amount of indebtedness, whichever is greater.

(ii) For loans or other credit transactions exceeding sixty months the amount of credit life insurance shall not exceed the net indebtedness, exclusive of unearned finance charges.

(k) The foregoing standards for premium rates are those to become effective November 1, 1983. Effective May 1, 1985, the monthly outstanding balance premium rate shall not exceed eighty cents per one thousand dollars outstanding balance of insured indebtedness and the single premium rate for decreasing term credit life insurance for which premiums are paid in one sum for the entire duration of indebtedness shall not exceed fifty-two cents per one hundred dollars repayable in twelve substantially equal monthly installments. Each company writing credit life insurance in Ohio shall submit experience data, required by paragraph (E)(3) of this rule, to the superintendent of insurance by July first of every year, beginning with 1985. The superintendent shall use this experience data to adjust the prima facie rates for credit life insurance on an industry-wide basis as necessary to establish and maintain fifty percent loss ratio. Prima facie rates shall first be adjusted in like manner effective November 1, 1986, based on the data reported the previous year, and shall be adjusted in like manner effective November first of every year after 1986.

(2) Standards for premium rates for credit accident and health insurance

(a) If premiums are paid in one sum for the entire duration of the indebtedness the following rates per one hundred dollars of initial indebtedness repayable in the indicated number of equal monthly installments are applicable:

DURATION __ PRIMA FACIE SINGLE PREMIUM RATE/$100 14-DAY RETROCATIVE PLAN __ PRIMA FACIE SINGLE PREMIUM RATE/$100 14-DAY NONRETROACTIVE PLAN

6 $1.87 $1.50

12 2.40 2.10

18 2.76 2.44

24 3.03 2.71

30 3.25 2.95

36 3.46 3.16

42 3.65 3.34

48 3.82 3.51

54 3.98 3.67

60 4.14 3.82

66 4.31 3.97

72 4.45 4.11

78 4.58 4.24

84 4.71 4.37

90 4.84 4.50

96 4.95 4.62

102 5.07 4.74

108 5.18 4.85

114 5.23 4.96

120 5.41 5.07

DURATION 30-DAY RETROACTIVE PLAN 30-DAY NONRETROACTIVE PLAN

6 $1.28 $ .74

12 1.81 1.27

18 2.04 1.62

24 2.20 1.82

30 2.34 1.96

36 2.47 2.08

42 2.57 2.19

48 2.67 2.28

54 2.77 2.38

60 2.85 2.47

66 2.95 2.55

72 3.04 2.63

78 3.11 2.70

84 3.19 2.78

90 3.26 2.85

96 3.33 2.92

102 3.39 2.98

108 3.46 3.06

114 3.52 3.11

120 3.59 3.18

Effective May 1, 1985, the one sum premium per one hundred dollars of initial indebtedness shall be one hundred three per cent of the rates listed in this paragraph of this rule. Each company writing credit accident and health insurance in Ohio shall submit experience data to the superintendent of insurance by July first, of every year beginning in 1985. The superintendent shall use this experience data to adjust the prima facie rates for credit accident and health insurance on an industry-wide basis as necessary to establish and maintain a sixty per cent loss ratio. Prima facie rates shall first be adjusted in like manner effective November 1, 1986, based on data reported the previous year, and shall be adjusted in like manner effective November first, of every year after 1986.

The above shows rates only for credit transactions repayable in a total number of installments which is a multiple of six. For transactions repayable in numbers of installments not set forth above; either the actuarial equivalent or straight line interpolation may be utilized. The rate standards set forth above shall be applicable for such contracts which contain a provision excluding or denying claim for disability resulting from pre-existing illness, disease or physical condition (whether or not by name or specific description) which totally disabled the debtor at any time during the six-month period immediately preceding the effective date of the debtor’s coverage, or provisions which exclude coverage for pre-existing conditions for which the insured debtor received medical advice, diagnosis, or treatment within six months preceding the effective date of the debtor’s coverage, and which caused loss within the six months following the effective date of coverage, but contain no other provision which excludes or restricts liability in the event of disability. The rate standards set forth herein may be increased ten per cent for such contracts that do not contain a provision excluding or denying a claim for disability resulting from pre-existing conditions.

Any contract to which the above rates apply may contain provisions excluding or restricting coverage in the event of pregnancy, intentionally self-inflicted injuries, foreign travel or residence, or flight in non-scheduled aircraft, war or military service.

Any contract may also provide an age limitation, which limitation may not be more restrictive than to exclude from coverage any debtor who has attained age sixty-five at incurral of indebtedness, or who will have attained age sixty-six at maturity of the indebtedness.

No contract shall provide for an actively-at-work test that requires the debtor to be employed more than thirty hours per week.

(b) Standards for premium rates for indebtedness repayable in installments other than as indicated in paragraph (C)(2)(a) of this rule shall be the equivalent of the standards.

(c) If premium rates are payable other than in one sum, an insurer may determine such rates on a basis consistent with the rates set forth in paragraph (C)(2)(a) of this rule.

(d) The standard for premium rates set forth in paragraph (C)(2)(a) of this rule is applicable to the form of credit accident and health insurance described which is illustrative of the kind of coverage that may be issued. This rule, however, shall not preclude an insurer from filing other forms of credit accident and health insurance for consideration by the superintendent.

(e) Standards for premium rates for contracts providing benefits on a basis different from those illustrated above shall be the equivalent of the standard.

(f) A policy provision that restricts coverage based on age in accordance with paragraph (C)(2)(a) of this rule shall, in the absence of misstatement, be valid only for the first sixty days of coverage. During the first sixty days of coverage the insurer shall have the right to cancel or restructure coverage that would otherwise provide benefits in excess of policy restrictions.

(3) Combination coverage

Standards for premium rates for contracts combining credit life and credit accident and health coverage in one policy shall be consistent with the standards set forth in paragraphs (C)(1) and (C)(2) of this rule, however, such contracts must provide for a refund of the unearned credit accident and health premium, in the event of the debtor’s death. Refunds shall be computed from the date of death. These refunds must also be provided when the insured debtor is covered by separate contracts providing credit life and credit accident and health coverage.

(4) Loss ratio adjustments

Notwithstanding any other provision or paragraph of this rule to the contrary, the superintendent of insurance may, after November 1, 1986, establish minimum loss ratio percentage requirements, based upon claim experience and expense factors, that differ from the fifty per cent standard for credit life and sixty per cent standard for credit accident and health coverage set forth in paragraphs (C)(1), (C)(2), and (C)(8) of this rule.

After November 1, 1986, any insurer desiring to show cause why its premium rates for a case or class of business should not be reduced, as set forth in paragraphs (C)(1) and (C)(8) of this rule, must agree to an examination and audit of it’s claim experience and expense factors. The examination and audit will be performed by qualified actuaries and accountants selected by the superintendent of insurance. The expense of the examination and audit will be paid for by the insurer and the insurer must agree to accept the findings of the superintendent of insurance which will be based upon the results of the examination and audit.

(5) Definitions

As used in connection with credit life or accident and health insurance, the following terms shall mean:

(a) “Claims” means benefits payable on death or disability and does not include loss adjustment expense, claim settlement expense or any other expense, charge, cost or payment.

(b) “Claims incurred” means claims actually paid during the year, plus any estimated reserves at the end of the year for reported claims in the process of settlement, and reserves for unreported claims, and less any estimated reserves at the end of the preceding year for reported claims in the process of settlement and for unreported claims.

Where premiums are payable monthly based on the outstanding balance of insured indebtedness, “premiums earned” shall mean the total premiums paid the insurer during the reporting year plus premiums due the insurer but unpaid at the end of the preceding year, less the premiums due the insurer but unpaid at the end of the current year.

Where premiums are payable in one sum for the entire duration of indebtedness, “premiums earned” shall mean the one-sum premiums which become due the insurer during the reporting year, plus the reserve at the beginning of the reporting year minus the reserve at the end of the reporting year.

The premiums as defined under either system of premium payments shall be without reduction of any kind except for premiums refunded or adjusted on account of termination of coverage.

(d) “Class of business” means a grouping of businesses under the following categories, each category being referred to as a class of business:

(i) Credit unions;

(ii) Commercial banks, societies for savings, and savings and loan associations;

(iii) Finance companies (including second mortgage lenders);

(iv) Motor vehicle dealers under retail installment sale contracts;

(v) All other sales finance companies (including dealers under retail installment sale contracts);

(vi) Production credit associations;

(vii) All others.

(6) Life premium rate deviations

Credit life insurance premium rates exceeding the standards in paragraph (C)(1) of this rule may be approved, as not being excessive in relation to the benefits provided, for the insurance covering the debtors of a creditor or a class of business hereinafter called the “case,” if the credible loss ratio for the case is more than sixty per cent. For such cases, the permissible premium rate shall be computed as follows, unless otherwise determined by the superintendent.

(a) Determine the credible monthly claim cost by multiplying the monthly outstanding balance prima facie premium rate of 0.846 dollars per one thousand dollars by the case credible loss ratio obtained in paragraph (C)(6)(e)(iii) of this rule.

(b) The permissible deviated outstanding balance rate is equal to the credible monthly claim cost plus 0.338 dollars per one thousand dollars.

(c) If the case is on the single premium basis, the permissible schedule of single premium rates is obtained using the formula SPn=n + 1 times the deviated monthly outstanding balance rate

from paragraph (C)(6)(b) of this rule, where:

“n” = the number of equal monthly payments.

“SPn” = the single premium rate per one hundred dollars for “n” monthly payments.

(d) The monthly outstanding balance prima facie premium rate of 0.846 dollars per one thousand dollars indicated in paragraph (C)(6)(a) of this rule, will reduce to eighty cents per one thousand dollars on May 1, 1985. The 0.338 dollars per one thousand dollars loading factor indicated in paragraph (C)(6)(b) of this rule, will reduce to thirty-two cents on May 1, 1985. On November 1, 1986 the monthly outstanding balance prima facie premium rate in paragraph (C)(6)(a) of this rule will be the rate required by paragraph (C)(1)(k) of this rule and the loading factor in paragraph (C)(6)(b) of this rule will be forty per cent of the outstanding balance rate.

(e) The credible loss ratio is computed as follows:

(i) Case size and credibility

Credibility of experience depends upon the case size. Case size is measured according to three premium size brackets to reflect the greater credibility of experience resulting from greater size. The premiums in the brackets are the premiums based on the prima facie premium rate standard. The size brackets are:

CASE SIZE EARNED PREMIUM

1 $ 50,000 – 200,000

2 200,000 – 500,000

3 500,000 – and over

(ii) Credible experience period

The credible experience period is three years if the case aggregate earned premium based on the prima facie rate, developed during the most recent three-year period is less than five hundred thousand dollars. If the case aggregate earned premium during the most recent three-year period based on the prima facie rate is equal to or greater than five hundred thousand dollars, then the credible experience period is the most recent number of years needed to accumulate five hundred thousand dollars of premium on the prima facie rate. For example, if a case were of sufficient size to generate at least five hundred thousand dollars in one year, the credible experience period would be one year.

The experience used in determining the permissible rate is the experience during the credible experience period, as follows:

(iii) Credible loss ratio

The credible loss ratio is based on the experience of the credible experience period. It is a composite of the case’s actual loss ratio (ALR) during the credible experience period and the basic loss ratio (BLR) contemplated by the prima facie rate standards which is fifty per cent for credit life insurance.

The actual loss ratio is the ratio of the incurred claims of the credible experience period divided by the earned premium based on the prima facie rate during the credible experience period.

The compositing of the actual and basic loss ratios takes account of fluctuations about expected experience, and dampens the effect of non-credible fluctuations. The factors used in compositing the loss ratios depend upon case size in accordance with the three size brackets in paragraph (C)(6)(e)(i) of this rule, as follows:

CASE SIZE CREDIBLE LOSS RATION

1 50% of ALR plus 50% of BLR

2 75% of ALR plus 25% of BLR

3 100% of ALR plus 0% of BLR

(7) Accident and health premium rate deviations

Credit accident and health insurance premium rates exceeding the standards in paragraph (C)(2) of this rule may be approved, as not being excessive in relation to the benefits provided, for the insurance covering the debtors of a creditor or a class of business hereinafter called the “case,” if the credible loss ratio for the case is more than sixty per cent. For such cases, the permissible premium rate shall be computed as follows, unless otherwise determined by the superintendent.

(a) Determine the credible claim cost by multiplying the prima facie premium rate, by the case credible loss ratio, obtained in paragraph (C)(7)(c)(iii) of this rule.

(b) The permissible deviated outstanding balance rate is equal to the credible monthly claim cost plus the loading factor. The loading factor is computed as a percentage of the prima facie rate as adjusted in accordance with the following table:

(i) Effective November 1, 1983-thirty-five per cent times the prima facie rate set forth in paragraph (C)(2)(a) of this rule;

(ii) Effective May 1, 1985-thirty-seven per cent times the prima facie rate set forth in paragraph (C)(2)(a) of this rule;

(iii) Effective November 1, 1986-forty per cent times the prima facie rate set forth in paragraph (C)(2)(a) of this rule.

(i) Case size and credibility

CASE SIZE EARNED PREMIUM

1 $ 50,000 – 200,000

2 200,000 – 500,000

3 500,000 – and over

(ii) Credible experience period

The credible experience period is three years if the case aggregate earned premium based on the prima facie rate, developed during the most recent three-year period is less than five hundred thousand dollars. If the case aggregate earned premium during the most recent three-year period based on the prima facie rate is equal to or greater than five hundred thousand dollars then the credible experience period is the most recent number of years needed to accumulate five hundred thousand dollars of premium on the prima facie rate. For example, if a case were of sufficient size to generate at least five hundred thousand dollars in one year, the credible experience period would be one year.

(iii) Credible loss ratio

The actual loss ratio is the ratio of the incurred claims of the credible experience period divided by the earned premium based on the prima facie rate during the credible experience period.

CASE SIZE CREDIBLE LOSS RATIO

1 50% of ALR plus 50% of BLR

2 75% of ALR plus 25% of BLR

3 100% of ALR plus 0% of BLR

(8) Required downward rate deviations

After November 1, 1986, any insurer which produces, for a case or class of business, as determined by the insurer, a credible loss ratio of less than fifty per cent for life and sixty per cent for accident and health, shall be required to make appropriate rate reductions or show cause why its premium rates for such case or class of business should not be reduced. When the rate for any case is required to be reduced, such reduction shall continue whether the case remains with the insurer or is transferred to another insurer, until the loss experience demonstrates that the reduction is no longer appropriate.

(9) Cases with no identifiable charge

Where no debtor of a case is paying directly or indirectly any part of the premium, the case rates shall be such reasonable rates as are approved by the superintendent.

(10) Approved rates

No insurer shall, commencing with the policy anniversary date on or after the effective date of this rule, charge a premium rate for credit life or credit health and accident insurance insuring a debtor under an existing group policy of credit life or accident and health insurance at a rate greater than that approved for the insurer under this rule, or a premium rate under a group policy of credit life or credit accident and health insurance for any renewal year greater than the rate approved pursuant to this rule.

(11) Time limit on deviations

Premium rate deviations as outlined in paragraph (C)(6) of this rule may be utilized for a period of time not to exceed the credible experience period or two years, whichever is less.

All rates in excess of those outlined in this rule are withdrawn as of the effective date of this rule except that any rate provided under a policy of group credit life insurance or group credit accident and health insurance heretofore approved by the department of insurance in excess of those prescribed herein may be continued until the first anniversary date of such group policy after the effective date of this rule. Such rate may be thereafter continued only if an application for increase in premium rates is approved with respect thereto.

(12) Charges for credit insurance

It will be considered that the debtor is charged a specific amount for insurance if, among other things:

(a) An identifiable amount for insurance is disclosed in the credit or other instrument furnished the debtor which sets out the financial elements of the credit transaction, or

(b) There is a differential in finance, interest, service or other similar charge rates charged to debtors who, except for their insurance status (insured vs. non-insured), are in like circumstances.

(D) Termination of coverage and refunds

(1) If a debtor is covered by a group credit insurance policy providing for the payment of single premiums to the insurer, then provision shall be made by the insurer that in the event of termination of the master policy for any reason, insurance coverage with respect to any debtor insured under such master policy shall be continued for the entire period for which the single premium has been paid, subject to the debtor’s right to cancel the insurance at any time by express action.

(2) If a debtor is covered by a group credit insurance policy providing for payment of premiums to the insurer on a monthly outstanding balance basis, then the group policy shall provide that, in the event of termination of the policy for whatever reason, the insured debtor shall be notified that coverage will continue for thirty days from the date of notice, except where replacement of the coverage by the same or another insurer in the same or greater amount takes place without lapse of coverage. The notice required in this paragraph shall be given by the insurer or, at the option of the insurer by the creditor.

(3) Refunds.

(a) Section 3918.08 of the Revised Code requires refund formulas to be filed and approved by the superintendent. This requirement will be considered satisfied if the refund formula to be applied by the insurer is set forth in either the policy if the coverage is written on an individual policy basis, or the certificate if the coverage is written on a group basis pursuant to a master policy; provided further that such forms of policies and certificates have not been disapproved by the superintendent. In the event that the refund formula to be used is the “sum of digits” also commonly known as the “rule of 78” it will be sufficient to state either descriptive name without further explanation in the provisions of the policy or certificate.

(b) The refund of premiums in case of reducing term credit life insurance or credit health and accident insurance on which premiums are payable other than by a single premium and of level-term credit life insurance shall be equal to the pro rata unearned gross premium, and in the case of reducing term credit life insurance paid by a single premium and of credit accident and health insurance shall be equal to the amount computed by the “sum of digits” formula commonly known as the “rule of 78.”

(c) The refund of the amount charged to or collected from the debtor for insurance in the case of reducing term credit life insurance or credit accident and health insurance where said amount, if payable other than in a single sum and of level-term credit life insurance, shall be equal to the pro rata unearned gross amount to be collected, and in the case of reducing term credit life insurance where the whole amount thereof is charged to or collected from the debtor in a single sum and of credit accident and health insurance shall be equal to the amount computed by the “sum of digits” formula commonly known as the “rule of 78.”

(d) Notwithstanding paragraph (D)(3)(a), (D)(3)(b) or (D)(3)(c) of this rule, the refund of premiums for credit accident and health insurance where the premiums are payable in a single sum, and for credit life insurance where the premiums are payable in a single sum and the amount of life insurance does not exceed the net indebtedness, shall be equal to the single premium that would be charged for the remaining term of the debt for the balance outstanding at the date of refund. This formula is commonly known as the “rule of anticipation.”

(e) No refund or credit need be made if the amount is less than one dollar.

(f) In the event of termination, no charge for coverage may be made for the first fifteen days of a loan month, and a full month may be charged for sixteen days or more of a loan month.

(E) Maintenance of statistics

(1) Each insurer writing credit life insurance and credit accident and health insurance shall maintain statistics, on a policy-year basis for group policies, and on a calendar-year basis for individual policies with respect to each plan or type of coverage showing, on an accrual basis, separately for credit life insurance and separately for direct business and reinsurance assumed with respect to the following:

(a) Gross premiums received.

(b) Refunds of premiums on terminated insurance.

(d) Earned premiums.

(e) Claims paid.

(f) Increase in claim reserve.

(g) Claims incurred.

(h) Reserve increases other than set forth in paragraphs (E)(1)(c) and (E)(1)(f) of this rule.

(i) Commissions.

(j) Fees and other allowances.

(k) Dividends and experience rating refunds.

(l) Mean amount of life insurance in force.

(m) Mean number of individual policies and certificates in force during the calendar year.

(2) With respect to credit accident and health insurance, each insurer shall keep a record for each plan or type of coverage which, in addition to the above statistics, shall show the nature of the benefits payable, the applicable waiting period, and the rate at which premiums are charged therefor.

(3) Credit insurance data and statistics shall be submitted to the superintendent using the instructions and forms as set forth in “Appendix II” and “Appendix III” of this rule by July first of each year beginning in 1985, and from time to time as requested by the superintendent of insurance.

(F) Responsibility of insurers with respect to creditors

(1) Each insurer transacting credit insurance shall be responsible to conduct a thorough review of each creditor with respect to the first year of business with such creditor. The insurer thereafter shall conduct such reviews as reasonably may be necessary to assure compliance with applicable statutes and rules.

(2) Such reviews shall include, but not by way of limitation, verification that:

(a) Premiums and charges to debtors are properly calculated and transmitted to the insurer, based on rates permitted under statutes and the superintendent’s rules and on the amounts of indebtedness actually insured; and

(b) Claims are refunds are properly calculated and paid;

(3) An insurer’s responsibilities are not discharged or avoided by the delegation of premium collection or refund calculation or check or draft drawing, and the actions of such delegatee will be considered as the acts of the insurer.

The insurer shall maintain records of such reviews for three years, and such records will be subject to call and review by the superintendent at his discretion.

(G) Reserve basis

(1) Life

All insurers writing credit insurance in the state of Ohio will be required to maintain reserves not less than 1958 “CET Table of Mortality” at four and one-half per cent interest. In addition to the mortality reserve, the extra liability for refunds shall be established and maintained as part of the total reserve. Any reserve basis which in the aggregate equals or produces a greater reserve not less than this basis will be acceptable to the superintendent. Also, proper rate credit and similar reserves approved by the superintendent shall be carried by the companies on such risks.

(2) Accident and health

The reserve must not be less than a reserve based on the 1964 “Commissioner’s Disability Table” at three per cent annual interest. However, should an insurer after establishing a credit disability reserve on the 1964 “Commissioner’s Disability Table,” develop a disability reserve for such disability policies which is less than the premium which would have been charged for the remaining benefits for the balance of the term, then an additional reserve must be established so that such aggregate total shall not be less than the premium which would have been charged for the remaining benefits for the balance of the term, for such disability policies. The mean of the gross unearned premiums calculated on a “rule of 78” and a pro rata basis shall be deemed to meet the requirements of this provision.

(H) Severability

Each paragraph of this rule and every part of each paragraph is an independent section and part of a section, and the holding of any section or a part thereof to be unconstitutional, void, or ineffective for any cause does not affect the validity or constitutionality of any other section or part thereof.

Appendix I – DISCLOSURE FORM OPTIONAL CREDIT INSURANCE

Credit life or credit accident and health insurance is protection for both the buyer and seller.

You are entitled to a copy of the policy or certificate of insurance within thirty days after credit is extended.

You ARE NOT required to buy credit life insurance or credit accident and health insurance from any particular company or agent. You may use existing policies if insurance is required as additional security.

If you buy credit life insurance, the proceeds will be used to reduce or pay off your unpaid loan or indebtedness when you die. Any insurance proceeds in excess of the amount required to pay off the loan will be paid to your beneficiary or estate.

READ your policy or certificate CAREFULLY for what the policy DOES NOT cover. For example: Some policies do not pay disability benefits unless you are disabled for 14 or 30 days or if you have a pre-existing condition. Some policies will not provide coverage if you are over age 65. See the policy for details on these.

You may not be eligible for credit accident and health insurance unless you now work at least thirty hours per week.

The customer, debtor or lessee, shall use this mandated disclosure form and shall initial the appropriate boxes below.

By initialing below, the customer, debtor or lessee acknowledges that he has accepted or declined credit life or credit accident and health insurance

[ ] ACCEPTS CREDIT LIFE INSURANCE

[ ] DECLINES CREDIT LIFE INSURANCE

[ ] ACCEPTS CREDIT ACCIDENT AND HEALTH INSURANCE

[ ] DECLINES CREDIT ACCIDENT AND HEALTH INSURANCE

IT IS THE INTENT OF THIS FORM THAT THE DISCLOSUERS ARE EASILY SEEN.

THERE SHALL BE NOTHING ELSE ON THIS PAGE.

Appendix II

Credit insurance experience report – instructions to forms A, and b.

(1) Form A

The purpose of this form is to provide statewide experience data under various classifications which will permit the review and regulation of premium rates and loss ratios at both company and state level.

(a) “Class of business” means any of the following:

(i) Credit unions;

(ii) Commercial banks, societies for savings, and savings and loan associations;

(iii) Finance companies (including second mortgage lenders);

(iv) Motor vehicle dealers under retail installment sale contracts;

(v) All other sales finance companies (including dealers under retail installment sale contracts);

(vi) Production credit associations;

(vii) All others.

(b) Earned premiums

(i) Actual earned premiums (line 1f) – the total of all premiums earned at the premium rate(s) actually charged and inforce during the experience period.

(ii) Earned premiums at prima facie rate (line 1g) – actual earned premiums adjusted (on form B) to the amount which would have been earned had the premium rate during the experience period been equal to the current prima facie rate. Note that if premiums inforce differ from the current prima facie rate, line if will not equal line 1G.

(i) The experience period will consist of a maximum of