Section 1051.10  Credit Life Insurance

 

a)         Only Decreasing Term Insurance may be written in connection with an indebtedness which is repayable in substantially equal installments.

 

b)         Level Term Insurance may be written only in connection with an indebtedness not repayable in substantially equal installments.

 

c)         The amount of insurance should at no time exceed the scheduled or actual amount of unpaid indebtedness, whichever is greater.

 

(Source:  Amended at 12 Ill. Reg. 2426, effective January 15, 1988)

 

Section 1051.30  Purpose and Scope

 

The purpose of this Part is to establish a procedure and methodology for the review of Credit Life Insurance rates by the Director of Insurance, and to establish standards for the review of such rates.  This Part does not apply to Credit Accident and Health Insurance, nor does 50 Ill. Adm. Code 1052 apply to Credit Life Insurance.

 

(Source:  Added at 12 Ill. Reg. 2624, effective January 15, 1988)

 

Section 1051.40  Definitions

 

            "Credit life insurance" means insurance as defined in Section 155.52(a) of the Illinois Insurance Code.

 

            "Code" means the Illinois Insurance Code [215 ILCS 5].

 

            "Department" means the Department of Insurance of the State of Illinois.

 

            "Director" means the Director of Insurance.

 

            "Earned Premiums" means premiums earned at the premium rates actually charged and in force during the experience period.

 

            "Experience" means earned premiums and incurred claims during the experience period.

 

            "Experience Period" means the most recent period of time for which experience is reported, but not for a period longer than three full years.

 

            "Incurred Claims" means total claims paid during the experience period, adjusted for the change in claim reserve.

 

            "Indebtedness" means total amount repayable including principal, interest and finance charges.

 

            "Net Written Premium" means gross written premium minus refunds on termination.

 

            "Prima Facie Rate" means a rate which will be accepted by the Director without filing detailed actuarial support as providing a reasonable credit life insurance benefit in relation to the premium charged.

 

(Source:  Added at 12 Ill. Reg. 2426, effective January 15, 1988)

 

Section 1051.50  Credit Life Insurance Rates

 

A credit life insurance rate shall be considered prima facie reasonable in relation to the benefits provided if the rate is not greater than that set forth below in subsection (a) for coverage containing no more restrictive exclusions than those described in subsection (b) of this Section.

 

a)         Premium Rate.  Credit life insurance premium rates for the insured portion of an indebtedness repayable in equal monthly installments, where the insured portion of the indebtedness decreases uniformly by the amount of the monthly installment paid, shall be as set forth in subsections (a)(1), (2) and (3).  Subsections (a)(4), (5) and (6) refer to premium rates for other types of benefits either alone or in combination with the type of benefits applicable to subsections (a)(1), (2) and (3).

 

1)         If premiums are payable monthly on the outstanding insured balance basis for term insurance on a single insured debtor, the prima facie premium rate shall be $.70 per month per $1,000 of outstanding insured indebtedness.

 

2)         If premiums are payable on a single premium basis for term insurance which decreases in equal monthly amounts on a single insured debtor, the prima facie premium rate shall be $.46 per annum per $100 of initial insured indebtedness.

 

3)         If premiums are payable on a single premium basis for level term insurance on a single insured debtor, the prima facie premium rate shall be $.92 per annum per $100 of initial insured indebtedness.

 

4)         A combination of the appropriate rate for level term and the appropriate rate for decreasing term (with equal decrements), if coverage provided is a combination of level term and decreasing term (with equal decrements) on a single insured debtor.

 

5)         Joint credit life rate shall be 1.67 times the appropriate single life rate.

 

6)         If the benefits provided are other than those described in subsections (a)(1), (2), (3), (4) and (5), then rates for such benefits shall be actuarially consistent with the rates provided in subsections (a)(1), (2), (3), (4) and (5).

 

b)         Exclusions.  The premium rates in subsection (a) shall apply to policies providing credit life insurance to be issued with or without evidence of insurability, to be offered to all debtors, and containing:

 

1)         No exclusions other than suicide within six months of the effective date of coverage and war or any act of war.  Under open-end credit plans, the effective date of coverage may apply separately with respect to each additional purchase or each additional loan to which the coverage relates.

 

2)         Either no age restrictions, or age restriction only for initial eligibility, making ineligible for coverage debtors age 66 or over at the time indebtedness is incurred or debtors having attained age 66 or over on the maturity date of the indebtedness, provided that coverage will remain in full force and effect in the event the insurer accepts premium on a debtor whose correctly stated age exceeds the maximum for eligibility and the premium is not refunded within 60 days of receipt.

 

3)         Insurance written in connection with an open-end credit plan may exclude from the classes eligible for insurance, classes of debtors determined by age, and provide for the cessation of insurance or reduction in the amount of insurance upon attainment of not less than age 66.

 

4)         On insurance written in connection with open-end credit plans where the amount of insurance is based on or limited to the outstanding unpaid balance, no provision excluding or denying a claim for death resulting from a pre-existing condition except for those conditions for which the insured debtor received medical diagnosis or treatment within six months preceding the effective date of coverage and which caused or substantially contributed to the death of the insured debtor within six months following the effective date of coverage.  The effective date of coverage for each part of the insurance attributable to a different advance or charge to the plan account is the date on which the advance or charge is posted to the plan account.

 

(Source:  Amended at 49 Ill. Reg. 7938, effective May 22, 2025)

 

Section 1051.60  Experience Reports and Adjustment of Prima Facie Rates

 

a)         Each insurer doing credit insurance business in this state shall annually file with the Director and the National Association of Insurance Commissioners (NAIC) Support & Services Office a report of credit life business written in Illinois on a calendar year basis.  Such report shall utilize the Credit Insurance Supplement − Annual Statement Blank as approved by the National Association of Insurance Commissioners.  Such filings shall be made no later than June 30^th of each year.

 

b)         Commencing July 1, 1991, and as needed thereafter, the Director will review the appropriateness of the prima facie rates set forth in Section 1051.50 based upon credible Illinois experience data (statistical data that would show a negligible sampling error) collected from companies writing credit life insurance in the State during the preceding three to 10 years pursuant to subsection (a) above.  The Director may determine therefrom the rate of expected claims on a statewide basis and compare such rate of expected claims with the rate of actual claims for the preceding period, if actuarially appropriate, determined from the incurred claims and earned premiums at prima facie rates reported in the Annual Statement Supplement and filed with the Director pursuant to subsection (a) above.  The Director shall also review changes in mortality experience for credit life insurance, changes in the average credit life policy or certificate size, changes in the fixed and variable expenses for credit life insurance, and other factors relevant to the credit life insurance premium rate including a reasonable profit margin for insurance companies writing credit insurance in determining whether to recommend a change in the prima facie rate as a result of this review of credit life insurance experience.

 

(Source:  Amended at 49 Ill. Reg. 7938, effective May 22, 2025)

 

Section 1051.70  Credit Life Rate Adjustments

 

a)         No insurance company may charge or collect a credit life insurance premium which would not be considered reasonable under this Part.  Unless otherwise approved by the Director pursuant to this Section, no insurance company writing credit insurance in this state shall charge or collect a premium rate in excess of the prima facie rate established by Section 1051.50 of this Part which shall be conclusively presumed to satisfy this general standard.

 

b)         No insurance company may charge or collect a credit life insurance premium rate higher than the prima facie rate, unless it files with the Director 60 days prior to the intended effective date of such rate, credible Illinois experience data, actuarial procedures and ratemaking assumptions in support of its proposed rate, and it demonstrates to the Director that a higher credit life insurance rate is reasonable in relation to the benefits provided for each credit life insurance policy form which contains the rate.  A proposed rate will be approved for a 12 month period beginning on the effective date of the proposed rate only if such ratemaking procedure is actuarially sound, and will produce a credit life insurance benefit that is reasonable in relation to the credit life insurance premium charged by the requesting company during the next 12 months beginning after the effective date.  No policy form may be approved for more than one year where the rate contained therein is greater than the prima facie rate contained in Section 1051.50.

 

(Source:  Amended at 49 Ill. Reg. 7938, effective May 22, 2025)

 

Section 1051.80  Effective Date

 

Approval of all forms not in compliance with this Part are hereby withdrawn as of 60 days subsequent to the effective date of this Part, and may not be used unless an approved rider has been attached bringing such form into compliance with this Part.

 

(Source:  Added at 12 Ill. Reg. 2426, effective January 15, 1988)