Kansas Administrative Regulations

Agency 40. Insurance Department

Article 5. Credit Insurance

40-5-107 Same; credit insurance rates and forms.

(a) The basic test of the reasonableness of the relation of benefits to the premium charges shall be an anticipated loss ratio of ``claims incurred'' to ``premiums earned'' of not less than 50 percent. Due consideration shall be given to a reasonable allowance for expenses.

(b)  Benefits shall not be reasonable in relation to the premium charged if the premiums or premium rates filed with the commissioner exceed the following, or actuarially equivalent, rates:

(1)  Credit life insurance.

(A)  For decreasing term life insurance the rate shall not exceed $.65 per $100 insurance per annum;

(B)  for joint life insurance the rate shall not exceed one and two-thirds of the appropriate single life rate;

(C)  for level term life insurance the rate shall not exceed $1.20 per $100 insurance per annum;

(D)  for monthly outstanding balance insurance the rate shall not exceed $1.00 per month per $1,000 of insurance; and

(E)  The rates shall be presumed reasonable only if the policies contain:

(i)  No exceptions, limitations or exclusions, except for suicide, during the first two years; and

(ii)  no age restriction or only age restrictions making ineligible for coverage debtors 65 years or over at the time the indebtedness is incurred, or debtors who have attained age 66 years or over on the maturity date of the indebtedness.

(2)  Credit accident and health insurance.

(A)  For credit accident and health insurance the following single premium rates per $100 initial insured indebtedness:

NONRETROACTIVE BASIS

number of months in which 14 day	elimination	30 day elimination
indebtedness is repayable	period	period
6 or less	1.00	.40
12	1.40	.80
24	2.20	1.60
36	3.00	2.40
48	3.50	2.90
60	3.90	3.30

RETROACTIVE BASIS

number of months in which 14 day	elimination	30 day elimination
indebtedness is repayable	period	period
6 or less	1.80	1.30
12	2.20	1.70
24	3.00	2.50
36	3.80	3.30
48	4.30	3.80
60	4.70	4.20

(B)  Rates for policies of credit accident and health insurance, the premiums for which are paid other than on a single premium basis, for benefits on a basis different than as provided in (C) below, or for different monthly durations than illustrated, shall be actuarially consistent with the rates specified above.

(C)  The premium rates specified shall be for policies which contain no exclusion for pre-existing conditions except for those conditions which manifest themselves to the insured by requiring medical diagnosis or treatment, or would cause a reasonably prudent person to seek medical diagnosis or treatment within six months preceding the effective date of the coverage as to the insured debtor, and which cause loss within the six months following effective date of coverage. Disabilities thereafter resulting from the condition shall be covered.

(c)  Each contract to which the foregoing rules apply may contain provisions excluding or restricting coverage in the event of total disability resulting from pregnancy, intentionally self-inflicted injuries, flight in nonscheduled aircraft, or war. The policies may contain the same age limitation on eligibility as set forth for credit life policies.

(d)  Each new policy or certificate of consumer credit insurance issued after the effective date of this regulation shall not be at a rate exceeding any provision of this regulation.

(e)  Each insurer may receive approval of a higher premium rate or schedule of rates to be used in connection with a particular policy form providing insurance on the debtors of a creditor or a class or classes of debtors if the insurer demonstrates, to the satisfaction of the commissioner, that the mortality or morbidity experience which may reasonably be anticipated shall develop a loss ratio in excess of 60 percent when the rate standards in K.A.R. 40-5-107 are used.

(f)  On the basis of mortality or morbidity experience reported under K.A.R. 40-5-109, the premium rates may be continued, allowed to be increased, or required to be decreased.

(Authorized by K.S.A. 40-103, 16a-4-112; implementing K.S.A. 16a-4-203; effective Jan. 1, 1974; amended May 1, 1979; amended May 1, 1986; amended May 1, 1988.)