Kansas Administrative Regulations

Agency 40. Insurance Department

Article 5. Credit Insurance

40-5-108 Same; refunds.

(a) Formulas for computing refunds of credit insurance premiums shall be acceptable to the commissioner for coverage as follows:

 (1)  Pro rata method. The pro rata unearned gross premium method for level term credit life insurance, credit accident and health insurance where the insured is covered for a constant maximum indemnity for a given period of time, after which the maximum indemnity begins to decrease in even amounts per month, and for credit insurance coverages under which premiums are collected from the consumer on a basis other than the single premium basis.

 (2)  Sum of the digits method. The ``rule of 78'' or ``sum of the digits'' unearned premium method of coverages other than those included in paragraph (1).

 (b)  At the option of the insurer but consistent with subsection (a):

 (1)  Any charge for credit insurance may not be made for the first 15 days of a loan month and a full month may be charged for 16 days or more of a loan month; or

 (2)  a refund may be made on a pro rata basis for each day within the loan month.

 (c)  The requirements of K.S.A. 16a-4-108 that refund formulas be filed with the commissioner shall be considered fulfilled if the refund formulas shall be set forth in the individual policy or group certificate filed with the commissioner. If the appropriate refund formula is the ``sum of the digits'' formula, commonly known as the ``rule of 78,'' reference by either phrase shall be sufficient.

 (d)  Any insurance refund need not be made to the consumer if all refunds and credits due to the consumer amount to less than $1.

(Authorized by K.S.A. 40-103, 16a-4-112; implementing K.S.A. 16a-4-108; effective Jan. 1, 1974; amended May 1, 1979; amended May 1, 1986; amended May 1, 1988; amended July 10, 1989.)