SECTION 365:10-5-69. Premium refunds

(a)   Purpose. The purpose of this section is to, with respect to credit life and credit accident and health insurance:

(1)   Establish refunds for unearned premiums;

(2)   Establish procedures for the payment of refunds;

(3)   Establish the responsibility of refunds;

(4)   Provide for maintenance of refusal records;

(5)   Establish a refund formula in the policy, whether individual or group;

(6)   Establish a minimum refund; and

(7)   Provide for treatment of refunds for partial months.

(b)   Refund of unearned premiums. With respect to policies issued and certificates delivered after the effective date of this Chapter:

(1)   The refund of an unearned amount paid by or charged to a debtor for reducing term credit life insurance, or for credit accident and health insurance on which charges to the debtor are payable by other than a single sum, and for level term credit life insurance must not be less than the pro rata gross unearned amount charged.

(2)   The refund of an unearned amount paid by or charged to a debtor for reducing term credit life insurance, or for credit accident and health insurance, on which the insurance charges to the debtor are paid in a single sum must not be less than the amount computed by "sum of the digits" formula, commonly known as the "Rule of 78".

(c)   Procedures for payment of refunds. Upon the termination of insurance prior to maturity, each debtor shall receive from the creditor any refund or unearned identifiable insurance charges by check, or by credit to and against the insured debtors indebtedness, in accordance with the insurers refund formula. Insurers shall be responsible for the establishment of procedures by which refunds or credits are to be made, and shall furnish to creditors schedules for refunds or credits to be made in the event of termination of insurance. Insurers shall also furnish instructions to creditors with respect to their duties in the making of such refunds or credits. In the event of a failure by a creditor to make such refund, the insurer shall be responsible for making such refund and for promptly notifying the Commissioner of said failure to refund.

(d)   Refund records. The insurer must maintain in its home office for inspection by the Commissioner, records of the completion of such refunds to debtors. Such records must set forth the completion or noncompletion of each refund due, and must specify the date and amount of such refund, to whom the refund was paid or credited, and must include data sufficient to verify the accuracy of the computation of the refund.

(e)   Refund formula in policy. The requirements for filing refund formulas will be satisfied if the formulas are set forth in the individual policy or group policy filed with the Commissioner and not disapproved. If the appropriate refund formula is the "sum of the digits" formula, commonly know as the "Rule of 78", it shall be sufficient to so refer to such formula by either description in the policy.

(f)   Refunds less than one dollar. A premium refund or credit need not be made if the amount thereof is less than One Dollar ($1.00).

(g)   Treatment of partial months. At the option of the insurer, but consistent with this section, no charge for credit insurance may be made for the first fifteen (15) days of a loan month and a full month may be charged for sixteen (16) days or more of a loan month or a refund may be made on a pro rata basis for each day within the loan month.