Formula for refund.
1. If an insurer specifies the formula for a refund in the individual policy or certificate of group insurance filed for approval by the Commissioner and the filing has been acknowledged and not disapproved by the Commissioner, the formula is acceptable. A formula for a refund which is the sum of the amounts for each remaining period for payment of the obligation, calculated by multiplying the amount paid as the premium by a fraction having a denominator equal to the sum of the total number of periods for payment of the obligation and a numerator equal to the sum of the remaining number of periods may be referred to as the “sum-of-the-digits” formula.
2. The following are acceptable methods for determining the amount of a refund for the type of insurance specified:
(a) For a premium for credit insurance, if the premium is paid on the single premium basis, the refund must be calculated by the sum-of-the-digits formula.
(b) For a premium for credit insurance, if the premium is payable other than on the single premium basis, the refund must equal the prorated unearned gross premium.
3. Refunds may be calculated by the insurer on a daily or on a monthly basis. The insurer shall indicate the basis used when he files the formula for calculating refunds for the approval of the Commissioner. Refunds may be calculated on an approximate daily basis by interpolating proportionately between the values at the beginning and at the end of the month. For this purpose, every month shall be deemed to have 30 days. If refunds are calculated on a monthly basis, a charge may not be made for a period less than 16 days after the date the last monthly installment was due, but may be made for the full month if the period is 16 days or more.
4. An insurer is not required to make a refund or credit of the premium pursuant to this section if the total refund for all credit insurance issued to the debtor by a single insurer in connection with a loan is less than $3.
Last modified: February 27, 2006