Michigan Laws 500.1623 – Rebates or inducements; prohibitions
Current as of: 2023 | Check for updates
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(1) The entire amount of the premium due from a creditor shall be remitted to the insurer or its producer in accordance with the insurer’s requirements. No commissions may be paid to, or retained by, a person or entity except a licensed and appointed producer.
(2) A creditor shall not retain unearned premiums upon cancellation of the insurance without crediting to the debtor‘s account the amount of unearned insurance charges.
Terms Used In Michigan Laws 500.1623
- Commissioner: means the director. See Michigan Laws 500.102
- Creditor: means the lender of money or vendor or lessor of goods, services, property, rights, or privileges for which payment is arranged through a credit transaction, or any successor to the right, title, or interest of a lender, vendor, or lessor. See Michigan Laws 500.1605
- Creditor-placed insurance: means insurance that is purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss, expense, or damage to collateralized personal property as a result of fire, theft, collision, or other risks of loss that would either impair a creditor's interest or adversely affect the value of collateral covered by limited dual interest insurance. See Michigan Laws 500.1605
- Debtor: means the borrower of money or a purchaser or lessee of goods, services, property, rights, or privileges, for which payment is arranged through a credit transaction. See Michigan Laws 500.1605
- Insurance tracking: means monitoring evidence of insurance on collateralized credit transactions to determine whether insurance required by the credit agreement has lapsed, and communicating with debtors concerning the status of insurance coverage. See Michigan Laws 500.1605
- Insurer: means an individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds organization, fraternal benefit society, or other legal entity, engaged or attempting to engage in the business of making insurance or surety contracts. See Michigan Laws 500.106
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- person: may extend and be applied to bodies politic and corporate, as well as to individuals. See Michigan Laws 8.3l
- Producer: means a person who receives a commission for insurance placed or written or who, on behalf of an insurer or creditor, solicits, negotiates, effects, procures, delivers, renews, continues, or binds policies of insurance to which this chapter applies, but does not include the following:
(i) A regular salaried officer, employee, or other representative of an insurer who devotes substantially all working time to activities other than those specified in this subdivision and who receives no compensation that is directly dependent on the amount of insurance business written. See Michigan Laws 500.1605state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories belonging to the United States; and the words "United States" shall be construed to include the district and territories. See Michigan Laws 8.3o
(3) Rebates to the creditor of a portion of the premium charged to the debtor are prohibited as are other inducements provided to the creditor by an insurer or producer. All of the following activities are prohibited rebates or inducements:
(a) Allowing insurers or producers to purchase certificates of deposit from the creditor or to maintain accounts with the creditor at less than the market interest rates and charges that the creditor applies to other customers for deposit accounts of similar amounts and duration.
(b) Paying a commission to a person, including a creditor, who is not appropriately licensed as a producer in this state.
(c) Purchasing or offering to purchase certificates of deposit from, or maintaining or offering to maintain deposit accounts or investment accounts with a creditor as part of a creditor-placed insurance solicitation.
(d) Any other activity identified by the commissioner and prohibited by rule, regulation, or order.
(4) Prohibited rebates or inducements do not include any of the following:
(a) The paying of commissions and other compensation to a duly licensed and appointed producer, whether or not affiliated with the creditor.
(b) The paying to the creditor policyholder of group experience rated refunds or policy dividends.
(c) The providing of insurance tracking and other services incidental to the creditor-placed insurance program.
(d) The paying to the creditor of amounts intended to reimburse the creditor for its expenses incurred incidental to the creditor-placed insurance program, such as costs of data processing, mail processing, telephone service, insurance tracking, billing, collection, and related activities, provided that these payments are approved in a manner consistent with the procedures in section 1615 and are calculated in a manner that does not exceed an amount reasonably estimated to equal the expenses incurred by the creditor.
(5) An insurer that pays commissions to producers for creditor-placed insurance that are greater than 20% of the net written premium shall demonstrate to the commissioner that the commissions are not unreasonably high in relation to the value of the services rendered.
(6) This section does not prohibit or restrict an insurer or producer from maintaining a demand, premium deposit, or other account or accounts with a creditor for which the insurer or producer provides insurance if the accounts pay the market interest rate and charges that the creditor applies to other customers for deposit accounts of similar amounts and duration.