(a) The entire amount of the premium due from a creditor shall be remitted to the insurer or its agent 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 insurance agent.

Terms Used In Tennessee Code 56-49-112

  • Agent: 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, except a regular salaried officer, employee or other representative of an insurer who devotes substantially all working time to activities other than those specified here and who receives no compensation that is directly dependent on the amount of insurance business written, and except a regular salaried officer or employee of a creditor who receives no compensation that is directly dependent on the amount of insurance effected or procured. See Tennessee Code 56-49-103
  • Commissioner: means the commissioner of commerce and insurance. See Tennessee Code 56-49-103
  • 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 Tennessee Code 56-49-103
  • 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 Tennessee Code 56-49-103
  • 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 Tennessee Code 56-49-103
  • 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 Tennessee Code 56-49-103
  • Insurer: means an insurance company, association or exchange authorized to issue insurance policies in this state. See Tennessee Code 56-49-103
  • 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: means any association, aggregate of individuals, business, company, corporation, individual, joint-stock company, Lloyds-type organization, organization, partnership, receiver, reciprocal or interinsurance exchange, trustee or society. See Tennessee Code 56-16-102
  • State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • written: includes printing, typewriting, engraving, lithography, and any other mode of representing words and letters. See Tennessee Code 1-3-105
(b) The retention by the creditor of unearned premiums upon cancellation of the insurance without crediting to the debtor‘s account the amount of unearned insurance charges is prohibited.
(c) 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 agent. The listing of the following activities as prohibited rebates or inducements is not intended to be restrictive, and the commissioner may identify an activity as prohibited by rule, regulation or order:

(1) Allowing insurers or agents 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;
(2) Paying a commission to a person, including a creditor, who is not appropriately licensed as an agent in this state; and
(3) 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) Prohibited rebates or inducements do not include:

(1) The providing of insurance tracking and other services incidental to the creditor-placed insurance program;
(2) The paying of commissions and other compensation to a duly licensed and appointed insurance agent, whether or not affiliated with the creditor;
(3) The paying to the creditor policyholder of group experience rated refunds or policy dividends; or
(4) 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, collections and related activities; provided, that these payments are calculated in a manner that does not exceed an amount reasonably estimated to equal the expenses incurred by the creditor.
(e) An insurer that pays commissions to creditor-related agents for creditor-placed insurance that are greater than twenty percent (20%) of the net written premium shall be required to demonstrate the commissions are not unreasonably high in relation to the value of the services rendered.
(f) Nothing contained in this section shall prohibit or restrict an insurer or agent from maintaining a demand, premium deposit or other account or accounts with a creditor for which the insurer or agent 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.
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