2023 Illinois Compiled Statutes › Chapter 215 - INSURANCE › 215 ILCS 5/ - Illinois Insurance Code. › Article XLIII - Mortgage Insurance Consolidation

(215 ILCS 5/Art. XLIII heading)
ARTICLE XLIII.
Mortgage Insurance Consolidation
(215 ILCS 5/1300) (from Ch. 73, par. 1065.1000)
Sec. 1300. 
		Title. 
		This Article may be cited as the Mortgage Insurance
Consolidation Law.
(Source: P.A. 86-378.)
(215 ILCS 5/1301) (from Ch. 73, par. 1065.1001)
Sec. 1301. 
		Purpose. 
		The purpose of this Article is to protect the
interests of Illinois insureds by:
(1) establishing minimum standards and procedures for the effectuation
of mortgage insurance consolidations;
(2) establishing disclosure requirements specific to mortgage insurance
consolidations and requiring insurers to make such disclosures on a timely
basis;
(3) clarifying the applicability of the unfair rate discrimination
provisions of this Code to consolidations involved in loan transfers so as
to prevent premium increases for consumers resulting from mandatory premium
recalculation;
(4) requiring that group mortgage life insurance certificates
contain minimum standard provisions including conversion rights; and
(5) preventing the arbitrary termination of mortgage insurance coverage
in connection with consolidations.
(Source: P.A. 86-378.)
(215 ILCS 5/1302) (from Ch. 73, par. 1065.1002)
Sec. 1302. 
		Scope. 
		(a) This Article applies:
(1) To all insurance companies authorized to transact the business of
insurance in this State of the kind or kinds of business described in Class
1(a) and (b) and Class 2(a) of Section 4 of this Code except for the kind
or kinds of business described in Article IX 1/2 of this Code.
(2) To all mortgage insurance coverage offered, issued, or issued
for delivery in this State, by mail or otherwise,
in connection with consolidations regardless of whether the financial
institution involved is located in or outside Illinois.
(3) To all consolidations whether the old coverage is provided under an
individual or group policy.
(b) Except as otherwise specifically provided, it is not intended that
this Article conflict with or supersede any other provisions of this Code,
or any rules promulgated by the Department of Insurance implementing any
such provisions.
(Source: P.A. 86-378.)
(215 ILCS 5/1303) (from Ch. 73, par. 1065.1003)
Sec. 1303. Definitions. The following definitions shall apply to
this Article:
"Consolidation" means any transaction in which a financial institution
makes its premium collection services available to its mortgage debtors in
connection with a particular insurer's ("new insurer") offer of mortgage
insurance, which offer is made to debtors who, immediately prior to the
offer, had mortgage insurance with another insurer ("old insurer") and were
paying premiums for that insurance with their monthly mortgage payments.
"Financial institution" or "servicer" means any entity or organization
that services mortgage loans by collecting and accounting for monthly mortgage
insurance premiums as part of the debtor's monthly mortgage payment for one
or more insurers.
"Insured" means the individual loan customer or certificate holder.
"Loan transfer" means a transaction in which the servicing of a block of
mortgage loans is transferred from one servicer to another servicer.
This shall include, but not be limited to, mergers or acquisitions.
"Loan transfer consolidation" means a consolidation in which coverage is
limited to insureds whose mortgage loans have been sold or transferred in
the secondary market from one servicer to another.
"Group-to-group consolidation" means a consolidation in which coverages
under both the old plan and the new plan is provided under group policies.
"Mortgage insurance" means mortgage life insurance (term or ordinary),
mortgage disability insurance, mortgage accidental death insurance, or any
combination thereof, including both individual and group policies, and
any certificates issued thereunder, on credit transactions of more than 10
years duration and written in connection with a credit transaction that is
secured by a first mortgage or deed of trust and made to finance the
purchase of real property or the construction of a dwelling thereon or to
refinance a prior credit transaction made for such a purpose.
"New coverage" or "new plan" means the mortgage insurance coverage or
plan for which a financial institution collects premium beginning on the
effective date of a consolidation.
"New insurer" means any insurer who offers mortgage insurance coverage to
borrowers of the financial institution who can no longer remit monthly
premiums for the old insurer along with their monthly mortgage payment.
"Old coverage" or "old plan" means the mortgage insurance coverage or
plan for which a financial institution collects premiums immediately prior
to a consolidation.
"Old insurer" means any insurer for whom a financial institution will no
longer make its premium collection facilities available for all or some
of the insurer's policyholders or certificate holders.
(Source: P.A. 100-201, eff. 8-18-17.)
(215 ILCS 5/1304) (from Ch. 73, par. 1065.1004)
Sec. 1304. 
		General requirements. 
		Except as provided in Section 1305, no
insurer shall participate in any consolidation unless, in addition to all
other requirements provided by law, it complies with the following:
(1) The new insurer must calculate premiums for the new coverage on the
basis of its own rates, the prospective insured's then attained age, if
applicable, and the amount of insurance offered.
(2) Notice of the new premium shall be mailed, together with the offer
of new coverage, to the prospective insured at least 30 days prior to the
effective date of the new coverage.
(3) The new coverage shall be put into effect only after the new insurer
receives an application which has been signed by the prospective insured.
(4) Whenever the existing coverage is provided under individual
policies, the new insurer shall comply with the requirements of Part 917 of
Title 50 of the Illinois Administrative Code, promulgated by the Department of Insurance.
(5) All riders which are a part of the existing insurance shall be
offered without proof of insurability to all policyholders (or certificate
holders) obtained by consolidation, including, but not limited to, waiver
of premium and accidental death insurance.
(6) Prospective insureds shall be given the option to name the
beneficiary of their choice by the new insurer, if the previous beneficiary
is other than a financial institution.
(7) Regulations including, but not limited to, those promulgated by the
Department of Insurance implementing Sections 143, 149, 151, 236, 237, 421,
424 and 507.1 of this Code concerning misrepresentations to any
policyholder for the purpose of inducing or tending to induce such
policyholder to lapse, forfeit or surrender his insurance, unfair or
deceptive practices, complaints, solicitation and replacement of life
insurance, compensation, and rebating shall be complied with.
(Source: P.A. 86-378.)
(215 ILCS 5/1305) (from Ch. 73, par. 1065.1005)
Sec. 1305. 
		Loan transfer consolidations. 
		In a consolidation conducted
as a result of a loan transfer, the offer of new coverage may be based on
the same premium the insured was paying for his old coverage only if, in
addition to all other requirements provided by law, the following conditions
are met:
(1) Both the old and the new coverage must be provided under a group policy.
(2) An offer of new coverage must be made as soon as reasonably possible
after the loan transfer.  If an offer of new coverage is not made within 30
days after the loan transfer, or at least 30 days prior to the proposed
effective date of the new coverage, the insurer shall notify the debtor,
in writing, that he has the right to an unconditional refund of all
premiums paid for the new coverage as long as he exercises that right, in
writing, within 30 days from the date of the notification.
(3) The new coverage offered to the prospective insured must be the same
as the old coverage, including all supplemental benefits provided under the
old plan.  If the coverage offered is not the same, then all the
requirements of Section 1304 shall apply.
(4) In addition to the requirements of Section 1307, the certificate
shall contain the following notice, printed in bold type on page one of
the certificate:
IMPORTANT NOTICE
This certificate is issued to you in connection with a mortgage insurance
consolidation.  It is the intention of the Company to provide you group
coverage which is equal to or better than the group coverage you had
before.  To the extent the benefits provided or the provisions of your
prior certificate of insurance are more liberal than those under this
certificate, the provisions of your prior certificate will control.
Therefore, you should keep your old certificate along with this certificate
for comparison purposes.
(5) The information contained in the notice prescribed by paragraph (4)
shall also be disclosed in writing (separate from the certificate of
insurance) to each prospective insured at the time the offer of new
coverage is made.
(6) Only the group coverage written in connection with the loans which are
the subject of the loan transfer may be consolidated pursuant to this Section.
(7) Payment of the required premium shall constitute acceptance of the
new coverage if:
(A) such acceptance mechanism is clearly explained to the debtor; and
(B) All other disclosure requirements of this Article are met.
(8) Regulations including, but not limited to, those promulgated by the
Department of Insurance implementing Sections 143, 149, 151, 236, 237, 421,
424 and 507.1 of this Code concerning misrepresentations to any
policyholder for the purpose of inducing or tending to induce such
policyholder to lapse, forfeit or surrender his insurance, unfair or
deceptive practices, complaints, solicitation and replacement of life
insurance, compensation and rebating shall be complied
with.
(9) If an insurer charges debtor insureds the same premium for the new
coverage that they were paying for the old coverage, and, as a result,
debtor insureds of a financial institution are charged different premium
rates for the same coverage, such rate differences shall not constitute
unfair discrimination under Sections 236 and 364 of this Code provided all
the other applicable requirements of this Code are met.
(Source: P.A. 86-378.)
(215 ILCS 5/1306) (from Ch. 73, par. 1065.1006)
Sec. 1306. 
		Out-of-state consolidations. 
		If Illinois residents whose
loans are serviced outside Illinois are involved in a group-to-group
consolidation by an out-of-state servicer, Section 1305 may be employed if
the Illinois residents are an incidental part of the consolidation.
Otherwise the provisions of this Article shall apply to any consolidation
insofar as it involves Illinois residents.  For purposes of this provision
"incidental" shall mean that the Illinois residents comprise less than 25%
or 100 lives of the total lives involved in the consolidation, whichever
is less.
(Source: P.A. 86-378.)
(215 ILCS 5/1307) (from Ch. 73, par. 1065.1007)
Sec. 1307. 
		Group certificates. 
		No insurer may participate in a
group-to-group consolidation or a loan transfer consolidation unless in
addition to all other requirements provided by law, it complies with
the following:
(1) A group certificate must be delivered to each debtor insured under
the new plan, which certificate shall include the following information:
(A) the name or names of the single or joint insureds;
(B) identification of the insured mortgage;
(C) the amount of insurance under the new plan;
(D) the premium for the new coverage;
(E) the effective date of the new coverage;
(F) the beneficiary for the new coverage.
(2) The new coverage offered to the prospective insured must be the same
coverage as the old coverage, including all supplemental benefits, or the
same type of coverage as the old coverage, whichever is otherwise required
by this Article.
(3) A group certificate evidencing the new coverage may not include a
contestability clause or, in the case of mortgage life insurance, a
provision excluding suicide.
(Source: P.A. 86-378.)
(215 ILCS 5/1308) (from Ch. 73, par. 1065.1008)
Sec. 1308. 
		Conversion privilege. 
		Notwithstanding the provisions of
Section 231.1(H) of this Code, all group mortgage life insurance policies
and any certificates issued thereunder shall include a conversion privilege
permitting a debtor insured to convert, without evidence of insurability,
to an individual policy of decreasing term insurance within 30 days of the
date the debtor insured's group coverage is terminated for any reason other
than the nonpayment of premiums.  The initial amount of coverage under the
individual policy shall be an amount equal to the amount of coverage
terminated under the group policy and shall decrease over a term that
corresponds with the scheduled term of the insured debtor's mortgage loan.
The premium for the individual policy shall be the same
premium the debtor insured was paying under the group policy.
(Source: P.A. 86-378.)
(215 ILCS 5/1309) (from Ch. 73, par. 1065.1009)
Sec. 1309. 
		Required disclosures. 
		(a) In conjunction with the offer of new
coverage involving any consolidation, the new insurer shall disclose in
writing to each insured under the old plan or plans at least 30 days prior
to the effective date of the new coverage the following:
(1) Identification of the insured mortgage.
(2) The name of the insured or insureds.
(3) Name of the owner of the individual policy or master policy (if
group insurance) under both the new and old plans, if known.
(4) The premium for the new and old coverage.
(5) Amount of coverage for both the new and old plans.  If the amount of
coverage for the old plan is not known, a statement that the amount may be
scheduled and it may be less than or greater than the amount of the loan
and the insured should check the policy schedule for an exact amount of
coverage.
(6) Effective dates of the old coverage if the contestable or suicide
period have not expired as of the effective date of the new coverage.  If
the new insurer waives the contestable and suicide period, then the
effective date of the old coverage does not need to be disclosed.
(7) Name of the beneficiary under the old plan, if known.
(8) A statement as to whether the old plan was an individual or group
plan and a statement as to whether the new plan is an individual or a
group plan.
(9) A statement that neither the old plan or new plan is required.
(10) A statement that the prospective insured may have the right to
continue or convert his old coverage by paying premiums directly to the old
insurer, and what the prospective insured must do to keep the old coverage
in effect including, but not limited to, the name and address of the
company involved, the policy number or other information which reasonably
identifies the insured's plan of coverage, the amount of the premium and
where it is to be sent.
(11) A statement that the mortgage payment will be reduced by the amount
of the old plan premium if the new plan is not accepted.
(12) Name and home office address of the new and old insurer, as well as
the address and phone number for the customer services office for Illinois
insureds.
(13) The effective date of the new coverage.
(14) Whether premium rates under the new plan are guaranteed.
(15) Material differences, if any between the new plan and the old plan.
(b) Any insurer which fails to provide the written notice required by
subsection (a) at least 30 days prior to the effective date of the new
coverage shall notify the debtor, in writing, that he has the right to an
unconditional refund of all premiums paid for the new coverage as long as
he exercises that right, in writing, within 30 days from that notification.
(Source: P.A. 86-378.)
(215 ILCS 5/1310) (from Ch. 73, par. 1065.1010)
Sec. 1310. 
		Compensation. 
		No sponsorship fees, or other special fees
designed to induce their participation, shall be paid to a financial
institution in connection with any mortgage consolidation, and any
compensation paid to either the financial institution or any of its
representatives shall be only in accordance with Section 151 and all other
applicable provisions of this Code.
(Source: P.A. 86-378.)
(215 ILCS 5/1311) (from Ch. 73, par. 1065.1011)
Sec. 1311. 
		
		No group policy or group certificate of mortgage insurance
used in connection with a consolidation, nor any application, endorsement
or rider which becomes a part of any such group policy or certificate, may
be issued or delivered in this State until a copy of the form has been
filed with and approved by the Director.
(Source: P.A. 86-378.)
(215 ILCS 5/1312) (from Ch. 73, par. 1065.1012)
Sec. 1312. 
		
		The Director is authorized to adopt such rules governing
mortgage insurance consolidations as he deems necessary to implement or
enforce this Article.
(Source: P.A. 86-378.)