Mississippi Administrative Code › Title 19 - Department of Insurance › Part 2 - Life Insurance › Chapter 10 - (89-102) Regulation of Certain Payments with Respect to Credit Life and Credit Disability Insurance › Rule 19-2-10.02 - Purpose

Current through June 25, 2024
The Commissioner is aware of the decision of the Mississippi
				  Supreme Court in
Tew vs. Dixieland Finance, Inc.,
527
				  So. 2d 665 (Miss. 1988), in which the Court addressed certain issues concerning
				  the licensing of agents to write credit life and credit disability insurance
				  and payments made in connection with writing such insurance. The Court stated
				  that it was delaying the effect of its decision with respect to those issues
				  until July 1, 1989, in order to provide the executive and legislative branches
				  of the government of the State of Mississippi with an opportunity to take
				  measures to resolve what the Court considered to be inconsistencies in the
				  statutes and regulations concerning the licensing of agents and payment of
				  compensation with respect to credit life and credit disability insurance. The
				  purpose of this Regulation is to clarify and regulate what persons or entities
				  may receive compensation payments made in connection with the issuance of
				  credit life and credit disability insurance and/or the manner in which such
				  payments may be received by licensed agents, creditors, corporations or other
				  persons or entities involved in credit transactions.
Mississippi Code Annotated, Section 83-17-105 states that "no
				  insurer or agent doing business in this state shall pay, directly or
				  indirectly, any commission or any other valuable consideration to any person
for services as an agent
within this state unless such
				  person shall hold a currently valid license and certificate of authority to act
				  as an agent, as required by the laws of this State (emphasis added)."
				  Mississippi Code Annotated, Section
				  83-17-7
				  contains a similar prohibition. Mississippi Code Annotated, Section
				  83-17-101(a), however, states that "the possessor of an insurable interest in
				  any risk or subject of insurance shall not be deemed an agent by reason of
				  procuring or maintaining, or agreeing to procure or maintain, insurance
				  extending to such interests, together with the interest or interests of others
				  in such risk or subject of insurance, however the cost may be borne." The
				  Mississippi Legislature clearly contemplated that creditors can receive
				  compensation from the sale of credit insurance. Mississippi Code Annotated,
				  Section
				  83-53-25
				  makes this fact clear. The Commissioner interprets these four sections together
				  and has determined that the prohibitions contained in Mississippi Code
				  Annotated, Sections
				  83-17-7
				  and 83-17-105 do not apply in certain contexts involving credit
				  insurance.
Many creditors offer credit insurance in connection with sale
				  or lease transactions in which the creditor to a purchaser or lessee of goods
				  or in connection with transactions in which the creditor makes a loan to a
				  borrower. Credit life insurance is designed to "pay off the loan obligation if
				  the insured borrower or co-borrower dies. Credit disability insurance provides
				  a monthly benefit equal to the loan's monthly payment if the primary borrower
				  is disabled." Fagg,
Credit Life and Disability
				  Insurance
, XIV (1986). These creditors are required by law to
				  offer credit insurance only through employees or other agents of the creditor
				  licensed to write such insurance. By its nature, credit insurance is designed
				  to protect both the creditor and the borrower from the risk of the borrower's
				  death or disability. The creditor's interest in the transaction is that the
				  extension of credit be repaid. Therefore, the Commissioner finds that the
				  creditor in a credit transaction is the possessor of an insurable interest. The
				  Commissioner further finds that the purchase and sale of credit insurance in
				  connection with such a credit transaction is designed to protect the creditor's
				  insurable interest in the transaction as well as the insurable interest of the
				  debtor in the credit transaction. The Commissioner also finds that payments of
				  compensation by a licensed employee or other agent of a creditor in a credit
				  transaction to the creditor are not payments made in violation of Mississippi
				  Code Annotated, Sections
				  83-17-7
				  and 83-17-105; such payments are not made to the creditor for the creditor's
				  "service as an agent" since the creditor is not acting as an agent when
				  procuring or arranging to procure insurance to protect its own insurable
				  interest as provided by Mississippi Code Annotated, Section 83-17-101(a). Many
				  lending institutions and other entities covered by the Lending Institutions Act
				  (Mississippi Code Annotated, Section 83-17-227 through 83-17-233) offer credit
				  insurance in connection with loans and other credit transactions. Such an
				  institution or entity is a creditor in a credit transaction and the possessor
				  of an insurable interest. As noted above, Mississippi Code Annotated, Section
				  83-17-229 provides that "the employees or officers of a lending institution or
				  holding company, may be licensed to sell credit life, health and accident
				  insurance for and on behalf of his employer in accordance with regulations
				  promulgated by the insurance commissioner." Pursuant to this regulatory
				  authority, the Commissioner finds that the "for and on behalf" language
				  authorizes a lending institution or holding company, to receive compensation in
				  connection with the sale of credit insurance without being licensed to sell
				  such insurance, provided an officer or employee of the lending institution or
				  holding company or a subsidiary or affiliate of the lending institution or
				  holding company is licensed to sell such insurance. The Commissioner also finds
				  that the prohibitions contained in Mississippi Code Annotated, Sections
				  83-17-7
				  and 83-17-105 do not apply to such lending institutions, holding companies,
				  subsidiaries or affiliates meeting the above standard.
Miss. Code Ann. §
										83-53-29
				  (Rev. 2011)