Sec. 185.8. Premium refunds

(a) Each individual policy of credit life insurance and credit accident and health insurance on which the premium is paid by the debtor and each group certificate or statement of group insurance for which an identifiable charge is made to the debtor shall provide that, in the event of termination of the insurance prior to the scheduled maturity date of the indebtedness, any refund of premium or identifiable charge due shall be paid or credited promptly to the debtor.

(b) If a creditor requires a debtor to pay the premium or an identifiable charge for credit life insurance and credit accident and health insurance and such insurance is declined by the insurer or otherwise does not become effective, the insurer or creditor shall immediately give written notice to such debtor and shall promptly arrange for refund or credit to the debtor of any premium or identifiable charge so paid for such insurance.

(c) In the case of credit life or accident and health insurance, a refund of premium or identifiable charge shall be made for any portion of premium or charge actually charged to the debtor which provides coverage for any period of insurance ending beyond any one of the following:

(1) the date on which termination of insurance becomes effective;

(2) in the case of monthly installment, the installment due date nearest the date of termination;

(3) the date based on a procedure allowed by the Banking Law and used for determining any unearned interest on the loan; or

(4) the date based on any other procedure filed by the insurer and approved by the superintendent.

Termination shall include termination for any reason, except death in the case of credit life insurance where the premium has been discounted for mortality as described in section 185.7(c)(4)(i) of this Part. For each period of insurance for which a refund is due, such refund shall be equal to the premium for the portion of the period of insurance after the termination date. The premium for each such period of insurance shall be calculated using the same assumptions that were used to calculate the premium or identifiable charge. Each insurer shall file for approval and include in the policy appropriate formulas and/or factors for refund, or reference to such formulas and/or factors as are on file with the superintendent. No refund or credit is required if the amount is less than one dollar.

(d) An insurer may file for approval alternative methods of calculating refunds, which will be approved by the superintendent if they produce results comparable to the refund produced by the method described in subdivision (c) of this section.

(e) An insurer shall promptly refund to an individual policyholder and refund or credit to a group policyholder any refund of premium due on termination of insurance prior to the scheduled maturity date of the indebtedness, and a group policyholder or creditor shall promptly refund or credit to the debtor any refund due pursuant to this section. Insurers shall be responsible for conducting a periodic review of creditor accounts to assure that procedures are in place for such refunds or credits to be made.