Section R20-6-604. Definitions

The definitions in A.R.S. § 20-1603 and this Section apply to R20- 6-604 through R20-6-604.10.

“Actual loss ratio” means incurred claims divided by earned premiums at rates in use.

“Actuarially equivalent” means of equal actuarial present value determined as of a given date with each value based on the same set of actuarial assumptions. When used in this Arti- cle in reference to rates and coverage, “actuarially equivalent” means a rate or coverage that is actuarially determined to yield loss ratios of 50% for credit life insurance and 60% for credit disability insurance.

“Credit insurance” means credit life insurance, credit disabil- ity insurance, or both, but does not include any insurance for which there is no identifiable charge.

“Earned premiums” means earned premiums at prima facie rates and earned premiums at rates in use.

“Earned premiums at prima facie rates” means an insurer’s actual earned premiums, adjusted to the amount that the insurer would have earned if the insurer’s premium rates had equaled the prima facie rates in effect during the experience period.

“Earned premiums at rates in use” means the premiums that an insurer actually earns on the premium rates the insurer charges during an experience period.

“Evidence of individual insurability” means information about a debtor’s health status or medical history that a debtor pro- vides as a condition of credit insurance becoming effective.

“Experience” means an insurer’s earned premiums and incurred claims during an experience period.

“Experience period” means a period of time for which an insurer reports income and expense information on the insurer’s credit insurance business.

“Final adjusted rates” means the prima facie rates referred to in R20-6-604.04 and R20-6-604.05, subject to any deviations approved under R20-6-604.08.

“Gross debt” means the sum of the remaining payments that a debtor owes a creditor.

“Identifiable charge” means a charge for credit insurance that is imposed on a debtor with credit insurance but not on a debtor without credit insurance, and includes a charge for insurance that is  disclosed in  the credit  or other financial instrument furnished to the debtor, which sets forth the finan- cial elements of a credit transaction, and any difference in finance, interest, service charges, or other similar charges made to a debtor in like circumstances except for the debtor’s status as insured or noninsured.

“Incurred claims” means the total claims an insurer pays during an experience period, adjusted for the change in the claim reserves.

“Net debt” means the amount necessary to liquidate a debt in a single lump-sum  payment excluding unearned interest and other unearned finance charges.

“Plan of credit insurance” means an insurance plan based on one of the following rate and coverage categories:

Credit life insurance, other than on revolving accounts, including joint and single life coverage, decreasing and level insurance, and outstanding balance and single pre- mium;

Credit life insurance on revolving accounts; Credit life insurance on an age-graded basis;

Credit disability insurance, other than on revolving accounts, including outstanding balance and single pre- mium, and each combination of waiting period and retro- active or non-retroactive benefits;

Credit disability insurance on revolving accounts, includ- ing each combination of waiting period and retroactive or non-retroactive benefits.

“Preexisting condition” means a condition:

For which a debtor received medical advice, consultation, or treatment within six months before the effective date of credit insurance coverage; and

From which the debtor dies, in the case of life insurance, or becomes disabled, in the case of disability insurance, within six months after the effective date of coverage.

“Prima facie adjusted loss ratio” means incurred claims divided by earned premiums at prima facie rates.

“Prima facie rates” means the rates established by the Director as prescribed in R20-6-604.03.

“Reasonableness standard” means the requirement in A.R.S. § 20-1610(B) that an insurer’s premiums for credit insurance shall not be excessive in relation to the benefits provided under the policy.

“Rule of Anticipation” means the product of the gross single premium per $100 of indebtedness for a debtor’s remaining term of indebtedness, times the number of hundreds of dollars of remaining indebtedness.

Historical Note

Former General Rule 70-22; Correction, original publica- tion did not include Exhibit C (Supp. 76-1). Amended effective January 8, 1980 (Supp. 80-1). Former Section R4-14-604 repealed, new Section R4-14-604 adopted effective April 1, 1982. See subsection (N) for further detail (Supp. 82-2). Amended subsection (N) and Exhibit A effective March 30, 1983 (Supp. 83-2). R20-6-604 recodified from R4-14-604 (Supp. 95-1). Section repealed; new Section made by final rulemaking at 8

A.A.R. 2725, effective June 7, 2002 (Supp. 02-2).