Non-cooperation on Audit / Premium Service
(Issued upon February 24, 2000)
To: Property and Casualty Insurers
From: Mr. Ernst N. Csiszar, Director
Subject: Non-cooperation on Audit / Premium Service
It has been brought to my attention that abuses are occurring with respect to property and casualty policies that contain provisions that make them auditable. Several abuses are addressed in this bulletin.
One abuse is insurers who attempt to audit a policy that has been cancelled mid-term and are not able to obtain an audit through non-cooperation of the insured, therefore, the insurer keeps the unearned premium. Unless there is evidence that the insured has misrepresented information on his application, the unearned premium must be returned. This includes situations where the premium is financed through a premium finance company.
A second abuse involves insurers who receive a mid-term request for cancellation and do not attempt to complete an audit within a reasonable amount of time. Insurer's must complete audits quickly. Any delay of more than 90 days will be considered unreasonable unless there are extenuating circumstances.
Another abuse is not directly related to auditable policies and the abuse involves not accepting premium finance contracts on policies. This is prohibited by South Carolina Code of Laws 38-5-200 which reads as follows:
(A) An insurer, its agent, or an insurance broker doing business in this State may not require a person to use a particular insurance premium finance company or other installment plan for which a finance charge or other fee in connection with an installment payment has been or will be imposed. (B) An insurer, its agent, or an insurance broker doing business in this State may not refuse to issue a policy of insurance solely because the premiums for the policy have been advanced by a premium finance company licensed in this State. (C) An insurer or its agent doing business in this State shall not reduce commission or intimidate or retaliate against a producer, agent, broker, or insured who uses premium financing by denying the producer, agent, broker, or insured the same rights accorded producers, agents, brokers, or insureds who pay premiums in a different manner.
(A) An insurer, its agent, or an insurance broker doing business in this State may not require a person to use a particular insurance premium finance company or other installment plan for which a finance charge or other fee in connection with an installment payment has been or will be imposed.
(B) An insurer, its agent, or an insurance broker doing business in this State may not refuse to issue a policy of insurance solely because the premiums for the policy have been advanced by a premium finance company licensed in this State.
(C) An insurer or its agent doing business in this State shall not reduce commission or intimidate or retaliate against a producer, agent, broker, or insured who uses premium financing by denying the producer, agent, broker, or insured the same rights accorded producers, agents, brokers, or insureds who pay premiums in a different manner.
Any insurer with questions regarding premium finance contracts and this bulletin should contact the Department of Insurance. The contact is Ms. Nancy Hoffman, Casualty Actuary, P.O. Box 100105, Columbia, SC 29202, phone 803-837-6230, facsimile 803-737-6233, e-mail nhoffman@doi.sc.gov.
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