Installment Fee Plan Filing Requirements

DATE: July 17, 2000

RE: Installment Fee Plan Filing Requirements

In accordance with the authority set forth in Chapter 13 of Title 27, Code of Alabama

1975, property, casualty and surety insurers are required to file with this Department

a copy of any and all insurance rules and rate manuals, etc., prior to using them

in this state. These filings are deemed approved as filed if not disapproved by

this Department within thirty (30) days of our receipt of the filing.

The Department has regulatory jurisdiction and authority to promulgate regulations

and bulletins regarding premium installment fee plans. Until now, the Department

has never issued any such regulations or bulletins. Historically, the Department

has reviewed premium installment plans submitted by insurers, but the Department

has informed insurers only on a case-by-case basis of its position regarding the

review of filings for installment payment fees.

This bulletin shall serve as official notice to all property, casualty and surety

insurers that the filing requirement set forth in Chapter 13 also includes premium

installment fee plans insurers may offer their policyholders as an alternative to

the advance payment of the entire annual or semi-annual premium. These fees are

to be considered premium for purposes of premium tax and rate making. Installment

fees should be disclosed in rate submissions for the same number of years as premium,

loss and expense data.

Additionally, this Department requires the disclosure of the minimum premium to

which the installment fee option may be applicable

e fees are

to be considered premium for purposes of premium tax and rate making. Installment

fees should be disclosed in rate submissions for the same number of years as premium,

loss and expense data.

Additionally, this Department requires the disclosure of the minimum premium to

which the installment fee option may be applicable. In reviewing these rate filings

for reasonableness, the Department applies the same standard applicable to premium

finance companies under Section 27-40-9, Code of Alabama 1975. Thus, the installment

fee can be a maximum of $9.00 per $100.00 per annum plus an additional charge not

to exceed $15.00 per policy. The formulas that may be used to determine the minimum

premium after downpayment for this purpose are as follows:

In the case of an annual policy:

((Installment fee x # of installments) - $15.00) / 0.09 = minimum premium after

downpayment

In the case of a semi-annual policy:

((Installment fee x # of installments) - $15.00) / 0.045 = minimum premium after

downpayment

Please make sure when filing your installment fee schedule that all the following

components are indicated in the final printed manual: number of installments, installment

fee amount, policy term, and minimum premium after downpayment allowed under your

plan.

Installment fee plans currently in use, which have not been approved, must be submitted

for approval within thirty (30) days.