AN ACT to make changes to the credit insurance laws to define "critical period coverage"; clarify the appropriate refund of premiums method when a policy or group certificate is terminated prior to the scheduled maturity date of the subject debt; allow credit card coverage from out‑of‑state financial institutions; provide that insurers must acknowledge to the claimant any claims not paid within thirty days; clarify that insurers can require registration with the state unemployment office and provision of an official state unemployment office decision letter regarding the claim to qualify for credit unemployment insurance benefits under the policy but cannot impose a time limit on that registration; and provide the commissioner of insurance with the authority to enforce the laws governing credit insurance consistent with the commissioner's general enforcement authority as set forth in chapter 58 of the general statutes.

The General Assembly of North Carolina enacts:

SECTION 1.  G.S. 58‑57‑5 is amended by adding a new subdivision to read:
"(5a)	"Critical period coverage" means insurance coverage for which benefits are limited to a stated number of payments or the payments end with the expiration of the policy, whichever is less."
SECTION 2.  G.S. 58‑57‑50(b) reads as rewritten:
"(b)	The refund of premiums for decreasing term credit life insurance shall be the actuarial method of calculating refunds which produces a refund equal to the original premium multiplied by the ratio of the sum of the remaining insured balances divided by the sum of the original insured balances as of the due date nearest the date of prepayment in full. The refund of premiums for single interest credit property insurance and single interest physical damage insurance shall be equal to the amount computed by the sum of digits formula known as the "Rule of 78."   The refund of premiums for level term credit life insurance and dual interest credit property insurance and dual interest physical damage insurance shall be equal to the pro rata unearned gross premiums."
SECTION 3.  G.S. 58‑57‑55 reads as rewritten:
"§ 58‑57‑55.  Issuance of policies.
All policies of credit life insurance and credit accident and health insurance shall be issued only by an insurer authorized to do business in this State and shall be issued only through holders of licenses or authorizations issued by the Commissioner. With the exception of credit insurance issued in accordance with G.S. 58‑57‑105, all policies of credit life insurance and credit accident and health insurance shall be delivered or issued for delivery in this  State. The enrollment of debtors under a group policy issued to a creditor and authorized under this Article shall not constitute the issuance of a policy of insurance."
SECTION 4.  G.S. 58‑57‑60 is amended by adding a new subsection to read:
"(d)	A claim acknowledgment shall be sent to the claimant within 30 days after receiving written or electronic notice of the claim. Acknowledgment shall include one of the following:
(1)	A statement made to the insured or the claimant advising that the claim is being investigated.
(2)	Payment of the claim.
(3)	A bona fide written offer of settlement.
(4)	A written denial of the claim."
SECTION 5.  G.S. 58‑57‑110 reads as rewritten:
"§ 58‑57‑110.  Credit unemployment insurance rate standards; policy provisions.
(a)	Each year the Commissioner shall prescribe a minimum incurred loss ratio standard requirement to develop a premium rate reasonable in relation to the benefits provided by credit unemployment insurance coverage. The following requirements must be met:
(1)	Coverage is provided or offered, with or without underwriting, to all debtors regardless of age who are working for salary, wages, or other employment income for at least 30 hours per week and have done so for 12 consecutive  months.
(2)	Coverage sets forth a definition of involuntary unemployment as a loss of employment income that may include, but is not limited to, loss caused by layoff, general strike, termination of employment, or  lockout.
(3)	Coverage does not contain any exclusion except: debts with irregular monthly payments; voluntary forfeiture of salary, wages, or other employment income; resignation; retirement; sickness, disease, or normal pregnancy; or loss of income due to termination as a result of willful misconduct that is a violation of some established, definite rule of conduct, a forbidden act, or willful dereliction of duty, or criminal misconduct.
(4)	Eligibility for benefits may be based upon registration with the State unemployment office but shall not be limited by any provision requiring registration within a specified time. An insurer may require the insured to provide a copy of the official State unemployment office decision letter regarding the claim for State unemployment benefits in order to qualify for benefits. The official State unemployment office decision letter may only be used to deny a claim for benefits under the credit unemployment coverage if the letter cites a reason listed in G.S. 58‑57‑110(a)(3).
(b)	The Commissioner may approve other policy provisions and coverages consistent with the purposes of unemployment coverage.
(c)	Joint coverage rates for credit unemployment insurance shall be one and two‑thirds (1 2/3) times the approved single rate of coverage."
SECTION 6.  Article 67 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58‑57‑71.  Enforcement and penalties.
(a)	The Commissioner may, after notice and opportunity for a hearing, impose civil penalties or petition for restitution under G.S. 58‑2‑70, revoke, suspend, or restrict the license of any insurer if:
(1)	The insurer fails or refuses to comply with any law, order, or rule applicable to the insurer.
(2)	The insurer's financial condition is unsound, or its assets above its liabilities, exclusive of capital, are less than the amount of its capital or required minimum surplus.
(3)	The insurer has published or made to the Department or to the public any false statement or report.
(4)	The insurer or any of the insurer's officers, directors, employees, or other representatives refuse to submit to any examination authorized by law or refuse to perform any legal obligation in relation to an examination.
(5)	The insurer is found to make a practice of unduly engaging in litigation or of delaying the investigation of claims or the adjustment or payment of valid claims.
(b)	Any suspension, revocation, or refusal to renew an insurer's license under this section may also be made applicable to the license or registration of any individual regulated under this Chapter who is a party to any of the causes for licensing sanctions listed in subsection (a) of this section.
(c)	The Commissioner may impose a civil penalty under G.S. 58‑2‑70 if an insurer fails to acknowledge a claim within 30 days after receiving written or electronic notice of the claim, but only if the notice contains sufficient information for the insurer to identify the specific coverage involved. Acknowledgment of the claim shall be one of the following:
(1)	A statement made to the claimant or to the claimant's legal representative advising that the claim is being investigated.
(2)	Payment of the claim.
(3)	A bona fide written offer of settlement.
(4)	A written denial of the claim. With respect to a claim under an accident, health, or disability policy, if the acknowledgment sent to the claimant indicates that the claim remains under investigation, within 45 days after receipt by the insurer of the initial claim, the insurer shall send a claim status report to the insured and every 45 days thereafter until the claim is paid or denied. The report shall give details sufficient for the insured to understand why processing of the claim has not been completed and whether the insurer needs additional information to process the claim. If the claim acknowledgment includes information about why processing of the claim has not been completed and indicates whether additional information is needed, it may satisfy the requirement for the initial claim status report.
(d)	If a foreign insurance company's license is suspended or revoked, the Commissioner shall cause written notification of the suspension or revocation to be given to all of the company's agents in this State. Until the Commissioner restores the company's license, the company shall not write any new business in this State.
(e)	The Commissioner may, after considering the standards under G.S. 58‑30‑60(b), restrict an insurer's license by prohibiting or limiting the kind or amount of insurance written by that insurer. For a foreign insurer, this restriction relates to the insurer's business conducted in this State. The Commissioner shall remove any restriction under this subsection once the Commissioner determines that the operations of the insurer are no longer hazardous to the public or the insurer's policyholders or creditors."
SECTION 7.  G.S. 58‑57‑70 and G.S. 58‑57‑80 are repealed.

SECTION 8.  This act becomes effective January 1, 2006, and applies to policies or certificates issued or renewed on or after that date.
In the General Assembly read three times and ratified this the 7th day of July, 2005.

	s/	 Beverly E. Perdue
	 President of the Senate

	s/	 James B. Black
	 Speaker of the House of Representatives

	s/	 Michael F. Easley
	 Governor

Approved 8:31 p.m. this 12th day of July, 2005