Nebraska Department of Insurance

The Nebraska Credit Insurance Act, Neb.Rev.Stat. §§44-1701 thr ough 44-1713, provides that benefits must be reasonable in relation to the premium charged. The Director has published credit insurance rates, and may from time to time publish new rates. Effective January 1, 1994, such rates are conclusively presumed to be reasonable in relation to the benefits only when the total compensation paid to the creditor and/or received by the creditor does not exceed 30% of the premium. Therefore, effective January 1, 1994, no insurer and/or agent shall separately or jointly pay or promise to pay to a creditor compensation of more than 30% of the premium; nor shall a creditor request or receive compensation in an amount exceeding 30% of the premium.

For the purpose of determining violations of the insurance code, the following definitions shall apply:

1. "Compensation" means money or anything else of value paid directly or indirectly. Compensation includes, but is not limited to the following items paid, directly or indirectly, by or on behalf of the insurer, or its agent, general agent, or by a subsidiary, parent, or affiliate of the insurer or subsidiary of the parent of the insurer or by any other person to or on behalf of a creditor;
   
   
   1. All commissions paid or allowed;
      
      
   2. Service fees; consulting fees paid or credited within or outside this State in relation to business produced or to be produced or written or to be written in this State; electronic data processing equipment or services; calculators, supplies (other than forms approved by the Department and the usual claims and reporting forms and envelopes for transmitting such claims and brochures, rate books, and rate charts); rental equipment of any type; advertising; telephone provided at a charge less than the usual cost; profit sharing plans; experience rating refunds; experience rating credits; dividends; expense allowances; and stock plans or bonuses;
      
      
   3. All benefits such as items or merchandise, travel, rewards, bonuses, trading stamps, script, prizes, conventions, vacations, trips and the like for the benefit of the creditor or employees of the creditor;
      
      
   4. Maintaining interest-free deposits or low-interest deposits with a creditor in order to acquire or maintain any creditor's insurance business or allowing the creditor to have the use of premiums collected by the creditor for undue periods of time at low or no interest rate;
      
      
   5. An insurance company may invest in Certificates of Deposit or interest bearing accounts with financial institutions which are the purveyors of its credit insurance if the interest paid on such Certificate of Deposit or such accounts is at least equal to that being paid by the financial institution on Certificates of Deposit or such accounts to other investors on the open market.
      
      
   6. Premiums received by a creditor or an agent must be actually remitted to the insurance company (and not just deposited to a company, agency, or agent account) within 45 days from the end of the month in which the premiums were received.
      
      
2. "Credit insurance" means both credit life insurance and credit accident and health insurance as defined in Neb.Rev.Stat. §44-1702.
   
   
3. "Creditor" shall mean lender of money or vender or lessor of goods, services, property, rights or privileges for which payment is arranged through a credit transaction or the successor to the right, title or interest of any such lender, vendor, or lessor, and an affiliate, associate, or subsidiary or any of them or any director, officer, or employee of any of them or any other person in any way associated with any of them.
   
   
4. "Director" shall mean the director of the Department of Insurance of the State of Nebraska.
   
   
5. "Premium" means the cost or charge for credit insurance based upon the rates established by the Director as reasonable in relation to the premium charged.
   
   

Under no circumstances will this Department consider a creditor, or any director, officer, employee or five percent (5%) beneficial stock owner of any agency or creditor as a bona fide general agent to whom an override compensation commission, salary, dividend or other payment may be made; nor shall any general agent make a payment to any such person whereby such person will receive in excess of thirty percent (30%) of said premium. All companies are responsible for the conduct of their agents and shall maintain internal procedures to actually determine the compliance of their agents to this provision.

Payment of compensation in excess of thirty percent (30%) as stated herein shall be prima facie evidence of violations of Neb.Rev.Stat. §44-1701 through 44-1713, 44-101, 44-360 44-361 and 44-1525.

WILLIAM H. MCCARTNEY

DIRECTOR OF INSURANCE