A. As used in this section: 1. “Administrator” means the person who may be responsible for the administrative or operational function of vehicle value protection agreements including, but not limited to, the adjudication of claims or benefits requested by contract holders; 2. “Contract holder” means a person who is the purchaser or holder of a vehicle value protection agreement; 3. “Provider” means a person that is obligated to provide a benefit under a vehicle value protection agreement. A provider may perform as an administrator or retain the services of a third-party administrator; and 4. “Vehicle value protection agreement” means a contractual agreement that provides a benefit towards either the reduction of some or all of the contract holder’s current finance agreement deficiency balance, or towards the purchase or lease of a replacement motor vehicle or motor vehicle services, upon the occurrence of an adverse event to the motor vehicle including, but not limited to, loss, theft, damage, obsolescence, diminished value, or depreciation. These agreements do not include debt waivers. These agreements may include, but not be limited to, trade-in-credit agreements, diminished value agreements, depreciation benefit agreements, or other similarly named agreements. B. 1. No administrator or provider operating as an administrator shall perform or engage in any administrative or operational functions of vehicle value protection agreements without first registering with the Insurance Department. Registration shall be renewed annually by July 15 of each calendar year. All registrations shall be filed and fees shall be paid electronically in the manner and form prescribed by the Insurance Commissioner. 2. An administrator or a provider operating as an administrator shall electronically file an updated registration within thirty (30) days of any change of name, address, or email address. 3. Every administrator and provider, upon receipt of any inquiry from the Commissioner, shall furnish the Commissioner with an adequate response to the inquiry within twenty (20) days from the date of receipt of the inquiry. C. Requirements for offering vehicle value protection agreements: 1. A provider may utilize an administrator or other designee to be responsible for any and all of the administration of vehicle value protection agreements in compliance with Section 140.2 et seq. of this title; 2. Vehicle value protection agreements shall not be sold unless the contract holder has been or will be provided access to a copy of that vehicle value protection agreement; 3. In order to assure the faithful performance of the provider’s obligations to its contract holders, each provider shall be responsible for complying with the requirements of one of the following: a. insure all of its vehicle value protection agreements under an insurance policy that covers one hundred percent (100%) of its claim exposure, satisfies the requirements of this act, and contains the following provision: “In the event the provider is unable to fulfill its obligations under vehicle value protection agreements issued in this state for any reason including insolvency, bankruptcy, or dissolution, the insurer will pay any losses and unearned fees to the person making a claim under such agreement.” The insurance policy shall be issued by an insurer licensed, registered, or otherwise authorized to do business in this state either: (1) at the time the policy is filed with the Insurance Commissioner, and continuously thereafter, (i) maintain surplus as to policyholders and paid-in capital no less than Fifteen Million Dollars ($15,000,000.00) and (ii) annually file copies of the insurer’s financial statements, its National Association of Insurance Commissioners (NAIC) Annual Statement, and the actuarial certification required by and filed in the insurer’s state of domicile, or (2) at the time the policy is filed with the Commissioner, and continuously thereafter, (i) maintain surplus as to policyholders and paid-in capital of less than Fifteen Million Dollars ($15,000,000.00) but at least equal to Ten Million Dollars ($10,000,000.00), (ii) demonstrate to the satisfaction of the Commissioner that the company maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not greater than 3 to 1, and (iii) annually file copies of the insurer’s audited financial statements, its NAIC Annual Statement, and the actuarial certification required by and filed in the insurer’s state of domicile, b. (1) maintain a funded reserve account for its obligations under its contracts issued and outstanding in this state. The reserves shall not be less than forty percent (40%) of gross considerations received, less claims paid, on the sale of the vehicle value protection agreement for all in-force contracts. The reserve account shall be subject to examination and review by the Commissioner, and (2) place in trust with the Commissioner a financial security deposit, having a value not less than five percent (5%) of the gross consideration received, less claims paid, on the sale of the vehicle value protection agreements for all vehicle value protection agreements issued and in force, but not less than Twenty-five Thousand Dollars ($25,000.00), consisting of the following: (a) a surety bond issued by an authorized surety, (b) securities of the type eligible for deposit by authorized insurers in this state, (c) a letter of credit issued by a qualified financial institution, or (d) another form of security prescribed by regulations issued by the Commissioner, or c. (1) maintain, or together with its parent company maintain, a net worth or stockholders’ equity of One Hundred Million Dollars ($100,000,000.00), and (2) upon request, provide the Commissioner with a copy of the provider’s or the provider’s parent company’s most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission (SEC) within the last calendar year, or if the company does not file with the SEC, a copy of the company’s audited financial statements, which shows a net worth of the provider or its parent company of at least One Hundred Million Dollars ($100,000,000.00). If the provider’s parent company’s Form 10-K, Form 20-F, or financial statements are filed to meet the provider’s financial security requirement, then the parent company shall agree to guarantee the obligations of the provider relating to the vehicle value protection agreements sold by the provider in this state; and 4. Except for the requirements in paragraph 3 of subsection C of this section, no other financial security requirements shall be required for vehicle value protection agreement providers. D. Vehicle value protection agreements shall disclose in writing and in clear, understandable language the following: 1. The name and address of the provider, contract holder, and administrator, if any; 2. The terms of the vehicle value protection agreement including without limitation, the purchase price to be paid by the contract holder, the requirements for eligibility, conditions of coverage, or exclusions; 3. That the vehicle value protection agreement may be canceled by the contract holder within a free look period as specified in the vehicle value protection agreement, and in such an event, the contract holder shall be entitled to a full refund of the purchase price paid by the contract holder, if any, as long as no benefits have been provided; 4. The procedure the contract holder shall follow, if any, to obtain a benefit under the terms and conditions of the vehicle value protection agreement including, if applicable, a telephone number or website and address where the contract holder may apply for a benefit; 5. Whether or not the vehicle value protection agreement is cancelable after the free look period and the conditions under which it may be canceled including the procedures for requesting any refund of the unearned purchase price paid by the contract holder; 6. In the event of cancelation, the methodology for calculating any refund of the unearned purchase price of the vehicle value protection agreement due; 7. That neither the extension of credit, the terms of the credit, nor the terms of the related motor vehicle sale or lease may be conditioned upon the purchase of the vehicle value protection agreement; and 8. Vehicle value protection agreements shall state the terms and restrictions, or conditions governing cancelation of the vehicle value protection agreement prior to the termination or expiration date of the vehicle value protection agreement by either the provider or the contract holder. The provider of the vehicle value protection agreement shall mail a written notice to the contract holder at the last known address of the contract holder contained in the records of the provider at least five (5) days prior to cancelation by the provider. Prior notice shall not be required if the reason for cancelation is nonpayment of the provider fee, a material misrepresentation by the contract holder to the provider or administrator, or a substantial breach of duties by the contract holder relating to the covered product or its use. The notice shall state the effective date of cancelation and the reason for the cancelation. If a vehicle value protection agreement is canceled by the provider for a reason other than nonpayment of the provider fee, the provider shall refund the contract holder one hundred percent (100%) of the unearned pro rata provider fee paid by the contract holder, if any. If coverage under the vehicle value protection agreement continues after a claim, then any refund may deduct claims paid. A reasonable administrative fee may be charged by the provider not to exceed Seventy-five Dollars ($75.00). E. Subsection D of this section and Section 140.6 of this title shall not apply to vehicle value protection agreements offered in connection with a commercial transaction.
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