HB1554: HB1554 Collateral Protection Insurance Act; enact

26 LC 46 1509 House Bill 1554 By: Representatives Howard of the 71st, New of the 40th, Huddleston of the 72nd, and Smith of the 18th A BILL TO BE ENTITLED AN ACT To amend Chapter 24 of Title 33 of the Official Code of Georgia Annotated, relating to1 insurance generally, so as to provide for collateral protection insurance; to provide for2 legislative intent; to provide for applicability; to provide fo r definitions; to provide for3 requirements for collateral protection insurance policy terms; to provide for restrictions on4 insurance charges made to mortgagors; to provide for the calcul ation of coverage and5 premiums; to require certain excess replacement cost coverage to be paid to the mortgagor;6 to prohibit insurers from writing collateral insurance having c ertain premium rates; to7 prohibit certain practices by insurers and insurance agents; to provide for certain8 requirements for the delivery and contents of policies or certificates of collateral protection9 insurance; to specify requirements for the filing of policy forms and rates; to require certain10 insurers to file annual reports with the Department of Insuranc e; to provide for statutory11 construction; to provide for related matters; to provide for a short title; to provide for an12 effective date and applicability; to repeal conflicting laws; and for other purposes.13 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:14 SECTION 1.15 This Act shall be known and may be cited as the "Collateral Protection Insurance Act."16 H. B. 1554 - 1 - 26 LC 46 1509 SECTION 2.17 Chapter 24 of Title 33 of the Official Code of Georgia Annotate d, relating to insurance18 generally, is amended by adding a new article to read as follows:19 "ARTICLE 520 33-24-130.21 (a) It is the intention of the General Assembly: 22 (1) To promote the public welfare by strengthening this state's laws governing collateral23 protection insurance on real property;24 (2) To create a legal framework within which collateral protec tion insurance on real25 property shall be written in this state;26 (3) To help maintain appropriate separation between the lender s and servicers and the27 insurers and insurance agents; and28 (4) To minimize the possibility of unfair competitive practice s in the sale, placement,29 solicitation, and negotiation of collateral protection insurance.30 (b) This article applies to:31 (1) Insurers and insurance agents engaged in any mortgage tran saction involving32 collateral protection insurance; and33 (2) All collateral protection insurance written in connection with mortgaged real34 property, including manufactured and mobile homes, except:35 (A) Insurance associated with mortgage loans or other extensio ns of credit made36 primarily for business, commercial, or agricultural purposes; 37 (B) Insurance offered by the lender or servicer and elected by the mortgagor at the38 mortgagor's option;39 (C) Insurance purchased by a lender or servicer on real estate owned property; or40 H. B. 1554 - 2 - 26 LC 46 1509 (D) Insurance for which no specific charge is made to the mortgagor or the mortgagor's41 account.42 33-24-131.43 As used in this article, the term:44 (1) 'Affiliate' means any person that directly, or indirectly through one or more45 intermediaries, controls, is controlled by, or is under common control with the person46 specified.47 (2) 'Agent' has the same meaning as set forth in Code Section 33-23-1.48 (3) 'Collateral protection insurance' means commercial propert y insurance where a49 creditor is the primary beneficiary and policyholder, covering the creditor's interest in real50 or personal property following a borrower's failure to maintain required coverage;51 provided, however, that, for purposes of this article, such term applies only to mortgaged52 real property and not to personal property.53 (4) 'Individual collateral protection insurance' means coverag e for individual real54 property evidenced by a certificate of coverage under a master collateral protection55 insurance policy or a collateral protection insurance policy for individual real property.56 (5) 'Insurer' means any person engaged as an indemnitor, surety, or contractor that issues57 insurance, subscriber contracts, or other contracts of insurance by whatever name called.58 (6) 'Investor' means a person, or an affiliate thereof, holding a beneficial interest in loans59 secured by real property.60 (7) 'Lapse' means the date on which a mortgagor has failed to comply with a mortgage61 agreement's requirements to maintain valid and sufficient insurance upon mortgaged real62 property.63 (8) 'Lender' means a person, or an affiliate thereof, making loans secured by an interest64 in real property.65 (9) 'Loss ratio' means the ratio of incurred losses to earned premium.66 H. B. 1554 - 3 - 26 LC 46 1509 (10) 'Master collateral protection insurance policy' means a g roup policy issued to a67 lender or servicer which provides coverage for all loans in the lender's or servicer's loan68 portfolio as needed.69 (11) 'Mortgage agreement' means the written document setting forth an obligation or a70 liability of any kind secured by a lien on real property and du e from, owing by, or71 incurred by a mortgagor to a lender on account of a mortgage lo an, which document72 includes the security agreement, the deed of trust, other documents of similar effect, and73 any other document incorporated by reference.74 (12) 'Mortgage loan' means a residential loan intended for personal, family, or household75 use.76 (13) 'Mortgagee' means a person that holds mortgaged real prop erty as security for77 repayment of a mortgage agreement.78 (14) 'Mortgagor' means a person that is obligated on a mortgag e loan pursuant to a79 mortgage agreement.80 (15) 'Real estate owned property' means property owned or held by a lender or servicer81 as a result of a foreclosure under the related mortgage agreement or acceptance of a deed82 in lieu of foreclosure.83 (16) 'Replacement cost value' means the estimated cost to replace covered property at the84 time of loss or damage without deduction for depreciation. Suc h term does not mean85 market value but is the cost to replace covered property to its pre-loss condition.86 (17) 'Servicer' means a person, or an affiliate thereof, contractually obligated to service87 one or more mortgage loans for a lender or an investor. Such t erm includes an entity88 involved in subservicing arrangements.89 H. B. 1554 - 4 - 26 LC 46 1509 33-24-132.90 (a) Collateral protection insurance shall become effective no earlier than the date of lapse91 of insurance upon mortgaged real property subject to the terms of a mortgage agreement92 or any state or federal law requiring the same.93 (b) Individual collateral protection insurance terminates on t he earliest of the following94 dates:95 (1) The date on which insurance acceptable under the mortgage agreement becomes96 effective, subject to the mortgagor providing sufficient eviden ce of such acceptable97 insurance;98 (2) The date on which the applicable real property no longer s erves as collateral for a99 mortgage loan pursuant to a mortgage agreement;100 (3) Such other date as specified by the individual policy or certificate of insurance;101 (4) Such other date as specified by the lender or servicer; or102 (5) The termination date of the policy.103 (c) An insurance charge shall not be made to a mortgagor for c ollateral protection104 insurance before the effective date of the collateral protectio n insurance or for a term105 longer than the scheduled term of the collateral protection insurance.106 (d) The calculation of coverage and payment of premiums shall be as follows:107 (1) Any collateral protection insurance coverage, and the subs equent calculation of108 premium, shall be based upon the replacement cost value of the property, which is109 determined as:110 (A) If known to the lender or servicer, the last known coverage amount, which is the111 dwelling coverage amount set forth in the most recent evidence of insurance coverage112 provided by the mortgagee. The insurer shall inquire of the insured at least once as to113 the last known coverage amount. If the insurer is unable to ob tain the last known114 coverage amount from the insured or in another manner, the insu rer may proceed115 according to subparagraph (B) or (C) of this paragraph, as applicable;116 H. B. 1554 - 5 - 26 LC 46 1509 (B) If the last known coverage amount is unknown, the replacem ent cost of the117 property serving as collateral, as calculated by the insurer, unless the use of replacement118 cost for this purpose is prohibited by other state or federal law; and119 (C) If the last known coverage amount is unknown and the repla cement cost is not120 available or its use is prohibited by other state or federal la w, the unpaid principal121 balance of the mortgage loan;122 (2) In the event of a covered loss, any replacement cost coverage provided by an insurer123 in excess of the unpaid principal balance of the mortgage loan shall be paid to the124 mortgagor; and125 (3) An insurer may not write collateral protection insurance for which the premium rate126 differs from that determined by the schedules of the insurer on file with the department127 as of the effective date of any such policy.128 (e) An insurer or agent shall not:129 (1) Issue collateral protection insurance on mortgaged propert y that such insurer or130 agent, or an affiliate thereof, owns, performs the servicing for, or owns the servicing right131 to;132 (2) Compensate, including through the payment of commissions to, a lender, an insurer,133 an investor, or a servicer on collateral protection property insurance policies issued by the134 insurer;135 (3) Share collateral protection insurance premium or risk with the lender, investor, or136 servicer that obtained the collateral protection insurance;137 (4) Offer contingent commissions, profit sharing, or other pay ments dependent upon138 profitability or loss ratios to any person affiliated with a se rvicer or the insurer in139 connection with collateral protection insurance;140 (5) Provide free or below-cost outsourced services to lenders, investors, or servicers or141 outsource its own functions to lenders, insurance agents, inves tors, or servicers on an142 above-cost basis; or143 H. B. 1554 - 6 - 26 LC 46 1509 (6) Make any payments, including, but not limited to, the paym ent of expenses to a144 lender, an insurer, an investor, or a servicer, for the purpose of securing collateral145 protection insurance business or related outsourced services.146 (f) Collateral protection insurance shall be set forth in an individual policy or certificate147 of insurance. A copy of the individual policy, certificate of insurance, or other evidence148 of insurance coverage shall be delivered by first-class mail or in person to the last known149 address of the mortgagor, or delivered in accordance with Code Section 33-24-14. 150 Notwithstanding any other information required by general law or by rule, the individual151 policy or certificate of insurance coverage shall include the following information:152 (1) The address and identification of the insured property;153 (2) The coverage amount, or amounts if multiple coverages are provided;154 (3) The effective date of the coverage;155 (4) The term of coverage;156 (5) The premium charge for the coverage;157 (6) Contact information for filing a claim; and158 (7) A complete description of the coverage provided.159 33-24-133.160 (a) With regard to filing, approval, and withdrawal of forms and rates:161 (1) Except as otherwise provided in this article, all policy f orms and certificates of162 insurance to be delivered or issued for delivery in this state are subject to the applicable163 provisions of Code Section 33-24-9, and the schedules of premiu m rates pertaining164 thereto are subject to the applicable provisions of Code Section 33-9-21;165 (2) With respect to any analysis of rates in accordance with Code Section 33-9-21, the166 analysis must also include a determination as to whether expenses included by the insurer167 in the rate are appropriate;168 H. B. 1554 - 7 - 26 LC 46 1509 (3) Notwithstanding any provision of law to the contrary, insurers subject to this article169 shall refile collateral protection property insurance rates at least once every four years;170 (4) All insurers writing collateral protection insurance shall have separate rates for171 collateral protection insurance and voluntary insurance obtained by a mortgage servicer172 on real estate owned property; and173 (5) Upon the introduction of a new collateral protection insurance program, the insurer174 shall reference its experience in existing programs in the associated filings. This article 175 does not limit an insurer's discretion, as actuarially appropriate, to distinguish different176 terms, conditions, exclusions, eligibility criteria, or other u nique or different177 characteristics. An insurer may, where actuarially acceptable, rely upon models or, in the178 case of flood filings where applicable experience is not credib le, on National Flood179 Insurance Program data.180 (b)(1) By April 1 of each year, each insurer with at least $100,000.00 in direct written181 premium for collateral protection insurance in this state durin g the prior calendar year182 shall report to the department the following information for the prior calendar year:183 (A) Actual loss ratio;184 (B) Earned premium;185 (C) Any aggregate schedule rating debit or credit to earned premium;186 (D) Itemized expenses;187 (E) Paid losses; and188 (F) Loss reserves, including case reserves and reserves for incurred but not reported189 losses.190 The report shall be separately produced for each collateral protection insurance program191 and presented on both an individual jurisdiction and nation-wide basis.192 (2) Except in the case of collateral protection insurance cove ring the peril of flood, to193 which this subsection does not apply, if an insurer experiences an annual loss ratio of less194 than 35 percent in any collateral protection insurance program for two consecutive years,195 H. B. 1554 - 8 - 26 LC 46 1509 the insurer shall submit a rate filing, either adjusting its ra tes or supporting their196 continuance, to the department no more than 90 days after the s ubmission of the data197 required in paragraph (1) of this subsection.198 33-24-134.199 This article shall not be construed to authorize an insurance a gent or insurer solely200 underwriting collateral protection insurance to circumvent the requirements of this article. 201 Any requirement, limitation, or exclusion provided in this article applies to an insurer or202 insurance agent involved in collateral protection insurance."203 SECTION 3.204 This Act shall become effective on January 1, 2028, and shall a pply to all applicable205 insurance policies issued, delivered, issued for delivery, or r enewed on or after such date. 206 For purposes of this Act, all contracts are deemed to be renewe d no later than the first207 anniversary of the contract date.208 SECTION 4.209 All laws or parts of laws in conflict with this Act are repealed.210 H. 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