Section 407.1203

Title XXVI TRADE AND COMMERCE

Chapter 407

Effective - 01 Jan 2007, 2 histories, see footnote   (history) 

  407.1203.  Service contracts issued, when, requirements — registration, fee — faithful performance of obligations, requirements — fees not taxable — licensing requirement exemption, exception — complicance. — 1. Service contracts shall not be issued, sold, or offered for sale in this state unless the administrator or its designee has:

  (1) Provided a receipt for the purchase of the service contract to the contract holder at the date of purchase;

  (2) Provided a copy of the service contract to the service contract holder within a reasonable period of time from the date of purchase; and

  (3) Complied with the provisions of sections 407.1200 to 407.1227.

  2. All administrators of service contracts sold in this state shall file a registration with the director on a form, at a fee and at a frequency prescribed by the director.

  3. In order to assure the faithful performance of a provider's obligations to its contract holders, each provider who is contractually obligated to provide service under a service contract shall:

  (1) Insure all service contracts under a reimbursement insurance policy issued by an insurer authorized to transact insurance in this state; or

  (2) (a) Maintain a funded reserve account for its obligation under its contracts issued and outstanding in this state. The reserves shall not be less than forty percent of gross consideration received, less claims paid, on the sale of the service contract for all in-force contracts. The reserve account shall be subject to examination and review by the director; and

  (b) Place in trust with the director a financial security deposit, having a value of not less than five percent of the gross consideration received, less claims paid, on the sale of the service contract for all service contracts issued and in force, but not less than twenty-five thousand dollars, consisting of one 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. Cash;

  d. A letter of credit issued by a qualified financial institution; or

  e. Another form of security prescribed by regulations issued by the director; or

  (3) (a) Maintain a net worth of one hundred million dollars; and

  (b) Upon request, provide the director with a copy of the provider's or, if the provider's financial statements are consolidated with those of its parent company, the provider's parent company's most recent Form 10-K 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. If the provider's parent company's Form 10-K or audited financial statements are filed to meet the provider's financial stability requirement, then the parent company shall agree to guarantee the obligations of the obligor relating to service contracts sold by the provider in this state.

  4. Provider fees collected on service contracts shall not be subject to premium taxes. Premiums for reimbursement insurance policies shall be subject to applicable premium taxes.

  5. Except for the registration requirement in subsection 2 of this section, persons marketing, selling, or offering to sell service contracts for providers that comply with sections 407.1200 to 407.1227 are exempt from this state's licensing requirements.

  6. Providers complying with the provisions of sections 407.1200 to 407.1227 are not required to comply with other provisions of chapter 374 or 375, or any other provisions governing insurance companies, except as specifically provided.

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(L. 2004 S.B. 1233, et al.)

Effective 1-1-07