As used in this article, “premium financing” means engaging in the business of advancing money, directly or indirectly, to an insurer or producer at the request of an insured pursuant to the terms of a premium finance agreement, wherein the insured has assigned the unearned premiums, accrued dividends, or loss payments as security for such advancement in payment of premiums on insurance contracts only, and does not include the financing of insurance contract premiums purchased in connection with the financing of goods and services.
General RegulationsPremium Financing
Section § 778
This law defines 'premium financing' as the practice of lending money to an insurer or insurance agent on behalf of a policyholder. The loan is based on a premium finance agreement, where the policyholder uses their potential refunds from unused insurance, dividends, or claims payouts as collateral. This applies only to paying insurance premiums, not when insurance premiums are tied to buying goods or services.
premium financing advancing money insured
Section § 778.1
This law defines a "premium finance agreement" as a type of loan where an insurance customer agrees to repay a lender over time. The lender pays the insurance premium upfront, and the customer repays with added charges. The agreement also involves using any unearned premiums, dividends, or payouts from the policy as security for the loan.
As used in this article, “premium finance agreement” means a loan contract, note, agreement, or obligation by which an insured agrees to pay to a lender in installments the principal amount advanced by the lender to an insurer or producer in payment of premium on an insurance contract or contracts, plus charges, with the assignment, as security therefor, of the unearned premiums, accrued dividends, or loss payments.
premium finance agreement loan contract insurance premium payment
Section § 778.2
If you're an insurance agent or broker involved in setting up financing for insurance premiums, and you receive a payment for this work, you must tell the insured person how much you're being paid. This needs to be done in a way set out by the insurance commissioner.
Also, keep a list for three years that shows all the payments you got and share it with the commissioner if they ask. There are some exceptions, like if the payment is related to interest from delayed premium payments.
The commissioner has to create rules on a standard way for you to let the insured know about these payments.
(a)CA Insurance Code § 778.2(a) Any person engaged in business as an insurance agent or broker and who participates in the arrangement of a premium financing agreement shall, if he accepts compensation for arranging, directing, or performing services in connection with the premium financing agreement, disclose to the insured, in a manner and form established by the commissioner, the amount of compensation he is to receive from the premium financer and maintain for three years and make available to the commissioner a list of accounts in connection with which he has accepted compensation for premium financing services showing the amount of such compensation with respect to each premium financing agreement and with respect to each financing schedule used by the agent or broker. The requirements of this subdivision shall not apply with respect to interest paid to the broker or agent by the premium financer based upon delay in payment of the premium due the insurer as permitted under subdivision (a) or (b) of Section 18628 of the Financial Code.
(b)CA Insurance Code § 778.2(b) The commissoner shall hold a hearing and adopt by regulation a standard procedure and form for making the disclosure to the insured required by subdivision (a).
insurance agent broker premium financing
Section § 778.3
This law section requires that any finance charges and their annual percentage rates (APRs) for premium financing must be clearly disclosed either in the insurance policy or in a separate premium financing agreement and billing statement. However, if the charge is a fixed fee, there's no need to include the APR. This requirement doesn't apply if similar information is already provided through other legal disclosures.
The amount of the periodic finance charges, if any, imposed for the premium financing purchased and the annual percentage rate associated with those charges shall be disclosed in the policy itself, or if arranged pursuant to a separate premium financing agreement in the premium financing agreement itself, and in the premium finance billings. If the finance charge is a fixed fee, regardless of the amount of the loan or the balance due, the disclosure is not required to include the annual percentage rate associated with those charges. This section shall not apply to any insurance policy or premium finance billing if the same information is otherwise disclosed to the insured as required by any other provision of state or federal law.
premium financing finance charges annual percentage rate
Section § 778.4
This law section requires insurance agents dealing with property and casualty insurance in California to provide clear information to clients when arranging premium financing. Agents must give applicants any required details from the federal Truth in Lending Act and secure a signed disclosure stating that some insurers offer payment plans for premiums. This disclosure must explain financing options and potential fees or charges. Agents must also follow the Consumer Contract Awareness Act if it applies.
If an insurance transaction occurs over the phone, agents can comply by mailing the necessary disclosures to the client within 72 hours, and they must keep proof that these documents were mailed.
(a)CA Insurance Code § 778.4(a) Every property broker-agent and every casualty broker-agent shall, prior to arranging premium financing for any new or renewal policy of insurance specified in Section 660, do all of the following:
(1)CA Insurance Code § 778.4(a)(1) Provide the applicant or prospective insured with any information that is required by the federal Truth in Lending Act (15 U.S.C. Sec. 1601 et seq.).
(2)CA Insurance Code § 778.4(a)(2) Obtain the signature of the applicant or prospective insured on the following disclosure, which shall be in 10-point boldface type on a separate form or sheet of paper:
Some insurance companies and the California Automobile
Assigned Risk Plan (CAARP) provide the opportunity to make payments on insurance premiums. Your agent or broker is required to disclose these options, if any are available for the insurance you are purchasing. If you choose to enter into a contract that provides for premium financing, your agent is required by law to make certain disclosures concerning interest, fees, or other charges. If your insurance has been financed by any person or business other than your insurance company, and your insurance is canceled for any reason, your loan may be subject to continued interest charges, or other charges that may result from delays by your insurance company in repaying the premium finance company. You should understand all of the charges associated with your financing plan. If you are uncertain about how the financing plan works, you should ask your insurance agent or broker.
(b)CA Insurance Code § 778.4(b) Every property broker-agent and every casualty broker-agent shall
comply with the requirements of the Consumer Contract Awareness Act of 1990 (Title 1.86 (commencing with Section 1799.200) of Part 4 of Division 3 of the Civil Code) to the extent that its provisions are applicable to any transaction subject to this section.
(c)CA Insurance Code § 778.4(c) If a transaction subject to subdivision (a) is conducted over the telephone, the property broker-agent and the casualty broker-agent shall be deemed to have complied with the requirements of subdivision (a) if, within 72 hours after transacting the contract or agreement, the disclosure form and other information required by subdivision (a) is mailed to the applicant or insured at the address provided by the applicant or insured. Proof of mailing shall be established by the method described in Section 38.
premium financing insurance broker disclosure Truth in Lending Act
