Commissioner of Commerce Agency File No. 1-1004-14813-2.
Considered and decided by Minge , Presiding Judge, Harten , Judge, and Halbrooks , Judge.
1. The presumption of reasonableness of credit insurance rates that comply with the state's prima facie rates may be rebutted by a showing that, because the insurer's average loss ratio is significantly below 50%, the rates are excessive in relation to benefits.
2. The withdrawal of approval of credit insurance rates that are excessive in relation to benefits is not unpromulgated rulemaking.
The opinion of the court was delivered by: Harten, Judge
Respondent Minnesota Commissioner of Commerce notified relator Universal Underwriters Life Insurance Company that it intended to disallow relator's credit insurance rates. Relator moved for summary disposition. Following a hearing, an administrative law judge (ALJ) denied relator's motion and recommended disallowing the rates. Respondent's designee issued an order adopting that recommendation. Relator now challenges that order.
Credit life and disability insurance provides for payment of a debt in the event of the debtor's death or disability. Insureds buy credit insurance policies from a vendor who is their creditor, not from insurance agents. The vendor receives a commission on the credit insurance policies sold. Credit insurers therefore compete not by providing low rates to insureds but by providing high commissions to vendors, who offer purchasers only one type of credit insurance on a take-it-or-leave-it basis.
To protect consumers, Minnesota law does two things: it establishes prima facie rates that are presumptively reasonable, and it requires the Commissioner of Commerce to disallow rates that are excessive in relation to benefits. See Minn. Stat. § 62B.07, subd. 2 (2002).
Based on information relator submitted that its loss ratios*fn1 over a five-year period averaged around 20%, respondent determined that relator's credit insurance rates were excessive in relation to benefits and, in accord with the recommendation of an ALJ, issued an order disallowing relator's rates.
1. Is the presumption of reasonableness of credit insurance rates that comply with the state's prima facie rates rebuttable by a showing that, because the insurer's average loss ratio is significantly below ...