MISSISSIPPI LEGISLATURE

2022 Regular Session

To: Insurance

By: Representative Arnold

House Bill 1381

AN ACT TO AMEND SECTION 83-7-26, MISSISSIPPI CODE OF 1972, TO REQUIRE LIFE INSURANCE POLICIES TO ONLY OFFER FIXED RATE POLICY LOANS; TO REQUIRE THE RATE TO BE IN EXPLICIT BOLD PRINT; AND FOR RELATED PURPOSES.

     BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

     SECTION 1.  Section 83-7-26, Mississippi Code of 1972, is amended as follows:

     83-7-26.  (1)  A life insurance policy which provides for policy loans shall contain a provision * * *concerning maximum policy loan interest rates as follows:

  (a)  A provision permitting a maximum interest rate of not more than eight percent (8%) per annum * * *; or, which must be a fixed rate.

 * * *  (b)  A provision permitting an adjustable maximum interest rate established from time to time by the life insurer as hereinafter determined.  The rate of interest charged on a policy loan made under this paragraph (b) shall not exceed the higher of the following:

   (i)  The rate used to compute the cash surrender values under the policy during the applicable period, plus one percent (1%) per annum; or

   (ii)  Moody's Corporate Bond Yield Average‑Monthly Average Corporates, as published by Moody's Investors Service, Inc., or any successor thereto.  In the event that Moody's Corporate Bond Yield Average‑Monthly Average Corporates is no longer published, a substantially similar average established by regulation issued by the commissioner shall be used. 

(2)  If the maximum rate of interest is determined pursuant to subsection (1)(b) of this section, the policy shall contain a provision setting forth the frequency at which the rate is to be determined for that policy.  Such maximum rate must be determined at regular intervals at least once every twelve (12) months, but not more frequently than once in any period of three (3) months. 

(3)  At the intervals specified in the policy pursuant to subsection (2) of this section:

  (a)  The rate being charged may be increased as permitted by subsection (1)(b) of this section whenever such increase would be one‑half of one percent (1/2 of 1%) or more per annum. 

  (b)  The rate being charged must be reduced whenever such reduction as determined under subsection (1)(b) of this section would decrease that rate by one‑half percent (1/2%) or more per annum.

     ( * * *42)  The life insurer shall * * *:

  (a) notify the policyholder, in explicit bold print, of the * * *initial fixed rate of interest on the loan at the time a cash loan is made. 

 * * * (b)  Notify the policyholder with respect to premium loans of the initial rate of interest on the loan as soon as it is reasonably practical to do so after making the initial loan.  Notice need not be given to the policyholder when a further premium loan is added, except as provided in paragraph (c) of this subsection. 

  (c)  Send to policyholders with loans reasonable advance notice of any increase in the rate. 

  (d)  Include in notices under this subsection the substance of the pertinent provisions of subsections (1) and (2) of this section. 

(5)  The loan value of the policy shall be determined in a manner consistent with Chapter 7, Title 83, Mississippi Code of 1972, but no policy shall terminate in a policy year as the sole result of a change in the interest rate during that policy year, and the life insurer shall maintain coverage during that policy year until the time at which it would otherwise have terminated if there had been no change during that policy year. 

     ( * * *63)  The pertinent provisions of * * *subsections subsection (1) * * * and (2) of this section shall be set forth in substance in the policies to which they apply. 

     ( * * *74)  For purposes of this section:

          (a)  The rate of interest on policy loans permitted under this section includes the interest rate charged on reinstatement of policy loans for the period during and after any lapse of a policy. 

          (b)  The term "policy loan" includes any premium loan made under a policy to pay one or more premiums that were not paid to the life insurer as they fell due. 

          (c)  The term "policyholder" includes the owner of the policy or the person designated to pay premiums as shown on the records of the life insurer. 

          (d)  The term "policy" includes certificates issued by a fraternal benefit society and annuity contracts which provide for policy loans. 

     ( * * *85)  No other law of this state shall apply to policy loan interest rates unless made specifically applicable to such rates. 

     ( * * *96)  The provisions of this section shall not apply to any insurance contract issued before January 1, 1984.

     SECTION 2.  This act shall take effect and be in force from and after July 1, 2022.

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