Summary of SB 118 (2026RS) — Kentucky
Purpose and overall intent
- SB 118 proposes a comprehensive framework for credit personal property insurance (CPPI) in Kentucky. The bill aims to regulate how CPPI is offered, priced, disclosed, filed, and administered in connection with credit transactions (such as repossession- or installment-credit arrangements) for personal, family, or household property.
- It sets consumer protections around pricing, bundling, disclosure, claims handling, and remedies, and creates a separate regulatory path within Kentucky’s insurance statutes for CPPI.
Key definitions (Section 1)
- Collateral: Personal property pledged as security (e.g., a motor vehicle).
- Credit personal property insurance (CPPI): Insurance tied to a credit transaction that covers perils to the collateral or the creditor’s interest.
- Credit transaction: Any loan, credit commitment, or retail installment sale/transaction; includes payments due at future dates.
- Creditor: Lenders, vendors/lessors, their successors, and related persons/entities.
- Debtor: Borrowers or purchasers/lessees in a credit transaction.
- Finance charge: Includes interest and related fees; excludes certain charges (default, taxes, license fees, etc.).
Scope and exclusions (Sections 2 and 3)
- General rule: CPPI written in connection with credit transactions for personal use is subject to Sections 1–8.
- Exceptions (not subject to these CPPI provisions): business/commercial credit, non-classified insurance, CPPI secured by real estate mortgages or deeds of trust, title insurance, non-filing insurance, post-repossession insurance, insurance with no identifiable debtor charge, debt cancellation agreements, blanket VSI, and vehicle financial protection products.
- For CPPI tied to closed-end credit, insurers cannot issue CPPI that exceeds the underlying gross debt or the scheduled term; CPPI must cover a substantial risk of loss to collateral; bundling of other credit coverages cannot be required; gross debt cannot be used to determine CPPI premiums; debtors must be offered CPPI separately.
Disclosures and filing (Sections 4–5)
- Disclosure: When CPPI is written, the creditor must deliver a CPPI policy/certificate disclosure detailing coverage and costs within 30 days of the loan.
- Filings: All CPPI-related documents (policies, applications, enrollment forms, premium schedules) must be filed with the Kentucky Commissioner of Insurance.
Premium refunds and calculation of unearned premium (Section 6)
- If CPPI is canceled before the debt’s maturity, the insurer must promptly refund or credit unearned premiums, with a minimum refund floor of $5.
- If the policy provides a stated unearned-premium calculation method, that method applies; if not, the method used for refunds of finance charges in the underlying credit transaction applies.
Claims handling (Section 7)
- Claims must be promptly reported to the insurer, and insurers must maintain adequate claims records.
- Claims payments are made by draft, electronic transfer, or insurer’s check to the claimant (or another designated party at the claimant’s direction).
- No third party (other than the insurer or its designated representative) may settle/adjust CPPI claims; creditors generally cannot act as claim representatives, though a group policyholder may, with insurer authorization, receive payments for claims.
- CPPI claims fall under Subtitle 12 to the extent applicable.
Regulatory remedies and process (Section 8)
- Affected parties may request an administrative hearing within 20 days of a final Commissioner decision (per KRS 13B procedures).
- Violations may incur penalties under Subtitle 99 of the insurance code.
CPPI-related insurance statutes amended or reaffirmed (Sections 9–12)
- Various amendments align CPPI with existing life/health insurance provisions in credit transactions, including:
- Definitions for credit life and credit health insurance.
- Requirements for filing, premium rates, and allowable structures.
- Standards for rates, age considerations, exclusions, and underwriter flexibility (with commissioner oversight).
- Statistical reporting by insurers and rules governing refunds and rate changes.
- Provisions ensuring refunds on termination and caps on premiums charged to debtors.
Implementation timeline (Section 14)
- Sections 1–8 (the CPPI framework) apply to CPPI contracts issued or renewed on or after the Act’s effective date.
Who is affected
- Creditors, lenders, vendors, and lessors who offer CPPI in connection with credit transactions for personal property.
- Debtors purchasing or leasing personal property under credit arrangements with CPPI.
- Insurance carriers and agents offering CPPI in Kentucky.
- The Kentucky Department of Insurance, for filing, rate approval, and enforcement.
Notes
- The bill includes a Senate Committee Substitute version (SCS 1) with largely identical core provisions and same scope, reflecting refinements likely from committee discussions.
- The bill was introduced in Senate and then moved through Banking & Insurance committees with sponsor support.
This summary highlights the bill’s substantive changes and protections without addressing broader political considerations. If you’d like, I can provide a side-by-side comparison with current Kentucky CPPI law or create a plain-language guide for consumers and for industry stakeholders.
