Section 73.137. Compensating balances or special deposits

(a) Definition. Compensating balances or special deposit accounts shall include the following:

(1) The deposit of premiums or money to the account of the insurer or an affiliate of the insurer when the account is either noninterest bearing or bearing interest at a rate less than the current market rate. The rate of interest will be considered less than usual if a higher rate of interest could be earned by combining the account with one or more other accounts, unless there is a business reason unrelated to the credit insurance program for maintaining separate accounts.

(2) The remittance of premiums to the insurer after the expiration of the grace period, except as provided in § 73.132(b) (relating to collection of premiums), on a regular basis thereby resulting in an arrearage period which is constant.

(3) The retention of premiums by a producer to whom the financial institution remits premiums beyond a reasonable period of time needed for the producer to remit premiums to an insurer, if the delay is a continuing practice in the premium paying process.

(4) Any other practice which unduly delays receipt of premiums by the insurer on a regular basis, or which involves the use of the financial resources of an insurer for the benefit of a financial institution.

(b) Illegal inducement. The use of compensating balances or special deposit accounts in connection with a credit insurance program constitutes a violation of section 635 of The Insurance Department Act of 1921 (40 P. S. § 271), section 346 of The Insurance Company Law of 1921 (40 P. S. § 471) and section 5(a)(4) of the Unfair Insurance Practices Act (40 P. S. § 1171.5(a)(4)).

(c) Premium basis. The prohibition on compensating balances and special deposits applies regardless of whether premiums are due the insurer on the single premium basis or on the monthly outstanding balance premium basis.

(d) Nonapplicability. This section does not prevent an insurer from making deposits in a financial institution which deposits are not related to a credit insurance program.