Service Warranty License

Regulations:  15 OS 141.1 to 141.35

Statutes

15 § 141.2 Definitions:

Service warranty means a contract or agreement for a separately stated consideration for a specific duration to perform the repair or replacement of property or indemnification for repair or replacement for the operational or structural failure due to a defect or failure in materials or workmanship, with or without additional provision for incidental payment of indemnity under limited circumstances, including, but not limited to, failure due to normal wear and tear, towing, rental and emergency road service, road hazard, power surge, and accidental damage from handling or as otherwise provided for in the contract or agreement. The term “service warranty” includes a contract or agreement to provide one or more motor vehicle ancillary service(s).

Gross income means the total amount of revenue received in connection with business-related activity.

Gross written provider fee means the total amount of consideration, inclusive of commissions, paid by a consumer for a service warranty issued in Oklahoma.

Provider fee means the total consideration received or to be received, including sales commissions, by whatever name called, by a service warranty association for, or related to, the issuance and delivery of a service warranty, including any charges designated as assessments or fees for membership, policy, survey, inspection, or service or other charges. However, a repair charge is not a provider fee unless it exceeds the usual and customary repair fee charged by the association, provided the repair is made before the issuance and delivery of the warranty.

Registration fees:

$400 annual fee

Cycle – license expires on November 1st following the date of issuance

15 § 141.5 Qualifications for License – The Insurance Commissioner shall not issue or renew a license to any service warranty association unless the:

  • Entity is solvent
  • Management is competent and trustworthy
  • Business name and trademark or emblem is distinctive and not so similar to any other entity already doing business in Oklahoma
  • Files the bond required by the Service Warranty Act
  • Entity is formed under the laws of this state and registered with the Oklahoma Secretary of State

Registration Application Requirements

Initial and/or renewal application

  • Current License # (renewal only)
  • List all DBA or trade names
  • Statement of management – which shall include the name and evidence of the business experience of any person who serves as president, chief executive officer, or otherwise has the authority to act as senior executive officer of the entity. A biographical affidavit is required to be on record with the OID for each person.  The OID may request an updated bio if deemed necessary.
  • Organization Chart
  • If requested by the OID – A copy of the articles of incorporation of the applicant, certified by the public official having custody of the original, and a copy of the bylaws of the applicant, certified by the chief executive officer of the applicant
  • A copy of the most recent financial statement of the applicant, which must be:
    • Audited if the applicant complies with the Financial Responsibility Requirements (A) below.
      • Verified under oath of at least two of its principal officers if the applicant utilizes an insurance policy which satisfies the Financial Responsibility Requirements (B) below.

141.6 Financial Responsibility Requirements (must meet one of the following)

      1. Reserve Account: Maintain a funded, unearned reserve account, consisting of unencumbered assets, equal to a minimum of twenty-five percent (25%) of the gross written provider fees received on all warranty contracts in force, wherever written. In the case of multiyear contracts which are offered by associations having net assets of less than Five Hundred Thousand Dollars ($500,000.00) for which provider fees are collected in advance for coverage in a subsequent year, one hundred percent (100%) of the provider fees for such subsequent years shall be placed in the funded, unearned reserve account. Additionally, an association establishing such reserve account shall also place in trust with the Insurance Commissioner a surety bond issued by an authorized surety having a value of not less than five percent (5%) of the gross provider fee received, less claims paid, on the sale of the service warranties for all service warranties issued and in force in this state, but in no event shall the bond be less than Twenty-five Thousand Dollars ($25,000.00).
      2. CLP: Entity has purchased a Contractual Liability Insurance Policy (CLP) which demonstrates to the satisfaction of the Insurance Commissioner that:
        • one hundred percent (100%) of its claim exposure is covered by such policy and that the policy satisfies the requirements of 15 OS 141.6
        • The policy may not be canceled or not renewed by either the insurer or the association unless sixty (60) days’ written notice has been given to the Commissioner by the insurer.
        • In the event that the service warranty association is unable to fulfill its obligation under contracts issued in this state for any reason, including insolvency, bankruptcy, or dissolution, the insurer will pay losses and unearned provider fees under such plans directly to the person making a claim under the contract.

Requirements of the insurer issuing the CLP:

        • Insurer is licensed, registered, or otherwise authorized to do business in this state, is rated B++ or better by A.M. Best Company, Inc., and that meets one of the following sub-requirements:
          1. Insurer maintains surplus as to policyholders and paid-in capital of at least Fifteen Million Dollars ($15,000,000.00), and annually file copies of the audited financial statements of the insurer, its NAIC Annual Statement, and the actuarial certification required by and filed in the state of domicile of the insurer; or
          2. maintain surplus as to policyholders and paid-in capital of less than Fifteen Million Dollars ($15,000,000.00) but at least equal to Ten Million Dollars ($10,000,000.00), maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not greater than three to one, and annually file copies of the audited financial statements of the insurer, its NAIC Annual Statement, and the actuarial certification required by and filed in the state of domicile of the insurer

141.14 Annual Statement/Quarterly Reports/Administrative Fee

      • Due on or before May 1st – annual audited financial statement showing all gross written provider fees or assessments received by the entity in connection with the issuance of service warranties. Entity’s that utilizes a CLP (to meet the financial responsibility requirement) the financial statement must be verified under oath of at least two of its principal officers and prepared in accordance with generally accepted accounting principles
      • A fine of up to One Hundred Dollars ($100.00) a day may be imposed for each day an association neglects to file its financial statement as required
      • Quarterly statement and fees:
        • Administrative Fees – a fee of 2% of the gross provider fee received on the sale of all service warranties issued in this state during the preceding calendar quarter are paid quarterly.
        • Reduced Administrative Fees – entities actively licensed with the OID since March 31, 2009, that have approved CLPs in place, may elect to pay an annual administrative fee of Three Thousand Dollars ($3,000.00) in lieu of the two-percent administrative fee.

36 § 362 Annual Fee to Investigate – An annual fee of Seven Hundred Fifty Dollars ($750.00) shall be paid to the Insurance Commissioner to be expended by the Insurance Commissioner for the purposes of investigation of suspected insurance fraud and civil or administrative action in cases involving suspected insurance fraud.

License Revocation, Suspension, or Refusal to Renew

The license of any service warranty association may be revoked or suspended, or the Insurance Commissioner may refuse to renew any such license, if it is determined that the association has violated any lawful rule or order of the Commissioner or any provision of the Service Warranty Act, or if the association is determined to be insolvent or impaired.

The Commissioner may at his or her discretion and without advance notice or hearing immediately suspend the license of any service warranty association if the Commissioner finds that one or more of the following circumstances exist:

  1. The association is insolvent or impaired
  2. The reserve account required by the Service Warranty Act is not being maintained
  3. A proceeding for receivership, conservatorship rehabilitation or any other delinquency proceeding regarding the association has been commenced in any state; or
  4. The financial condition or business practices of the association otherwise pose an imminent threat to the public health, safety, or welfare of the residents of this state

Exemption Request 15 § 141.2 (17)

  1. Maintenance service contracts under the terms of which there are no provisions for such indemnification. Financial Statements are not required for this exemption.
  2. Entity has a contractual liability insurance (CLP) in place, from an insurer licensed in the state, which covers one hundred percent (100%) of the claims exposure on all contracts written without being predicated on the failure to perform under such contracts. Financial Statements are not required for this exemption.
  3. Service contracts entered into between consumers and nonprofit organizations or cooperatives the members of which consist of condominium associations and condominium owners, which contracts require the performance of repairs and maintenance of appliances or maintenance of the residential property.Audited financial statements are required.
  4. Warranties, guarantees, extended warranties, extended guarantees, contract agreements or any other service contracts issued by a company which performs at least seventy percent (70%) of the service work itself and not through subcontractors, and which has been selling and honoring such contracts in this state for at least twenty (20) years. Audited financial statements are required.
  5. Financial statement showing $100,000,000 in net assets or $25,000,000 if using a parent company. Audited financial statements are required.