(9) Contracts: filing, review and required language. Ins 15.01(9)(a)1.1.
As a condition for obtaining a limited certificate of insurance authority to transact a warranty business in Wisconsin, an applicant shall file a copy of all contracts which are an essential or integral part of the conduct of the applicant's business. Contracts which an applicant shall file with the commissioner include, but are not limited to:
Contracts with providers of any service to be performed pursuant to the obligations assumed under the warranty contract.
As a condition of maintaining a limited certificate of insurance authority to transact a warranty business in this state, the warrantor or warranty plan administrator shall file a copy of any modification to a contract filed under subd. 1.
prior to using the contract as modified.
The contract shall satisfy the conditions set forth in s. 631.20
, Stats., and shall clearly present the obligations being assumed by the warrantor and the obligations being transferred by the warrantor to other parties.
All warranty contracts issued under a warranty plan subject to this section shall contain the following statement, printed in bold type:“THIS WARRANTY IS SUBJECT TO LIMITED REGULATION BY THE OFFICE OF THE COMMISSIONER OF INSURANCE."
All warranty contracts issued under a warranty plan subject to this section shall contain a provision under which the purchaser may, within 15 calendar days of the delivery of the warranty contract, reject and return the warranty contract for a full refund less actual costs or charges needed to issue and service the warranty contract.
(10) Certificate of authority; issuance and suspension or revocation. Ins 15.01(10)(a)(a)
Within 90 days of receipt of the completed application, the commissioner shall issue a certificate of authority to transact a warranty business in this state upon finding that all of the requirements of this section have been met and that the applicant is sound, reliable and entitled to public confidence and that the commissioner may reasonably expect the applicant to perform its obligations continuously in the future. Upon issuance of the certificate of authority, the warrantor or warranty plan administrator shall pay the fee required by s. 601.31 (1) (b) 1.
The commissioner may revoke or suspend a certificate of authority previously granted under this section if:
The commissioner finds that the warrantor or warranty plan administrator is unable to conduct a warranty plan in a manner consistent with the protection of Wisconsin citizens and consumers.
The financial condition of the warranty plan is such that the interests of Wisconsin citizens and consumers are threatened with imminent and substantial injury.
The warrantor or warranty plan administrator makes a material misstatement of fact in the application, annual reports or in connection with any examination conducted by the commissioner.
As a condition prerequisite to the continuation of a limited certificate of insurance authority to transact a warranty business in Wisconsin, every warrantor and warranty plan administrator shall, by March 31 of each year, submit financial statements prepared on an accrual basis in accordance with generally accepted accounting principles and audited by an independent certified public accountant on the financial condition of such warrantor or warranty plan administrator for the preceding calendar year ending December 31 and which shall also include such additional information as the commissioner may require. An annual continuation fee required under s. 601.31 (1) (c) 1.
, Stats., shall accompany the annual report.
The commissioner may examine the applicant for a certificate of authority and may examine any warrantor or warranty plan administrator who holds a certificate of authority under this section under the procedures of ss. 601.43
(12) Applicable statutes.
In addition to statutes previously set forth in this section, ss. 601.41
and ch. 645
, Stats., apply to a warrantor, a warranty plan administrator and the transaction of a warranty business in this state.
(13) Transition requirements.
Plans which hold a limited certificate of insurance authority under the current rule on June 1, 1991 need not reapply for a license but shall comply with subs. (7)
effective June 1, 1991, and shall file all contracts under sub. (9)
within 60 days of June 1, 1991.
Ins 15.01 Note
Note: This rule requires use of an application form for warranty plans which may be obtained from the Office of the Commissioner of Insurance, Financial Examinations Bureau, P.O. Box 7873, Madison, Wisconsin 53707-7873.
Ins 15.01 Note
This rule was first promulgated in 1978 and it was revised in December 1984. This revision is an attempt to update the rule such as to provide more effective regulation and also to more effectively recognize the complexities that currently exist in the warranty plan marketplace. In general, the sale of warranty contracts is clearly the transaction of an insurance business under the provisions of Wisconsin Statutes. The rule as adopted in 1978 exempts warranty plans and contracts from a major portion of the Wisconsin insurance regulatory statutes and administrative rules. Warranty plan corporations have been established in Wisconsin and foreign corporations have been authorized to do business in this state under the limited regulation provided by the administrative rule in existence up until this current revision. It would be unrealistic to significantly change the 1978 plan of exemption from the insurance statutes.
Ins 15.01 Note
The rule now being promulgated regulates the content of Wisconsin contracts and the rule imposes basic requirements for solvency protection of Wisconsin consumers. The rule makes no attempt to regulate the countrywide operations of entities issuing warranty contracts but it does require periodic financial reports from any such entity and the commissioner has the authority and the responsibility to remove from the marketplace those companies that are unable to demonstrate reasonable financial and operational solidity.
Ins 15.01 Note
The regulation of warranty plans and warranty contracts even to the limited extent provided in the revised administrative rule, is complex and difficult because of a number of factors which are unique to warranty contracts and which present the insurance commissioner with a kind of business that has little or no similarity to the traditional insurance mechanism. For example, there is no countrywide system of regulation of warranty plans and warranty contracts. In many states there is no regulation whatsoever and in other states there is partial regulation somewhat comparable to that imposed by the Wisconsin administrative rule. In addition, there is no uniform accounting standard or system applicable to the financial reports submitted to the regulatory authorities. The financial reports that OCI receives are of limited value because of the difficulty in determining or measuring the liabilities assumed under contracts issued in Wisconsin and in the other states in which the company does business. Similarly, the value of the assets held by the warranty company in various locations throughout the country is often difficult to determine. Warranty plan companies are quite often an integral part of a holding company system with intricate contractual relationships between various corporate entities involved with the marketing, the sale of the product that is the subject of the warranty, claims adjustment, and the processing of warranty payments. This revised administrative rule attempts to accomplish reasonable regulatory objectives while at the same time recognizing the difficulties of asserting the entire scheme of insurance regulation.
Ins 15.01 History
Cr. Register, January, 1978, No. 265
, eff. 2-1-78; cr. (6) (c), Register, December, 1984, No. 348
, eff. 1-1-85; r. and recr. Register, May, 1991, No. 425
, eff. 6-1-91; CR 04-131: cr. (3) (d) Register June 2005 No. 594, eff. 7-1-05.