UPDATE: Senate Bill 1475 was sent to the Governor on April 19, 2012. Once it becomes law, this legislation will more clearly settle the status of motor vehicle and consumer goods service warranties as non-insurance products. Current law relating to home service contracts already provides that such are not insurance.
Oklahoma’s current law, entitled the Service Warranty Insurance Act, would be repealed under Senate Bill 1475, and an almost identical statutory scheme for regulating these contracts would be codified in another section of law, as the Service Warranty Act. Under this legislation, service warranties would continue to be regulated by the Insurance Commissioner and all licensing and other operational requirements applicable to service warranty associations offering these types of contracts, including the filing of quarterly and annual reports and the use of statutory accounting, would remain the same. The bill would enact a provision that makes clear that the marketing, sale, issuance and administration of motor vehicle and consumer goods service warranties, and related warranty retail sellers, are exempt from the Insurance Code.
The bill replaces the current definition of “premium”, as the consideration for a service warranty, with the term “provider fee”. However, the bill does not change the applicability of a 2% administrative fee which, prospectively, would be due relative to gross provider fees written in Oklahoma by a service warranty association. The legislation does not remove the exception to this requirement for all service warranty associations having a contractual liability in place prior to March 31, 2009. Service warranty associations qualifying for this exception will still be able to pay a flat administrative fee of $3,000, in lieu of the 2% administrative fee, under this legislation if enacted.
Lastly, the bill also makes technical cross-reference changes to the term “service contract” in the current law governing home service contracts, vehicle protection products and portable electronics insurance. This bass has an effective date of November 1, 2012.
