93-13: Administrators of Vehicle Service Contracts
From: Jay Angoff, Director
Re: Administrators of Vehicle Service Contracts
Date: December 13, 1993
Third party administrators may not act as obligors under vehicle service contracts because in doing so they are transacting the business of an insurance company. Section 375.786, RSMo, requires a certificate of authority from the Department to transact an insurance business. Prior judicial interpretations of the phrase "insurance business" leads the Department to conclude that a person who accepts premiums for assuming the risk for mechanical breakdown of a vehicle which the person neither made nor sold is engaged in the insurance business.
The Department is aware that certain insurance companies may be using third party administrators in administering vehicle service contracts on behalf of the insurer. Insurers may use administrators for that purpose so long as it is clear under the vehicle service contract that the insurance company is directly liable for the payment of claims pursuant to an insurance contract. If a vehicle service contract lists an obligor, the obligor listed should be the insurance company and not the administrator. Otherwise, it would appear that the administrator is acting as the insurer. The administrator cannot act as an insurer unless the administrator obtains a certificate of authority from the Department to transact business as an insurance company.
If you have any questions regarding this bulletin, please contact Jennifer Hart, Compliance Technician in the Property and Casualty Section, telephone number (314) 751-3365.