Arkansas: a service contract is not insurance, and providers that are not exempt register with the Insurance Department each year

Arkansas regulates service contracts under its Service Contracts Act (Arkansas Code § 4-114-101 and following) and a rule of the Arkansas Insurance Department at 23 CAR Part 36. The rule says a service contract is not insurance. It sets an annual registration and a fee, and ties the provider's financial backing to Arkansas Code § 4-114-104(d). This page describes the rule and the registration form attached to it. The statute is the controlling text and is not quoted here.

The short answer

Not insurance: the rule says a service contract, as defined in the Service Contracts Act and the rule, "is not insurance and is not subject to the Arkansas Insurance Code."¹
Annual registration, unless exempt: each provider must register with the Insurance Commissioner each year on or before October 1, pay a $200 fee on initial registration and every year after, and submit a certificate of compliance, unless it is exempt (the rule refers to the exemptions in Arkansas Code § 4-114-102(c)).¹
Motor vehicle service contracts are outside this registration: the Department's page lists agreements the Act does not apply to, including motor vehicle service contracts as defined in ACA § 4-90-501 and following. This page sits in our home warranty section for that reason.³
Financial backing: the rule requires each provider to comply with the financial requirements of Arkansas Code § 4-114-104(d). The registration form, as attached to the rule, asks the provider to select the financial-security basis it uses and lists the boxes set out below.¹ ²

What the rule covers

The Arkansas Insurance Commissioner issued the rule under Arkansas Code § 23-61-108 and the Service Contracts Act. The rule states its purposes as creating a legal framework within which service contracts are defined, sold and regulated in the state, adding significant consumer protections and eliminating unnecessary administration. It says the Act and the rule do not apply to the agreements and transactions listed in Arkansas Code § 4-114-102(c).¹ The rule was first effective on October 1, 2007 and has since been codified in the Code of Arkansas Rules.¹

A "service contract" under the rule is a contract or agreement for a separately stated consideration and a specific duration to perform service, repair, replacement or maintenance of property, or to indemnify for it, for the operational or structural failure of property due to a defect in materials, workmanship or normal wear and tear. It may include incidental indemnity such as for unavailability of parts, obsolescence, food spoilage, rental or shipping, and may cover damage from power surges or accidental damage from handling. It does not include mechanical breakdown insurance or maintenance agreements.¹ A "provider" is a person contractually obligated to the holder under the contract, and an "administrator" is the person responsible for administering a contract.¹

Registration, the fee and the certificate

Section 36-103 says service contracts may not be issued, sold or offered for sale in Arkansas unless the provider or its designee has complied with Arkansas Code § 4-114-104(b). Unless it is exempt, each provider must file a registration with the Insurance Commissioner annually on or before October 1, pay $200 on initial registration and every year after, update the registration by written notice if material changes occur, and submit a certificate of compliance on the Department's form.¹

The Department's page lists agreements the Act does not apply to. It lists agreements the Act does not apply to, including motor vehicle service contracts as defined in ACA § 4-90-501 and following.³ The rule's attached registration form asks for the provider's legal name, any trade name, address, domicile, a representative for Arkansas inquiries, and the states where it provides service contracts. It states that a provider of a service contract issued on or after October 1, 2007 must register unless exempt.² The form as attached to the rule still refers to "Arkansas Insurance Department Rule 91."²

What the registration form asks about financial backing

The rule requires each provider to comply with the financial requirements of Arkansas Code § 4-114-104(d).¹ The form, as attached to the rule, has the provider state that it has chosen to comply under one of the options checked, and lists the boxes below. The statute is the controlling text and was not read for this page, so the table shows only what the form says. The Department's own page describes a 2009 Act as restoring the Service Contract Act "to correctly set forth the three ways to comply with the Act's applicable financial requirements" without listing them.³ Read § 4-114-104(d) to see how the form's boxes relate to the statute.

The financial-security boxes on the registration form as attached to the rule
Box	What the form says
1. Reimbursement insurance	All service contracts are insured under a reimbursement insurance policy meeting § 4-114-104(d)(1). The provider submits a copy of the active policy.²
2. Funded reserve account	A funded reserve account meeting § 4-114-104(d)(2). The provider submits documentation of the account.²
3. Security deposit	A financial security deposit of not less than 5% of gross considerations received less claims paid, but not less than $25,000, consisting of a surety bond issued by an authorized surety. The provider submits proof and completes the Department's bond form.²
4. Net worth	A net worth of $100,000,000 under § 4-114-104(d)(4), shown by the provider's or its parent's most recent Form 10-K or 20-F filed with the SEC, or an audited financial statement. If the parent holds the net worth, it must give a signed, notarized written guarantee of the provider's obligations under contracts sold in Arkansas.²

The bond form states a sum of not less than 5 percent of the gross consideration received, less claims paid, on all contracts issued and in force, and not less than $25,000. It provides that the surety may end the bond by delivering 30 days' written notice to the Department.²

The regulatory-history question and the sworn certification

The registration form asks whether any administrative or regulatory action has been taken against, or is pending against, the provider by any governmental agency within the last ten years, and, if so, requires a detailed explanation. An officer of the provider signs a sworn certification, notarized, that the provider complies with the Service Contracts Act and that its contracts comply with the disclosure requirements of Arkansas Code § 4-114-106.²

Disclosures, prohibited acts, records and enforcement

A contract must be written in clear, understandable language that is easy to read and must conspicuously disclose the requirements of § 4-114-106. It is a violation of the rule and the Act for a provider to engage in any act prohibited by § 4-114-107, and providers must follow the recordkeeping requirements of § 4-114-108.¹ The rule refers to those statute sections without reproducing them, so this page does not list their contents. Read the Act itself for the specific required disclosures.

The Commissioner may investigate or examine providers, administrators, insurers and other persons to enforce the Act and the rule and to protect holders, and may take any action necessary and appropriate, including actions authorized by Arkansas Code § 4-114-111. On request, a provider must submit documents or other evidence of compliance.¹

Where this fits in our standard

Point 3 of our standard asks whether state licensing or registration is verified directly with the state's own record, point 4 asks whether a funded-claims mechanism is verified where the state requires one, and point 10 asks about enforcement history. Arkansas's registration, its financial-security form and its history question relate to those points. The Register describes how we apply them. This page describes a rule, not any provider.

How to verify this yourself

Open the Arkansas Insurance Department's PDF of 23 CAR Part 36, which includes the registration and bond forms (references 1 and 2), and the Department's service contract provider page (reference 3).
Read Arkansas Code § 4-114-101 and following for the Act itself, including § 4-114-102(c) (exemptions), § 4-114-104 (financial requirements) and § 4-114-106 (required disclosures). The rule cites them but does not reproduce them.¹
The rule says registrations are filed with the Insurance Commissioner (§ 36-103). Contact the Department to ask what records it can confirm about a provider. This page does not claim that a public lookup exists.¹
For the general method, see how to verify a home warranty company.

What this page is not

This is general information about a regulation and its forms, not legal advice. The rule and forms are the Department's published versions, and they refer to statute sections this page does not quote. It does not say whether any provider is registered, exempt or compliant. Confirm the current text and forms with the Department before relying on them.

What to do next

Read your own contract's disclosures against the Act's section 4-114-106, then see our warranty contract checklist, or return to the state regulation hub.