33-4-504. Cash premium or assessment plans. (1) An insurer may transact business either on a cash premium plan or on an assessment plan, depending upon which plan is provided for in its articles of incorporation or bylaws.

(2) If transacting business on the cash premium plan, the insurer shall collect from each member a premium in cash in an amount that the insurer considers adequate to cover losses and expenses incurred during the term of the insurance.

(3) If transacting business on the assessment plan, the insurer shall principally depend for the payment of losses and expenses upon assessments from time to time levied upon members either before or after any losses or expenses have been incurred. This provision may not be construed as preventing any insurer from collecting from each member an initial amount that the insurer considers proper prior to or at the time of the effectuation of the member's insurance, and this provision may not be considered to prohibit the acquisition, accumulation, and maintenance of surplus or unallocated funds.

(4) An insurer transacting business on the cash premium plan may provide in its bylaws and policies for special assessment of its members if the cash premium charged is found by the insurer to be inadequate to pay in full losses and expenses currently incurred. The bylaws must provide a specific limitation on the amount that can be assessed in any one policy year, and the amount may not be less than one or more than six times the premium charged on each member's policy at the annual rate for a term of 1 year.