Printer Friendly

PROPOSED STATE LAW COULD SAVE CONSUMERS MILLIONS ON CREDIT INSURANCE

 RALEIGH, N.C., March 26 /PRNewswire/ -- Insurance Commissioner Jim Long today urged support for proposed legislation to protect North Carolina consumers from paying too much for credit insurance.
 National consumer organizations argue that consumers are often overcharged for credit life insurance, and have called the coverage "the nation's worst insurance ripoff."
 Credit insurance is coverage sold in conjunction with consumer loans. In exchange for a premium which is built into the loan, the credit insurer guarantees that the loan will be paid off if death or disability prevents the borrower from making scheduled payments.
 "We've been unsuccessful in our efforts to get the credit insurance industry to behave more responsibly toward consumers," said Long. "The price paid by consumers for this line of insurance is unreasonably high. Credit insurers are taking advantage of our state's consumers and we cannot allow this to continue."
 A credit insurance bill (HB665) has been introduced in the House by Representative Brad Miller. Senator William Martin is expected to introduce a companion bill in the Senate early next week. Both bills incorporate elements of model legislation developed by the National Association of Insurance Commissioners, a national organization of the chief insurance regulators of the fifty states.
 The standard method for determining a reasonable profit level for credit insurance is to examine the ratio between the amount of money collected in premiums and the amount paid out in claims; this is referred to as the "loss ratio."
 While consumer groups and regulatory officials consider a 60 percent loss ratio reasonable, the national loss ratio for credit insurance is about 42 percent. North Carolina's loss ratio of only 27 percent ranks it third worst in the nation.
 Under the proposed legislation, each line of credit life insurance would be required to achieve at least a 60 percent loss ratio. Said Long: "Moving from our current loss ratio to a minimum of 60 percent would save North Carolina consumers approximately $29 million a year."
 The bills would also prohibit the amount of credit insurance from exceeding the actual amount of unpaid indebtedness, less finance charges. The Department of Insurance estimates that insuring only the amount of indebtedness would save North Carolina consumers an additional $4 million per year.
 Other consumer protection measures in the legislation include a guarantee that purchasers of credit insurance have the right to cancel the coverage within a period of no less than 30 days and the elimination of origination fees now charged on credit insurance transactions.
 Nationally, only South Carolina and Louisiana consumers get a smaller portion of their premiums back in benefits than those in North Carolina, with 26 percent and 23 percent respectively. North Carolina is tied with Mississippi, New Mexico and Hawaii for the third-worst loss ratio in the country.
 -0- 3/26/93
 /CONTACT: Paul Mahoney, N.C. Department of Insurance, 919-733-5238/


CO: North Carolina Department of Insurance ST: North Carolina IN: INS SU:

SB-CM -- CH003 -- 0014 03/26/93 10:45 EST
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Mar 26, 1993
Words:494
Previous Article:CARDTOOLS SYSTEMS RELEASES CARDTOOLS 4.0 FOR SOLARIS 2.X FOR SPARC(R)
Next Article:ASTRONICS CORPORATION ANNOUNCES REDEMPTION OF SUBORDINATED DEBT
Topics:


Related Articles
CONSUMER ORGANIZATIONS HAIL INTRODUCTION OF BILL TO REPEAL SPECIAL PROTECTION FOR INSURANCE INDUSTRY
GOV. CASEY PROPOSES LIFE INSURANCE REFORM LEGISLATION
PENNSYLVANIA INSURANCE COMMISSIONER SAYS LEGISLATIVE REPORT CONFIRMS SUCCESS OF CASEY AUTO REFORM LAW
Key Consumer Bill on Boundary Coverage Lauded By Stewart.
Pickens says new law protects insurance buyers. (Insurance).
NAMIC stresses need for state regulatory reform.
FTC may release final rule on private insurance this year.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters