MONTPELIER, Vermont -
Vermont is proposing the regulation in response to consumer complaints about a lack of full disclosure on lenders part regarding additional premiums.
"Our hope is that this is a reasonable compromise," according to the Vermont Department of Banking, Insurance and Health Care Assistant General Counsel, Kevin Moriarty. "It's workable, while still looking out for the little guy."
In a letter to the Vermont Secretary of State, Moriarty detailed the benefits of the proposed regulation, writing that it will "reduce the time and cost of obtaining a license for individuals that sell only credit insurance."
What The Regulation Does
The regulation will establish a Limited Lines Producer License for the sale of credit insurance and the required regulations.
Under present Vermont law, "any person engaged in the sale of Credit Insurance must be licensed as an insurance producer, but the sale of credit insurance does not require the professional competency demanded for an insurance producer's license," Moriarty wrote.
Vermont defines credit insurance as credit life, credit disability, credit property, credit unemployment, involuntary unemployment, mortgage life, mortgage disability or guaranteed automobile protection (GAP) insurance.
Moriarty said Vermont recognizes that there is a "fair amount of turnover" among employees in financial institutions and hopes the regulation will help reduce costs for banks and credit unions. Under the proposed regulation, only one licensed insurance producer would be required with a number of Limited Lines Credit Insurance Producers working under their license and supervision.
The regulation requires:
* An employee or representative be 18 years or older
* The credit union has taken reasonable steps to ensure the employee/representative is competent and trustworthy
* The employee has completed a training and education program consistent with the requirement of the regulation
* The employee complies with regulation requirements.
The new regulation would require a credit union's credit insurance education program would include specific instruction legally prohibiting an employee to make a statement, imply or lead a consumer to believe:
* That credit insurance is required to make a purchase or obtain financing,
* That the consumer does not already have insurance policies in place that provide the coverage being offered, or
* That the employee is qualified to evaluate the adequacy of the consumer's existing coverage.
Education Programs To Be Created
Moriarty said financial institutions will be allowed to create their own education programs or seek a third party for advice, all of which would need proper documentation.
"We would want the business entity to be able to show it has a training program," he said.
Credit unions selling credit insurance will also be required to provide brochures or other written material at each point of sale location detailing how to file a claim, a toll free number, summary of terms, exclusions and conditions plus explain that credit insurance is not required to get a loan.
CUNA Mutual Group Product Director for Credit Insurance Debbie Peterson said the majority of states have similar legislation regarding limited licenses.
"We're very supportive of it. Most states have it. It's less arduous," she said.
Peterson said credit unions that don't have their own education programs for credit insurance can contact their CUNA point of contact for resources.
The state of Vermont is working with representatives from the Vermont Credit Union League, Vermont Banking Association, the Vermont Retail Association, Universal Underwriters Group and the Vermont Automobile Dealers Association.
The regulation will have a public hearing on Sept. 24 and Moriarty said after a legislative review could take effect by the end of October.
FOR MORE RESOURCES
For info on this story:
* Vermont Department of Banking Insurance and Healthcare, www.bishca.state.vt.us
* CUNA Mutual Group, www.cunamutual.com
