WASHINGTON -- Credit life insurance is costing consumers too much and needs to be better regulated, according to a report made public Monday,
The report, released by the National Insurance Consumer Organization and the Consumer Federation of America, urged state insurance commissioners to lower the premiums companies can charge.
The groups' goal is to move the ratio of benefits to premiums closer to the 60% standard established by the National Association of Insurance Commissioners to hold credit life insurance prices down.
Credit life insurance can cost as much as $30 annually for a $4,000 loan.
ABA States Its Case
Philip Corwin, lobbyist for the American Bankers Association, said this figure is higher than similar provisions in most life insurance policies. But he added that the coverage is voluntary.
"We think consumers are pretty well-informed, and they are aware that it's optional. Let them make their own decision," he said. "It's more expensive because it's bought in small amounts and is available to everybody regardless of age and health."
The consumer groups stressed that 17 states showed loss ratios below 40% and annual premiums of more than 50 cents per $100 of loan taken out.
"Bringing all the states in compliance with the NAIC standard would save consumers an additional $530 million," said James H. Hunt, director of the insurance consumer group.
However, instances of discrimination against borrowers who reject offers of credit life insurance are on the decline, according to Stephen Brobeck, executive director of the Consumer Federation of America.
Depends on Resources
Borrowers with financial resources or life insurance coverage adequate to pay off loans in case of death should avoid purchasing credit life insurance altogether, Mr. Hunt said.
"Consumer credit may not meet the needs of every consumer," said William Burfeind, executive vice president of the Consumer Credit Insurance Association.
