NU Online News Service, Feb. 27, 9:30 a.m. – Minnesota Commerce Commissioner Jim Bernstein is lobbying for a bill that would require issuers of credit life insurance, credit disability insurance and other forms of credit insurance to spend at least 55% of the premium revenue on customer benefits.
Insurers collected $94 million in credit insurance premiums in Minnesota in 2000, according to state figures. The insurers paid $33 million, or 35% of the total, in the form of commissions to the retailers and financial institutions that sold the policies, and $32 million, or 34% of the total, in the form of customer benefits, Bernstein says.
Credit insurers argue that they must have low payout ratios in good times to accumulate the reserves they need for bad times.
But Bernstein has issued a statement arguing that credit insurance payout ratios ought to be closer to the ratios for traditional life and disability policies.
“Credit insurance is simply a cash cow for credit insurance companies, retailers and lenders,” Bernstein says. “It is the only insurance product that pays the seller more than the customer.”