Life insurers use the Market Conduct Annual Statement template to show regulators how they handle claims, complaints and other matters.
Consumers typically buy credit life insurance from mortgage lenders, credit card issuers and other lenders.
Some members of the Market Analysis Procedures Working Group, part of the National Association Insurance Commissioners, want to cut credit life out of market conduct reporting for ordinary life insurance, because they believe credit life insurance is different from ordinary life insurance.
The Center for Economic Justice, one of the groups that speaks for consumers in NAIC proceedings, says it thinks that separating credit life from ordinary life in the annual market conduct statement makes sense. The center says, however, that the statement should provide more information about credit life operations, not less.
“Credit life is sold in a reverse-competitive market in which consumers have far less market power than in traditional life insurance markets,” the group says in a comment sent to the working group.
In January, the Consumer Financial Protection Bureau found that a bank collected at least $3.75 million in credit insurance premiums from borrowers whose credit insurance should have been canceled, the center says.
The bank also canceled the credit insurance of some borrowers prematurely, and 25 of those borrowers ended up facing credit insurance claim denials, the center says.
One solution would be for credit life insurers to report the same kind of experience data that issuers of ordinary life report, to help regulators spot problems, the center says.
The working group has posted the comment on its section of the NAIC’s website.
Tom Keepers, executive director of the Consumer Credit Industry Association, says there’s no evidence of any widespread problems with credit insurance.
The problems the Center for Economic Justice cites in its comment were the result of a computer programming error, Keepers says.
Keepers says the NAIC itself reported only 31 closed confirmed complaints in 2015 for 17.5 million credit life contracts in force.
Regulators already get information about credit life complaint data on a Credit Insurance Experience Exhibit, Keepers adds.
Regulators from Pennsylvania and Texas confirmed that complaints about credit life are rare.
Jeffrey Arnold, chief of market analysis for the Pennsylvania Insurance Department, says its residents are paying $93 million per year in premiums to 46 issuers of the product. Policyholders have filed no complaints about credit life in the past three years.
Stacie Parker, who analyzes market conduct for the Texas Department of Insurance, says Texas residents paid $92 million in credit life premiums in 2016 and filed just seven credit life complaints.
The Center for Economic Justice argues that low insurance regulator complaint numbers are a poor indicator, because consumers buy credit life policies from lenders, not insurance agents or insurance companies. The holders of the policies are more likely to file complaints with the lenders’ regulators than with insurance regulators, the center says.
— Read Regulators Want Insurers’ Disaster Response Plans on ThinkAdvisor.