The products may be sold by credit card companies, auto dealers, finance companies, department stores, furniture stores or wherever loans are made and credit extended for the purchase of personal property. Credit Accident and Health, also known as Credit Disability, pays a limited number of monthly payments on a specific loan or credit card account if the borrower becomes disabled during the term of coverage. Credit Involuntary Unemployment pays a limited number of monthly payments on a specific loan or credit card account if the borrower becomes involuntarily unemployed during the term of coverage. Unlike the first three credit insurance products, credit property insurance is not directly related to an event affecting a consumer's ability to pay his or her debt. This report reviews the performance of state insurance regulators in protecting the consumers of credit insurance.
Additional problems exist for credit property insurance.
Table 1 shows 1997 countrywide credit insurance premiums, loss ratios and commissions by coverage. Overall, less than 39 cents on the premium dollar was paid out in claims on behalf of consumers. The actual loss ratios fall far below even the NAIC minimum standards. The credit involuntary unemployment and credit property loss ratios are particularly egregious. Table 2 shows the 1995-97 combined loss ratio for credit life, disability, unemployment and property and the amount of premium overcharges by state.