New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter VII - Credit And Creditor Insurance › Part 185 - Credit Life Insurance And Credit Accident And Health Insurance › Section 185.0 - Preamble

Current through Register Vol. 46, No. 28, July 10, 2024
(a) In the
				financing of the flow of goods and services, credit insurance provides
				important stability by protecting the interests of lenders and sellers in the
				payment of outstanding debts and avoiding hardship to debtors and their
				families in the event of death or disability.
(b) In the marketing of credit insurance, the
				inferior bargaining position of the debtor creates a captive market in which,
				without appropriate regulation of such insurance, the creditor can dictate the
				choice of coverages, premium rates, insurer, agent and broker, with such
				undesirable consequences as: excessive coverage (both as to amount and
				duration); excessive charges (including payment for nonessential items
				concealed as unidentifiable extra charges under the heading of insurance);
				failure to inform debtors of the existence and character of their credit
				insurance and the charges therefor, and consequent avoidance of the protection
				provided the debtor by such coverage.
(c) In the absence of regulation, premium
				rates and compensation for credit insurance tend to be set at levels determined
				by the rate of return desired by the creditor in the form of dividends or
				retrospective rate refunds, commissions, fees, or other allowances, instead of
				on the basis of reasonable cost. Such reverse competition, unless properly
				controlled, results in insurance charges to debtors that are unreasonably high
				in relation to the benefits provided to them.
(d) Section 3201 (b)(4)(A)  of the
				Insurance Law provides that there be filed with the superintendent, subject to
				his approval, all forms of policies, certificates, certificate statements,
				applications and other forms pertaining to credit life insurance and credit
				accident and health insurance, together with premium rates for such policies.
				Section 3201(b)(4)(B) provides that the superintendent shall promulgate
				regulations pertaining to credit insurance. Section 3201(c)(8) provides that
				the superintendent shall not approve any such forms or premium rates if such
				premium rates are unreasonable in relation to the benefit. Section 3201(c)(2)
				prohibits the delivery or issuance for delivery in this State of any policy or
				certificate form, along with any application, rider or endorsement used in
				connection therewith, pertaining to life insurance or accident and health
				insurance which would be prejudicial to the interests of policyholders or
				members or it contains provisions which are unjust, unfair or inequitable.
				Section 3201(c)(3) prohibits the delivery or issuance for delivery in this
				State of any policy form, contract, certificate or other evidence of any such
				insurance contract pertaining to accident and health insurance and any
				application, rider or endorsement used in connection therewith if such form
				contains provisions which encourage misrepresentation or are unjust, unfair,
				inequitable, misleading, deceptive, or contrary to law or the public policy of
				this State.
(e) The secondary
				mortgage market has become an important source of funds for consumer credit.
				The department recognizes the need for efficient operation and the emergence of
				organizations which provide administration of mortgages that have been assigned
				by the original lender or consolidated from various lenders has benefited the
				public. In order to simplify administration and reduce costs, mortgage loan
				servicers are therefore recognized as a type of creditor under sections 4216 (b)(14) and
				4235 (c)(1)(M)  of the
				Insurance Law.
(f) In the recent
				past, insurers have left the credit marketplace in New York and concerns have
				been expressed about the continued availability of coverage in this State. The
				department has reviewed the provisions of regulation 27A and finds that there
				is a need to update the regulation with respect to the types of products
				authorized, to simplify the regulatory process related to the sale of credit
				insurance and to promote a more active marketplace in New York. Pursuant
				thereto, in order to prevent the aforementioned abuses without impairing the
				sound operation of the business of credit insurance, the rules and standards in
				this Part are hereby adopted.