John Mancini
Public Affairs Manager
National Association of Insurance Commissioners
120 West 12th St., Suite 1100
Kansas City Mo 64105-1925
Re: NAIC Creditor-Placed Insurance Model Act
Dear Mr. Mancini,
We are writing, some of
us on behalf of low-income clients, in strong opposition to the Creditor-Placed
Insurance Draft Model Act. Early drafts included provisions that would be helpful
in dealing with a major area of consumer abuse and anti-competitive conduct.
The latest version does little else but legitimize many of the most obnoxious
practices in the sale of creditor-placed insurance.
This is an area where
the market does not work since creditors are making the purchase decision
and consumers are paying for what the creditor selects. The 1980's and
early 1990's saw a feeding frenzy as many insurers, agencies, and creditors
saw an opportunity to extract hundreds of millions of dollars from consumers.
Despite this, state
insurance regulation until now has failed to focus on these abuses. The
only force to reform the abuses in this area has been a series of class
actions resulting in multi-million dollar settlements and individual cases
where juries awarded millions of dollars in punitive damages. Automobile
creditors have now paid out hundreds of millions of dollars in these lawsuits
and agreed to stop many of their most outrageous practices.
The Creditor-Placed
Insurance Model Act is an opportunity for the NAIC to get back in front
in an area it has until recently not addressed. The early drafts offered
credible solutions to some of the abuses. In a startling reversal, the
more recent drafts offer virtually no protection to consumers and instead
offer a thinly veiled immunity to the industry for many of their most
outrageous creditor-placed insurance practices. Many of the practices
the model act legitimizes are practices that are so unfair and deceptive
that individual companies have already promised courts they would stop
engaging in such practices.
Draft Model Act Legitimizes
"Kick-Backs" to Creditors in the Form of Tracking and Notification
Expenses
No issue is more central
to abuses in this industry than the fact that all expenses to track and
notify a creditor's total book of business are loaded into the premium
of just those who are forced-placed. Earlier drafts of the NAIC's Creditor
Placed Insurance Model Act § 6C took the correct position that "the
premium of a creditor-placed insurance policy shall not incorporate the
creditor's cost of tracking and notifying debtors that their insurance
has lapsed."
In contrast the latest
version legitimizes the very conduct the earlier draft prohibited: "Prohibited
rebates and inducements do not include: (1) the providing of insurance
tracking and other services incidental to the creditor-placed insurance
program." (Section 12D). Such a position is at variance with the
practices of a growing number of companies and a number of court orders.
See for example Burke v. Bank of America (Ariz. Super. Ct. 1995) (injunction);
Lopez v. BancAmerica Auto Finance Corp . (Cal. Super. Ct. 1994) (permanent
injunction). See also Section 12D(4) that permits the even more outrageous
practice of insurers paying the lender for the names and addresses of
all of the lender's customers, and then adding this payment into the premiums
of just those who are forced-placed.
It is quite astonishing
that the NAIC is considering legitimizing the practice of loading all
tracking and notification expenses into the creditor-placed premiums.
Not only does the practice have no rational basis, but it is very costly
to consumers. For example, one insurer estimates tracking expenses as
25% of premium.
Loading Creditor-Related
Expenses Into Premium Is Effectively a Kick-Back to the Creditor. Those
few who are forced-placed are unfairly forced to pay costs the insurer
incurs on behalf of the creditor to track other consumers and to notify
other consumers that their coverage is lapsed. Somewhat typical of most
lenders will be breakdowns such as that 100% of customers are tracked,
that 8% of borrowers let their coverage lapse and receive warning notices,
and that 1% of borrowers are eventually forced-placed. The result: 1%
are paying the expenses to track all 100% and notify 8% of borrowers whose
insurance records indicate a lapse -- expenses that should be borne instead
either by the creditor or by all of its customers.
Insurers argue that
those who fail in their contractual obligation should bear the cost of
tracking and notification. They claim that these expenses are only required
because of those who are forced-placed and others should not pay for these
expenses. This argument has apparently won out in the NAIC deliberations
even though it is not only unfair to those forced-placed, but is factually
erroneous.
Tracking and notification
expenses are not necessitated just by those few who are forced-placed.
In fact, from a creditor's point of view, tracking and notification expenses
are most needed for its other customers who let their coverage lapse only
temporarily and for those who would let their coverage lapse if it were
not for the tracking.
Using a Balboa study
of 100,000 borrowers will graphically demonstrate this fact. Balboa sent
a first letter concerning lapsed coverage to 8,000 of 100,000 borrowers,
a second to 4,200 borrowers, a certificate was issued to 3,200 borrowers,
only 800 borrowers were actually charged a premium, and only 200 retained
the coverage for the full year. Assume $1 to track each customer, $1 to
send each notice, and $1 to send a certificate. Insurers arguing that
forced-placed insureds bear the full cost of notice and tracking would
then require these 800 to pay the $115,400 in tracking and notification
expenses, or $144 each.
All 100,000 borrowers
should share the $100,000 cost to track all 100,000 borrowers. But even
if one accepts the argument that those violating their contracts must
pay for all the tracking expenses, there are 8000 borrowers who violated
their contracts, not 800. That is, all of the tracking costs and first
notice costs should be borne by these 8000, the second notice costs by
4200 borrowers, and the certificate issuance costs by 3200 borrowers.
Using this logic,
the forced-placed insureds should each pay $15.50 for tracking and notification,
not $144. The other 7200 borrowers who were identified by tracking will
have to bear costs ranging from $13.50 to $15.50. These amounts can be
collected in a similar manner by which the lender collects late charges.
Consider also GMAC's
practice of tracking and notifying its total customer base, but only forced-placing
those customers whose coverage lapsed and who in advance had been determined
to be high risks. GMAC has no intention to ever forced-place insurance
on its lower risk customers, but it tracks and notifies these low risk
customers to encourage them to purchase their own insurance. There is
absolutely no justification to include in the forced-placed premium GMAC's
expenses to track and notify customers that it will never forced-place.
Insurers' arguments
that all tracking and notification expenses should be included in the
forced-placed premium, taken to an extreme situation, also produces absurd
results. If one in ten thousand are forced-placed, that one borrower would
have to pay over $10,000 just for the tracking and notification expense
portion of his or her annual premium.
Tracking and notification
expenses are loaded into the premium so that insurers can reward creditors
for doing business with that insurer. These expenses would normally be
borne by the creditor (or passed on to all of its customers). Instead,
the insurer pays for these creditor expenses -- by loading them all onto
those who are forced-placed.
Loading of Tracking
Expenses Into the Premium Produces Inappropriate Incentives. Tracking
paid for by loading a fixed amount into each insurance premium for tracking
also provides the wrong incentives if the insurer is the company performing
the tracking and notification and deciding when to forced-place coverage.
The insurer's narrow self-interest is to do as bad a job of notifying
as possible and write as many policies as possible. It is, therefore,
not surprising that consumers so frequently claim that they never received
notice of the forced placement, and do not realize the obligation to pay
for the policy until a balloon becomes due at the end of the term. Insurers
have an incentive to foster this ignorance.
In fact, if insurers
do too good a job at notification, the number of forced-placed insureds
goes down, and the amount that each must pay in tracking expenses goes
up. If this goes up too high, the premiums become unaffordable, and consumers
turn in their cars, which further increases premiums for those left. This
would create a downward spiral until the whole scheme collapses. For creditor-placed
insurance to be viable where tracking is loaded into the premium, it is
thus essential that insurers find enough borrowers one way or another
to forced-place, or the whole arrangement collapses like a deck of cards.
Loading of Tracking
Expenses Into the Premium Is Anti-Competitive . By bundling tracking with
the insurance premium, insurers also retain an unfair competitive advantage
over other tracking companies who would perform these services for a fee
per borrower that is tracked, not per borrower that is forced-placed.
Reducing competition for tracking services means that tracking and notification
costs more than it should and is less efficient than it should be.
Bundling of tracking
and notification with the insurance premium also creates misplaced incentives
for lenders to opt for forced-placed insurance over self-insurance or
blanket insurance. Even when a lender self-insures, the lender may want
to reduce its self-insurance costs by tracking its customers, to warn
those with lapsed coverage to obtain their own policy. But self-insuring
would require the lender to absorb tracking costs, unlike the situation
with creditor-placed insurance.
The Draft Model Act Allows the Sale of and Labeling of "Single Interest"
Products as Insurance -- Products That Do Not Meet Consumers' Expectations of
"Insurance"
Single interest, creditor-placed
coverage is extremely limited. It protects only the creditor's interest
in the car, and applies only after a car has been repossessed or stolen.
Most consumers are shocked to discover that the creditor-placed insurance
they have purchased provides no coverage to repair the car if the consumer
wants to keep the car.
There is ample evidence
that consumers do not understand the limits to this coverage. For example,
an expert witness in language comprehension examined GMAC's notices concerning
the type of coverage that would be placed, and found that consumers reading
the notices would not understand that coverage is available only where
the consumer no longer possesses the car. A GMAC vice president had similar
difficulty understanding GMAC's own notices. Another GMAC official has
suggested that it is very difficult to explain to consumers the limits
on the coverage.
Single interest, creditor
placed insurance places consumers in a no-win situation. Either consumers
pay for the damage out of their own pockets (which they often cannot afford),
or consumers must turn the car in to the lender, pay a deficiency reduced
by the forced-placed insurance, and then try to obtain another loan to
purchase another car.
One of the frustrating
aspects of this latter option is that the consumer may have difficulty
obtaining another car loan because the first lender may report the first
loan to a credit bureau as a voluntary repossession. This may be interpreted
as the consumer falling so far behind in car loan payments that the consumer
turned the car in voluntarily. In fact, all that happened is that the
car was damaged.
It is true that consumers
are partially responsible for their predicament, because they failed to
obtain their own insurance. But this is no excuse for the lender to misrepresent
to the consumer that insurance is being purchased, when in fact the product
does not meet the normal expectation of what insurance does. Some consumers
forgo purchasing their own coverage in reliance that the lender's insurance
will be adequate.
While the clear trend
today is for creditors to offer limited dual interest insurance instead
of single interest insurance, the NAIC Draft Model allows the sale of
single interest, creditor placed policies. A drafting note states that
some states may wish to prohibit such single interest policies outright.
We urge the NAIC to prohibit, directly in the draft Model, the sale of
single interest, creditor placed policies. Consumers do not view these
policies as insurance.
Whenever single interest,
creditor placed coverage is described to consumers as "insurance,"
the very use of the word "insurance" will mislead consumers
because consumers will assume that it will pay accident claims. This is
not cured by burying in a consumer notice technical language warning about
the limited nature of single interest coverage. The NAIC's Model Notice
will mislead consumers into thinking they have purchased a greater level
of protection.
If the NAIC allows
single interest, creditor placed policies, we strongly urge that the coverage
not be called "insurance," but a "default charge"
or a "non-purchase of insurance penalty" or a similar phrase.
Consumers must understand that they are not purchasing "insurance"
for claims while they retain possession of the car. The contract and all
notices would disclose that the lender would assess a charge or penalty
if the consumer failed to provide coverage -- but the disclosure cannot
in any way suggest that coverage is being purchased for damage to the
vehicle while still retained by the consumer.
NAIC Draft Model Legitimizes
Creditor-Placed Insurance Balloon Payments Larger Than the Original Loan
Amount The current NAIC Draft Model Act legitimizes the outrageous practice
of selling creditor-placed insurance for the term of the loan, with one
balloon payment at the end, financed at the same rate of interest as the
loan itself. Section 4 allows a policy term for the remaining term of
the loan (which may be as many as five years.)
While Section 5C prohibits
balloon payments on the one hand, it allows such payments if specifically
agreed to by the debtor. Creditors can thus include balloon payment agreements
in the fine print of the loan contract, and the full five year premium
plus financing costs could be due as a balloon at the end of the loan
term. (Until the very latest draft, the consumer had to agree to the balloon
at the time the charge was added to the outstanding credit balance.) In
addition Section 13D, Paragraph 2 of the Final Notice, allows financing
at the same interest rate as the loan itself.
The NAIC Draft thus
sanctions some of the more outrageous examples of creditor-placed insurance
balloon payments. In one case a lender forced-placed a five year policy
with a $6802 premium, and then financed the whole amount over the five
years for $7417. At the end of the five years, when the consumer had made
all of the loan payments and was ready to obtain clear title to the car,
the lender presented the consumer with a bill for $14,219. It is not impossible
for the balloon to exceed the original loan amount.
If the consumer refuses
to pay the balloon, the lender will not release its lien on the vehicle's
title and will report to credit reporting agencies that the loan is in
default. The creditor could then repossess the car, sell it to pay off
the insurance premium obligation, and seek any remaining deficiency from
the consumer.
Lenders have a direct
monetary incentive to require such huge balloon payments for policies
that cover the full loan term. This will allow the creditor to finance
the maximum amount of premium for the maximum amount of time. Insurers
sometimes claim that the premiums for a policy in effect for the full
term of a loan are a better deal for consumers than a series of one year
policies. An examination of premiums reported by the California Insurance
Department proved this not to be the case. It was generally cheaper to
purchase a series of annual policies than to purchase a policy for the
whole term, and was certainly so when one considered the difference in
financing costs. That is, a $5000 five year policy requires the full $5000
to be financed over five years, while one year policies involve smaller
amounts financed over shorter periods of time.
Another problem with
insurance for the full term of the loan is that the Rule of 78 rebate
penalty is far harsher for a longer term policy than a short term policy.
Since most forced-placed insureds cancel soon after the policy is placed
(they may not have received or understood the notices or it may have taken
a while to find coverage), they experience excessive penalties where the
policy is for the full remaining term of the loan.
Prior versions of
the NAIC Draft Model required the actuarial method for determining rebates.
(See Section 9C in earlier drafts.) This requirement should be reinstated.
It is particularly unacceptable to allow five year term policies and Rule
of 78s rebates.
NAIC Draft Model Permits Excessive Financing Costs When No Financing Costs
Are Necessary
One reason why creditors
favor balloon payments and long policy |erms is that financing creditor-placed
insurance premiums is more lucrative than financing the original car loan
because the interest rate is the same but financing the insurance premium
is a far less risky loan. Default on a car loan is protected only by the
collateral, which may bring the creditor as little as 60% of its wholesale
value, less repossession, storage, reconditioning, and sale expenses,
and nothing at all if the consumer skips. On the other hand, when the
car is repossessed for non-payment, the creditor-placed coverage is cancelled
and the full unearned insurance premium is refunded to the lender.
Since interest rates
are based upon risk, and since the car loan is much riskier than the insurance
premium loan, the interest rate for the forced-placed insurance premium
loan should be less than that financing the car loan. The higher the rate
of the car loan, the bigger should be the differential between that loan's
interest rate and the loan on the insurance premium.
Insurers often offer
consumers low financing rates for consumer-purchased policies because
they are competing for consumers' business. Where insurers and lenders
are working together to further the lender's interests, one instead sees
excessive finance charges going to the lender.
Unfortunately, the
NAIC Draft Model actually legitimizes excessive interest rates by specifying
that the same interest rate will be used as the contract rate. See Section
13D, Para. 2 of the Final Notice.
In fact, there is
no need for any financing costs at all for creditor-placed insurance.
The insurer can bill the creditor on the master policy on a monthly basis,
the consumer then reimburses the creditor on a monthly basis, and there
is no finance charge. This is the approach taken by earlier drafts of
the NAIC Draft Model Act. See Section 13B of earlier drafts. This approach
is by far the fairest for consumers and prevents incentives for creditors
to forced-place consumers.
NAIC Draft Model Act
Authorizes Payments to Creditors That Are in Effect "Kickbacks"
Sections 12D and 12E provide an insurer safe haven for various types of
kickbacks to creditors for selecting (on behalf of the consumer) that
particular insurer. Subsection 12D(1) concerning tracking and notification
expenses has been described above, and we refer you to our comments there.
Subsection 12D(4)
authorizes insurers to pay creditors for supplying to the insurer the
list of the creditor's own borrowers. Like tracking expenses, these expenses
relating to all customers should not paid for just by those who are forced-placed.
Moreover, it will
be impossible for an insurance regulator to determine if each and every
expense an insurer rebates to a creditor is reasonably estimated to equal
the expenses incurred by the creditor. This is an impractical standard
for insurance regulators who have neither the time nor resources to conduct
the auditing of creditors that would be needed.
These "kickbacks"
can be significant and can substantially raise insurance premiums. One
industry statement estimates them at 10% of premium. In one recent case
a major provider of forced-placed insurance in Mississippi was paying
lenders 50 cents a month for each of the lender's customers that the insurer
tracks (not just for each customer forced-placed). This was found to be
far in excess of the lender's true expenses, and little more than a disguised
commission. If one percent of a lender's borrowers are forced-placed,
and this $6 a year per borrower charge was passed on only to those forced-placed,
this would increase each premium by $600 a year!
NAIC Draft Model Section
12D(3) authorizes yet another "kick-back" in the form of experience-rated
refunds or dividends. Rather than pass these rebates on to the consumers
who paid the premiums, and whose experience was better than expected,
lenders retain them as a windfall. In some cases, the lender continues
to collect from the consumer premiums and related financing charges where
the lender has already received payment for that premium from the insurer
via a rebate. Not only does the lender retain rebates that belong to consumers,
but lenders have an incentive to ask insurers for initial premiums as
high as possible, so that the experience-rated rebates they retain are
maximized. There is no practical difference between dividends or experience
rated refunds and bribes if these amounts are passed on to the forced-placed
insured.
In addition, NAIC
Draft Model Section 12D(2) allows entities created by creditors to receive
commissions to do so. Section 12E even legitimizes 20% commissions to
such fictitious entities, while not foreclosing the companies from paying
higher than 20% commissions.
The NAIC, through
these various provisions, will allow 20% or more in payments in commissions
to creditors, plus tracking expenses, plus the creditor's own expenses,
plus experience-rated rebates. In short, the Model offers no practical
limit to insurer payments to creditors to write business with them, and
in fact legitimizes certain specific forms of payments that only serve
to drive up the costs consumers must pay.
NAIC Draft Model Has
Abandoned Requirement That Creditor Use Commercially Reasonable Efforts
to Purchase Insurance
An earlier version of the NAIC Draft Model Act provided an effective approach
to preventing lenders from selecting the creditor-placed insurance that
is the best deal for the creditor, even though it is the worst deal for
the consumer. The May 16 Draft created a statutory duty that lenders behave
in a commercially reasonable manner in finding insurance for its customers.
That is lenders must look out for the best interests of their customers
when selecting an insurer.
This requirement was
deleted in the August 28, 1995 and later drafts. Part of the reason appears
to be purely coincidental; the requirement was paired with a provision
requiring lenders to be subject to liability claims against the consumer,
a provision that was harshly criticized. The only specific industry objection
to the commercially reasonable requirement in the Draft was that it would
force lenders to pick the lowest priced coverage, even if the insurer
was almost insolvent.
This, of course, is
a gross misstatement of the commercially reasonable requirement. The lender
would not be required to find the lowest priced coverage, but only to
make a commercially reasonable choice. The lender could justify its choice
of a higher-priced insurer based on the marginal solvency or poor claims
handling of a lower-priced alternative insurer. But the lender would have
to engage in reasonable efforts to look out for the forced-placed insured's
best interests.
Some might complain
that a commercially reasonable standard is either too vague to be fair
to lenders or, conversely, too loose to have much teeth. But "commercially
reasonable" is a standard with which lenders are intimately familiar
in that the Uniform Commercial Code § 9-504 requires lenders to use commercially
reasonable efforts in selling cars after repossession. The standard in
that context has remained viable for thirty years without change. It allows
creditors flexibility while providing a cause of action for improper conduct.
The sale of repossessed
cars is a strikingly similar situation to the placement of forced-placed
insurance. In both cases, the consumer's default provides the creditor
with the right to act unilaterally without court supervision or the consumer's
permission in ways that have direct financial consequences for the consumer.
And in both situations, there is a danger of self-dealing.
NAIC Draft Model's Rate Regulatory Provision Is Inadequate
Draft Section 8D sets out a file and use approach which is totally inappropriate
for this line of insurance. At a minimum, a prior approval approach is required.
To date, state regulators have not significantly regulated this line of insurance
and are unlikely to make this a major priority compared to other lines of insurance.
To give an insurance regulator 30 days to examine the rate or it goes into effect
places an unrealistic burden on the regulator.
Few things are more
obvious than that competition does not work to regulate creditor-placed
insurance rates. For this reason, if for no other, creditor-placed rates
should require prior approval, and not just file and use. Forced-placed
insurance premiums are an example of reverse competition. The consumers
who pay for the insurance are not the ones selecting the insurance. Instead,
the lender is making the insurance purchasing decision. Insurers do not
compete on the price of the premium, but on benefits that can be provided
to the lender.
Part of the proof
that market forces are not working is the significant variability in price
for the same forced-placed coverage in the same state. This marked variation
indicates that something beside normal market forces is in operation,
and that extraordinary rate supervision is required. The California Insurance
Department found premium levels in California ranging among seven companies
from $313 to $954 for two year term policies where the outstanding balance
was $2,500. One year policies on a $10,000 loan ranged from $591 to $1280.
Four year policies on a $12,500 loan ranged from $2154 to $5798.
Just as dramatic as
the variability of these premium levels is their absolute size. Balboa
is one of the major forced-placed insurance writers in the country, and
the California Insurance Department reports Balboa charges for a one year
VSI policy $1,280 for a $10,000 gross loan balance (i.e. not net of unearned
finance charges) and $1600 for a $12,500 loan balance. Not only is this
just physical damage coverage, but it covers losses up to the loan balance
if and only if a car is repossessed or a total loss. Compare this with
the typical dual interest physical damage policy purchased by a consumer
that is typically priced under $400.
Another interesting
indication that forced-placed insurance is not at competitive levels is
the experience in Texas. Although the state insurance department establishes
rates for this line of insurance, county mutual insurance companies are
not bound by state-established rates. Staff at the Texas Insurance Department
report that county mutual insurance companies are major writers in that
state of forced-placed insurance, and that their premiums are significantly
above those set by the state.
Creditor-placed insurance
also presents an unusual problem for loss ratio-based regulation because
insurers may be providing benefits to lenders in the form of high claims
payments. There are reports that insurers are paying off the full deficiency
balance on repossessed cars, instead of just the amount of the damage
claim. When an insurer pays a claim under a creditor-placed policy on
a repossessed car, it has no way of knowing what damage was caused before
the policy went into effect, what damage was done during the policy period,
or what damage occurred after the policy period during repossession or
storage. The insurer may generously pay for all damage and more under
the forced-placed policy because the insurer wants to please the creditor,
even though it would not make such payments under a policy purchased by
the consumer. Excessive claims payments that are retained by the creditor
have the same effect as kick-backs paid directly to the creditor. These
high claims costs drive up the loss portion of the premium, and will thus
force consumers to pay excessive premiums, even if rates are based on
an established loss ratio.
Draft Prohibition Against Extra Coverages Will Help Consumers
Section 6 provisions that prohibit extra coverages effectively deal with a
serious abuse found in creditor-placed insurance policies. There can be no justification
for creditors forced-placing coverage in excess of what the consumer is required
to purchase. A series of lawsuits have challenged inclusion of these undisclosed
and unauthorized extra coverages in the master policy paid for by the consumer,
and a number of court injunctions now prohibit creditors from charging such
coverages to the consumer's forced-place premium.
These extra coverages
are not only not authorized and not disclosed, but they should be included
in a loan's finance charge, and not paid by consumers as an amount to
be financed. If the lender attempted to include this extra coverage in
a consumer loan as an extra charge paid by the consumer, federal and state
law would require that this be treated as part of the finance charge and
thus increase the interest rate for purposes of Truth in Lending disclosures
and state usury law.
A related practice concerns the deductible of the forced-placed policy. The
credit agreement will specify or the creditor will have a standard as to the
maximum deductible allowed on the consumer-purchased physical damage insurance
(e.g. $500). But when the creditor forced-places coverage, it will purchase
a policy with a lower deductible or even zero deductible. The creditor has thus
received greater protection than through consumer-purchased insurance, and the
consumer is forced to pay for this extra protection for the creditor.
NAIC Draft Model Act's Prohibition on Private Remedies Prevents Effective Enforcement
of the Act
The primary reason that forced-placed insurance issues are before the NAIC today
is that private litigation uncovered gross fraud and resulted in recoveries
for defrauded consumers. Though forced-placed insurance may not represent a
large segment of the insurance industry, it is a line that is subject to many
abuses. Victims of abuse in this area are not vocal and are not well-connected.
It is unlikely that overburdened insurance regulatory staff will be able to
effectively monitor the complex interrelationships between numerous insurers
and creditors.
On the other hand,
there is no reason to insulate insurers and creditors from one of the
most effective means of enforcement, the ability of victimized consumers
to bring an action to recover what was stolen from them. But this is exactly
what the NAIC Draft Model Act does at Section 2C. We urge the NAIC to
delete this language.
Conclusion
The early drafts of the Creditor-Placed Insurance Model Act showed some promise
of providing relief in an area of great potential consumer abuse. The recent
drafts offer almost no consumer protection, and instead legitimize practices
that are unfair, deceptive, anti-competitive, and that in fact are even in violation
of numerous court injunctions against individual companies. As presently drafted,
we urge the NAIC to abandon its efforts in this area as being counterproductive
to the public interest.
Respectfully Submitted
Jonathan Sheldon,
Staff Attorney
National Consumer Law Center
Mary Griffin
Insurance Counsel
Washington Office
Consumers Union
and NCLC