NAIC President Addresses Credit Insurance Study

Addressing the recent study on credit insurance conducted by the Consumer Federation of America (CFA) and Center for Economic Justice (CEJ), NAIC President and Kansas Insurance Commissioner Kathleen Sebelius made several observations.

“As the report noted, NAIC members this year adopted the Credit Personal Property Insurance Model Act, which state regulators are currently working with their legislatures to introduce and adopt,” Sebelius said. “However, the report assumes that financial circumstances are the same in every state and therefore every state should adopt NAIC model acts and regulations exactly as they were drafted.

“The NAIC is ideally suited to playing the role it was meant to play – as a coordinating body for its members. Because insurance products are local products, and consumers have local needs, each insurance regulator – in coordination with their legislature – works to have laws and regulations enacted that are in the best interest of the citizens of their particular state. It must also be noted that many of the conclusions and criticisms in the study are the result of the writers’ opinions, which don’t take into account each NAIC member’s years of state-specific regulatory data and experience.

“In addition, the study contains inaccuracies regarding actions various states have undertaken in regard to credit insurance. For example, the study implies that Ohio has not met its regulatory burden of reviewing prima facie rates since 1985. However, the Ohio Department of Insurance reviews prima facie rates on an annual basis, and, if necessary, issues a rate adjustment by Nov. 1 of each year. In fact, the department issued a prima facie rate adjustment Oct. 31, 2001.

“The nation’s insurance commissioners, working through the NAIC, are committed to creating a 21st century regulatory system that not only makes it easier for companies to introduce products to market and gives consumers more choices, but also enhances the protection of policyholders.

“To that end, the NAIC’s Credit Insurance Working Group will be holding a public hearing on credit insurance during our Winter National Meeting (Dec. 8-11) in Chicago. A principle concern of the working group is a regulatory review of loss ratios for credit insurance, which is used to determine if policy benefits are reasonable in relation to the premium charged.”