N.Y. Comp. Codes R. & Regs. tit. 11 § 185.0
Current through Register Vol. 46, No. 45, November 2, 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.N.Y. Comp. Codes R. & Regs. Tit. 11 § 185.0