Cal. Code Regs. Tit. 10, § 2248 - Preamble and Authority

(a) Credit insurance provides important stability in financing the flow of goods and services; protecting the interests of lenders and sellers by assuring payment of outstanding debts, and avoiding hardship to debtors and their families in the event of death or disability of the debtor prior to termination of the debt.

(b) In the marketing of credit insurance there have been occasions where the inferior bargaining position of the debtor creates a "captive market" which, in the absence of appropriate regulation, places the creditor in a position to dictate the choice of coverage, the premium rate, the insurer and agent, with undesirable consequences, such as: excessive coverage both as to amounts and duration; excessive charges to debtors; failure to inform debtors of their insurance coverage; and failure to provide debtors the protection purchased by the debtor.

(c) In the absence of appropriate regulations, 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 experience-rating refunds or in the form of commissions either to the creditor as a licensed agent or broker controlled or owned by the creditor instead of on the basis or reasonable cost for the protection provided to the consumer, the debtor. This results in "reverse competition" which, unless properly controlled through the regulation of the premium rates charged to the debtor and the amount of compensation received by the creditor, agents and brokers results in inequitable insurance premium charges to debtors which are unreasonably high and not reasonable in relation to the premium charged for the insurance benefits received by debtors, and constitute provisions which are unjust, inequitable and unfair.

(d) These regulations are promulgated pursuant to Section 779.21 of the Insurance Code and apply to credit life insurance and credit disability insurance which is subject to the subject to the provisions of Article 5.9, Chapter 1, Part 2, Division 1, of the Insurance Code.

Notes

Cal. Code Regs. Tit. 10, § 2248

1. Repealer of article 6.7 (sections 2248.1-2248.25, consecutive) and new article 6.7 (sections 2248-2248.20, consecutive) filed 12-29-78; designated effective 4-1-79 (Register 79, No. 2). For prior history, see Registers 73, No. 22; 70, No. 18.
2. Amendment of article heading filed 4-14-94; operative 5-18-94. Submitted to OAL for printing only pursuant to Government Code section 11343(a)(1) (Register 94, No. 15).

Note: Authority cited: Section 779.41, California Insurance Code.

1. Repealer of article 6.7 (sections 2248.1-2248.25, consecutive) and new article 6.7 (sections 2248-2248.20, consecutive) filed 12-29-78; designated effective 4-1-79 (Register 79, No. 2). For prior history, see Registers 73, No. 22; 70, No. 18.
2. Amendment of article heading filed 4-14-94; operative 5-18-94. Submitted to OAL for printing only pursuant to Government Code section 11343(a)(1) (Register 94, No. 15).