WASHINGTON -- Consumers who buy credit insurance when they take out a loan, buy a car or get a credit card are being overcharged by $2 billion a year, Consumers Union and another group charged Tuesday.
Mary Griffin, insurance counsel for Consumers Union, and Birny Birnbaum, consulting economist for the Center for Economic Justice, blamed state insurance regulators for what they said is lax supervision of credit insurance sales.
"We're asking the states to do their job," Mr. Birnbaum said at a news conference.
An official of the National Association of Insurance Commissioners, which represents the state regulators, said they share some of the concerns about credit insurance rates and are looking into the matter.
Several regulators "have expressed concern about the credit industry in general" and credit insurance rates, said Steven Larsen, chairman of the NAIC's market conduct and consumer affairs committee.
"This needs to be re-examined," Mr. Larsen, who also is Maryland's insurance commissioner, said in a telephone interview.
Credit insurance pays a lender, such as a bank or finance company, car dealer, department store or credit card company, if a borrower becomes disabled or dies. Other types of credit insurance provide for monthly payments if a borrower loses his job, or for repair or replacement of property bought with the loan or used as collateral.
More than $17 billion in credit insurance was sold in this country from 1995 to 1997, according to Consumers Union, which publishes Consumer Reports magazine, and the Center for Economic Justice, an advocate for low-income consumers.
Although buying the insurance usually is not mandatory, the two groups maintain that lenders often coerce consumers into taking it.
The groups released a study of credit insurance sales in that period, concluding that most consumers are paying more than is reasonable.
"We think (most) consumers should stay away from this product," Ms. Griffin told reporters. Credit insurance "is a bad deal, and it's only getting worse," she said.
An exception, Ms. Griffin said, involves those consumers who live in states with lower rates for credit insurance or who are elderly or in poor health.