LESS THAN 2 CENTS A DAY PRESERVES A MARKET

Two cents a day.

It's the difference between the credit insurance market today and the market credit insurance critics want. It's the amount they want to take away from the credit insurance industry by raising loss ratios to reduce rates. They say it would go to consumers. They're wrong.
It would be the cost of closing down the market.

Take away that 2 cents a day and you take away the credit insurance market.

 
You take away credit insurance from millions of people who want it.

Periodically, critics issue reports saying credit insurance rates should be set based only on loss ratios.
They say there should be a mandatory minimum loss ratio set at a number that translates into a maximum credit insurance rate of 40 cents for each $100 of coverage.
In 2001 the national average rate for credit life insurance is 50 cents per $100 of coverage.
What does this rate difference mean in real dollars to real consumers?

The average size of a loan protected by credit life insurance is about $6,000.

At a cost of 50 cents per $100 of coverage, the cost for a credit life insurance policy to insure a $6,000 loan is $30 per year. That's 8.2 cents day.
If the cost were 40 cents per $l00 per year, the cost to insure a $6,000 loan would be $24 per year, or less than 6.6 cents a day.
The difference? It's $6 a year - less than 2 cents a day (1.6 cents per day).

What does the less than 2 cents-a-day difference mean?

In the past 20 years, more than 200 companies left the market.
There are 175 companies that still offer credit insurance.
They know that less than 2 cents a day pays to keep the product in the market.
The product pays for insurance premium taxes and regulatory fees to states, salaries and benefits for insurer employees, and for other fixed administrative costs.
It includes the industry-wide profit of .4 cents per day (four tenths of one cent).
Less than 2 cents a day is the difference between offering the product or maybe having to get out of the credit insurance business.

There are more than 47 million loans insured by credit insurance representing tens of millions of consumers who want the protection they get from it. Ask them if it's worth less than 2 cents a day to make sure they can have it.

What would they say to less than 2 cents a day to preserve $6,000 of insurance?

They would say yes.

They already do.