HOUSE BILL REPORT

SHB 147

BYHouse Committee on Financial Institutions & Insurance (originally sponsored by Representatives Lux, Winsley, Nutley, Chandler, Day, P. King, Dellwo and Zellinsky)

Revising provisions relating to credit insurance.

House Committe on Financial Institutions & Insurance

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (14)

     Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Betrozoff, Crane, Day, Dellwo, Ferguson, Grimm, King, Meyers, Niemi, Nutley, Silver and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE FEBRUARY 9, 1987

BACKGROUND:

Credit life insurance is usually sold on a group basis by a lender and provides that in the event that the borrower dies, any remaining indebtedness will be cancelled.  In most instances, credit life insurance is optional with the borrower.  If the borrower chooses to purchase the coverage, an additional fee is charged to the loan account.  In some instances, the coverage is provided without charge to the borrower; the lender pays for the coverage to protect itself from the risk of default on the loan.

In 1961, the legislature adopted an act extensively regulating the credit life insurance business.  Over the past ten years, various amendments have been made to the act provisions governing the amount of group insurance that may be sold.  The original act limited the sale of coverage to loans with a term of no more than five years and in an amount no greater than $10,000.  That limit was periodically increased and in 1983, the legislature removed the dollar limit and left only a limit on the term of the loan eligible for coverage - ten years.

SUMMARY:

The ten year coverage limit on group life coverage is repealed; group coverage may be provided for a period greater than ten years.

Fiscal Note:    Not Requested.

House Committee ‑ Testified For:     Mike Medlund, Cuna Insurance Group.

House Committee - Testified Against: None Presented.

House Committee - Testimony For:     Financial markets have changed considerably since the credit life and disability insurance statute was adopted.  What ever reasons once existed to limit the sale of group policy to loans with a maturity under ten years are no longer valid.  Since credit unions are now offering loans with a maturity well in excess of ten years, they should be permitted to offer customers credit life insurance for those loans.

House Committee - Testimony Against: None Presented.