Mellin commends DFS for credit life exemption from proposed amendment


New York Credit Union Association President/CEO William J. Mellin recently submitted a comment letter to the state Department of Financial Services commending the department for exempting credit life insurance from a proposed amendment to an insurance regulation.

The DFS is seeking to implement a “best interest” standard with respect to life insurance and annuity products, whereby insurers and producers would be required to conduct a suitability analysis in order to determine whether the sale of a given policy is in the consumer’s best interest.

In his letter, Mellin explained that credit life insurance is a product designed to pay the debts of a borrower in the event of the borrower’s death, and the face value of the policy decreases over time as the balance of the loan is paid down. He also highlighted the credit union movement’s long history with the product, which is only intended to serve as a helpful service to credit union members.

“The additional compliance burden associated with the implementation of a “best interest” standard for credit life products would result in the inability of most, if not all credit unions, to continue to offer credit life products to their members,” wrote Mellin.

He went on to explain that New York credit unions are not licensed insurance producers and do not receive commissions relating to the sale of group credit life products. They do not engage in selling, soliciting or negotiating the sale of credit life insurance. Rather, they offer a basic credit life product with one set price for all members. Credit unions, as master policyholders, enroll credit union members who voluntarily choose to purchase credit life insurance and provide them with certificates of insurance. There is minimal underwriting involved and the insurer generally has little, if any information regarding individual enrollees unless and until a claim is filed.

“The Association strongly supports the exemption of group credit insurance products from the Revised Proposed First Amendment to Regulation 187 and urges the Department to include this exemption in the Final Amendment,” Mellin wrote. “Credit unions have been singularly focused on promoting the wellbeing of their members for more than 100 years. Credit life insurance is an important resource that credit unions provide for their members to ensure that the tragic loss of a family member does not become a financial crisis for the family.”

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