appendix a survey questionnaire and cover letter978-1-4613-1327-4/1.pdf · appendix a survey...

Appendix A

SURVEY QUESTIONNAIRE AND COVER LETTER

On the following pages are the cover letter and questionnaire sent to each customer in the sample. As can be seen, the letter was sent on Credit Research Center stationery. In the two bracketed expressions appeared one of the following sets of phases depending on the type of creditor supplying customer addresses:

"a finance company" and "an automobile loan" "consumer finance company" and "a loan or line of credit" "bank" and "a loan or line of credit" "the credit union" and "a loan or line of credit"

128 Survey Questionnaire and Cover Letter

Ct Dear Consumer:

You can help set public policy on credit life insurance by giving us your views as a consumer who may have recently considered purchasing credit life insurance. Credit life insurance pays off your loan balance in case of death.

Many fmancial institutions nationwide are participating in a research project that examines public policy relating to credit insurance products. Your name was selected at random by [nature of com~any] from whom you recently obtained [nature of a loan or line of credit]. We '1eed to understand how you decided whether or not to purchase credit life insurance and what you think about this type of insurance. Since you represent several thousand other consumers in your area, your response to this short questionnaire is very important. You have our self-addressed, stamped envelope in which to return the questionnaire.

We do not have and will not receive your name and address, and the credit grantor will not see your answers to this questionnaire. Your responses are anonymous and will remain confidential.

You will note that your questionnaire is to be returned to the Credit Research Center. Who are we? The Credit Research Center was founded in 1974 and is part of Purdue University's Graduate School of Management. Our goal is to improve understanding of the fmancial markets that serve the needs of consumers. We can reach that goal only with the help of people like yourself, who are willing to take 10 minutes to complete the short questionnaire.

We would greatly appreciate your participation in this survey. Please help us by completing the questionnaire today.

Sincerely yours,

Michael E. Staten Executive Director

P.S. If you would like a summary of our research fmdings when they are available, just drop us a postcard or letter separately from this questionnaire.

Credit Research Center Krannert Graduate School of Management, Purdue University

West Lafayette, Indiana 47907 (317) 494-4380

Survey Questionnaire and Cover Letter 129

CREDIT INSURANCE QUESTIONNAffiE Credit Research Center

Part 1. The OtTer of Credit Insurance

Please think about your recent credit transaction (loan, purchase on credit, or other).

1. In your recent credit transaction, were you offered an opportunity to purchase credit life insurance? o Yes o No (Please go directly to Part 2 - Question 20) o Don't remember (Please go directly to Part 2 - Question 20)

2. Was an offer to provide credit life insurance made: o in persoo o by telephone o by mail (please go directly to question 5) o Don't remember

3. We would lilce to know wben the credit insurance was offered or suggested to you. Was it o When you frrst applied for credit or ftIled out an application form. o After you were told your application for credit had been approved, but before you signed the fInal

papers. o After you had signed all the papers and received the loan. o Don't remember.

4. We would lilce to know how the credit insurance was offered to you. Please answer even if you did not purchase the insurance. Indicate what you think about each of the statements below.

Strongly Strongly Don't Agree Agree Disagree Disagree Recall

a. The person handling my loan explained that buying credit insurance was not required. 0 0 0 0 0

b. I felt that buying credit insurance would help my chances of obtaining the loan. 0 0 0 0 0

c. I believed that buying credit insurance would get me better credit terms (lower interest or fees). 0 0 0 0 0

d. The person handling my loan pressured me to sign up for credit insurance. 0 0 0 0 0

5. Did you purchase credit life insurance? 0 Y es ~ Please turn to top ofnext page 0 No (Please go directly to Part 2 - Question 14) 0 Don't remember (please go directly to Part 2 - Question 20)


a. While credit life insurance pays off your loan ba1ance in case of death, does your credit insurance also cover your loan payments in case you are unable to work due to illness or accident?

o Yes 0 No 0 Don'tremember

b. Do you have the right to cancel your credit insurance and obtain a refund of part of your insurance premium?

o Yes 0 No 0 Don'tremember

Part 2. Attitude Towards Credit Life Insurance

We are now interested in knowing what factors affected your decision to buy or not to buy credit life insurance.

If you PURCHASED credit life insurance, please rate the importance of EACH of these possible reasons for buying the insurance:

A major Very Somewhat Not very Nota factor Important Important Important factor

6. Not enough other life insurance protection. 0 0 0 0 0 7. No requirement for a medical exam. 0 0 0 0 0 8. The convenience of buying the insurance. 0 0 0 0 0 9. The cost of the credit life insurance. 0 0 0 0 0 10. To protect my credit rating. 0 0 0 0 0 11. Don't want my debts to be a fmancial burden. 0 0 0 0 0

12. Improve my chances for getting the loan. 0 0 0 0 0

13. Other (please explain)

If you DID NOT PURCHASE credit life insurance. please rate the importance of EACH of these possible reasons for not buying the insurance:

14. I have enough life insurance protection. 15. The cost of the credit life insurance. 16. Was not adequately explained to me. 17. Publicity regarding credit life insurance. 18. Not eligible because of age or other reason.

19. Other (please explain)

A major factor

0 0 0 0 0

Very Somewhat Important Important

0 0 0 0 0 0 0 0 0 0

Not very Not a Important factor

0 0 0 0 0 0 0 0 0 0

Survey Questionnaire and Cover Letter 131

20. Please think about credit life insurance in general and its cost. Would you say Ihat it is: o A very good deal for Ihe cost. o A fairly good deal for Ihe cost. o Fairly priced: neilher over-priced nor under-priced. o Somewhat over-priced. o Very over-priced. o Don't know.

21. Assume Ihat you were to obtain Ihe same type and amount of credit again. How likely are you to

also purchase credit life insurance? o Would defmitely buy. o Would probably buy. o Don't know. o Would probably not buy. o Would defmitely not buy.

Part 3 About You

Finally, in order to compare our results from Ihis survey wilh other national surveys, please help us by providing some infonnation about yourself. If there is some question that you don't want to answer, just cross it out and go on to the rest.

22. In what year were you born? 19

24. You are: o Male o Female

26. You are: o White o Black o Hispanic origin o Asian o American Indian o Other

23 . Your marital status: o Currently married o Never married o Separated, divorced or widowed

25. Do you own your own home or condominium? DYes o No

27. What is Ihe highest grade of school or year of college Ihat you completed? Please check one:

o 0-8 o 9 - 11 grades o High school diploma o Some college o College degree

28. The number of your dependents, excluding yourself: __ .

29. In what state do you live? _______ _


30. Which of the statements below comes closest to the amount of financial risk that you (and your spouse) are willing to take when you make investments? Please check OIle. D Take substantial risks expecting to make substantial returns. D Take above ayeralle fmancial risks expecting to earn above ayeralle returns. D Take ~ fmancial risks expecting to earn ~ returns. D Take below averalle fmancial risks expecting to earn below averalle returns. D N2l willing to take any financial risk.

31. Do you have any life insurance (including any provided by your employer) besides the credit life insurance coverage that you were recently offered? D No D Don't remember DYes

1111 Is the amount of that other life insurance $50,000 or more? DYes D No D DOIl't remember

32. How much was the total income of your family members living at home in 1992 from all sources, before taxes and other deductions? D Less than $10,000 D $10,000 -19,999 D $20,000 - 29,999 o $30,000 - 39,999 o $40,000 - 49,999 o $50,000 - 74,999 D $75,000 - 99,999 D $100,000 or more

Thank you for being so helpful. Please return your completed questionnaire in the postage-paid envelope provided.

Or, return to ~ Credit Research Center Krannert Graduate School of Management Purdue University West Lafayette, IN 47907·1310

Appendix B

RESPONSES TO OPEN·END SURVEY QUESTIONS

In Part 2 of the survey questionnaire, respondents were given the opportunity to expand on their reasons for purchasing or not purchasing insurance. The comments obtained from those respondents who answered these open-ended questions are reported in their entirety below. The comments add important insights into the experiences of customers. A conclusion that becomes quickly apparent is that credit insurance triggers strong reactions from borrowers, both positive and negative. Beyond that, however, the comments must be analyzed cautiously because most respondents did not feel strongly enough about the questions to take the extra time to write a response. Consequently, we should not assume that the open-ended responses are representative of the opinions of all respondents. For clarity, these responses have been sorted into six categories reflecting the actual purchase decision, the perceived purchase decision and customer impressions of the sales IreS

sage.

Category I responses are from individuals who actually purchased credit life insurance, correctly perceived that they had, and, in response to specific survey questions, remembered hearing that credit life was optional, did not feel pressured to purchase the credit life, and did not think it would help their chances of getting the loan. As Exhibit 6.6 in Chapter 6 illustrates, such survey participants represent the largest portion of all buyers of credit life insurance. Not surprisingly, comments from individuals in this category are predominantly favorable toward credit life insurance, although there are a few comments that indicate the purchase was viewed as required. Note also a sizable number of the comments indicate the presence of "adverse selection", in that those who have trouble buying insurance elsewhere due to pre-existing medical conditions are using credit life insurance as an alternative. Such customers appreciate the advantages of "group-insurance" pricing. Naturally, the higher likelihood of paying claims from such customers raises the cost of providing this insurance to others.

Category II responses are from individuals who actually purchased credit life insurance, correctly perceived that they had, but, in response to specific survey questions, indicated that either it had not been explained that credit life was optional, or that they felt pressured to purchase credit life insurance, or that they thought it would help their chances of obtaining the loan. The comments from such individuals illustrate the displeasure of this vocal minority group of buyers of credit life insurance. They also illustrate the range of borrower experiences at the point of sale. For example, there is evidence that some creditors "offered" insurance by including the payments in the [mal loan papers for the borrower to sign. Borrowers could have declined the coverage, but apparently some believed the

134 Responses to Open-End Survey Questions

consequent delay in reprinting the documents more than offset the savings from requesting deletion of the coverage, and purchased anyway. A more troubling fmding is that some borrowers were told insurance was required, when in fact it was not.

Keep in mind that Exhibit 6.9 in Chapter 6 estimated that a maximum of 3.4 percent of all buyers purchased credit life insurance due to coercive/abusive sales tactics alone. Indeed, comments from borrowers in Category II reaffirm that some borrowers who said they felt pressured would have purchased the credit life insurance anyway.

Category III responses are from individuals who did not actually purchase credit life insurance and perceived that they had not Not surprisingly, when such individuals choose to write in comments, they were typically negative.

Category IV responses are from individuals who thought they had purchased credit life insurance but in fact had not. As discussed in Chapter 5, many of these responses mirror those of individuals who actually purchased, indicating that at least to some extent, this group reflects a missed sales opportunity.

Category V responses are from individuals who thought they had not purchased credit life insurance but in fact had. As discussed in Chapter 5, many of these responses are similar to those who did not purchase credit life insurance, indicating that a small group of individuals did unknowingly purchase credit life insurance.

Category VI responses are from individuals who either indicated that they could not recall their purchase decision or for whom the perceived purchase decision could not be ascertained as certain questions were left blank.

CATEGORY I

(Reasons to purchase credit life insurance given by those who actually purchased credit life insurance, correctly perceived that they had, and, in response to specific survey questions, remembered hearing that credit life was optional, did not feel pressured to purchase the credit life and did not think it would help their chances of getting the loan.)

• Only got it on my husband. He is major bread earner even though I work too.

• Lost job.

• Each person should pay the same rate on credit life. Age should not be a consideration.

• Should be a little higher for man and wife. Either one death could be burden to other. I would have paid more if offered opportunity.

• As I'm 60 years old, I just thought it was a smart thing to do.

Responses to Open-End Survey Questions 135

• A major purchase we wished to cover with insurance.

• It was explained to me.

• Single parent.

• In case if sickness or death, my loan would be taken care of.

• In case of death before payoff, would be left to children.

• I think insurance should be available to all customers and they should purchase it if possible.

• We got credit life. But when Leon got cancer, and we bought another car would not cover Leon.

• It is cheap for the protection.

• Would not have gotten the loan without it. It was mandatory.

• We didn't have a choice they said that life and accident were required on all purchases that were fmanced. It is very expensive.

• I wasn't given a choice.

• Life insurance paid house loan off at my husbands death in 1987.

• Peace of mind.

• Spouse would have strongly advised against purchasing as life insurance is adequate without it.

• Need the insurance.

• Will get my payments covered in case of sickness.

• We thought it would be good to have. If something happened to David, I wouldn't have this bill to worry with.

• To protect my husband in case of my death.

• The cost of this type insurance is too expensive.

• Spouse benefit on my death.

• Rates were cheaper then savings bank life insurance.

• Our son was killed in an auto accident and his credit insurance paid his loan. We know it doesn't always happen to the other guy.

• Our friend is the sales manager, and he also represents the insurance company.

• On previous loan I took credit life not knowing what it was really about. Two years later I could not work because of heart surgery for six months. It definitely helped my financial situation.


• My wife and I were driving from Florida to New York state with a fmanced car.

• May be increasing income (and insurances) next year. Then will probably trade up car (or lease) and cancel loan. It's very temporary and convenient life insurance.

• Just something we thought was a good idea.

• In case of death do not want family to have to deal with outstanding debt.

• In case of an accident I would want my payments made if I was unable to make them.

• In case I do not survive the length of the loan I wanted the car paid for.

• I would rather a family member get the car rather than a car dealer taking it back.

• I was turned down by the insurance company because I had breast cancer three years ago.

• I purchased the insurance because you never know what may happen during the lifetime of the note. If it can happen it would probably happen to me. But I feel the cost is excessive.

• I know what being without life insurance can do to someone when a death occurs.

• I have had health problems.

• I do not want my wife to inherit a lot of debts if I die plus it was reasonable.

• I always buy this insurance when purchasing a car or major appliance or hOOle.

• Felt dollar for dollar a good deal.

• Due to my age, it was a good thing. Private insurance would have cost more or maybe not been available.

• Don't want my debts to be a fmancial burden on my family in case of death or any disablement They would need the vehicle anyway.

• At age 67 the inevitably of death is more likely to happen.

• Assist in paying if I'm physically unable to work.

• A vehicle is an asset if paid for when something happens to the one with the obligation. I wanted my family to have the car if something happened to me.

• I did not want any fmancial burden on any member of my family.

• Wife not working at the moment.


• While I knew what was said my wife who took out the loan misunderstood and took the insurance when she really dido't want it.

• The increased cost of the loan was the easiest way to put the amount of loan into a favorable status regarding interest rate charged.

• The cost of insurance was small so I boUght it.

• Surviving spouse would have a hOOle free and clear and could pay other debts with other life insurances.

• Spouse disabled. Wanted loan covered to protect him.

• So you don't loose your house or car.

• Protect spouse.

• It was kindly suggested to me.

• It is a good thing to have the insurance on a loan just in case of an illness, accident, or death.

• In case of death or illness or accident, I don't want my family to take on the burden of the loan.

• If something happened to me I would not want my wife to worry about the payments or for me to worry about payment if something happened to my wife.

• I was only a cosigner.

• I just wanted to say that I dido't even consider the fact that my other life insurance protection could be used to pay for the balance of my loan. If I had thought of that, I wouldo't have purchased the credit life Insurance.

• I have a co signer on the loan.

• Don't want my family in debt for my loans if I die

• Co loan with a family member. We did not wish to be a burden to one another in case of death.

• Cannot get medical insurance at this time feel I need something in case un-able to work.

• Can write the insurance off on taxes.

• Because I dido't feel safe with my job at the time I obtained the loan.

• Like to get my bills paid in the event of my death.

• It was only offered to the member of credit union not the husband.

• Cost per $1000 small for older borrowers.

• At my age, 64 years old, life insurance is very expensive.


• At age 65, it is entirely possible that I might die before my car is paid off.

• As a single person, did not want family members burdened with my debts.

• All my loans and credit cards have credit life insurance.

• Would not insure Mr. *** because of age. He was the insured, but when he reached a certain age they dropped him and put me on. I do not think that was fair.

• Wife is in cancer remission.

• We could not afford to pay the loan payments if either of us died or were injured.

• Wanted to be sure the survivor would not be left owing a big debt.

• Main reason was our house was collateral for the loan.

• In case of my death I did not want my wife to use insurance money to payoff loan.

• I just experienced the death of my father. He had no insurance on any of his loans. Guess who is stuck with paying off the loans. His kids.

• I have had bypass surgery. Insurance is not easy to obtain, and this is a good way to cover my actions.

• I have a dependent I feel insurance is important I carry it on all my credit cards and loans.

• For me buying insurance is very important It is the way to protect your family for the future.

• Do not want estate sold off to payoff remaining bills at time of death.

• Credit life was added to protect the lender and borrower.

• As in 11, should I die, I do not want my beneficiaries burdened by my debts.

• Answer to #10 based on the fact that I have a major life insurance policy through SC National Guard thus all debts could be paid in event of my death.

• If I had no family to be concerned about.

• Denied because of medication I take for Rheumatoid arthritis. My arthritis is in remission, and I am monitored monthly related to the medication. Why should insurance companies be allowed to practice medicine? This what happens when you are denied in my opinion.

• If I passed away I don't want my wife to be stuck with nothing.

• So cheap it seemed worth it.


• Insurance was already filled in on loan agreement when I received it for signature without my requesting it, even though contract stated insurance was not a requirement.

• I stated upfront that I did not want credit life insurance. When the papers appeared at my branch for signing from the loan center, the insurance was put on the loan. There had already been delays and my husband was in favor of the insurance so we went ahead.

• Advised lending institute I did not want CL insurance. When application was drawn up it was included. I called this to their attention and they said they could correct it but it would take about one hour to redo. This was the first of two other transactions.

• We purchased the insurance because my husband does not have enough life insurance and is unable to obtain more because of a medical condition I have enough. So it was not because of my insurance coverage.

• If I should pass away, I would not want a debt left for my children to pay.

• I am self employed and own my own business. If I am sick I have no other means of paying the bills.

CATEGORY II

(Reasons to purchase credit life given by those who actually purchased credit life insurance, correctly perceived that they had, and, in response to specific survey questions, indicated that either it had not been explained that credit life was optional, or that they felt pressured to purchase credit life insurance, or that they thought it would help their chances obtaining the loan.)

• I was told I must be insured in order to obtain loan.

• Was not given a choice.

• I do not need or want credit life on any of my accounts. It was required, the whole transaction was rushed.

• Did not want my sons to have a problem if I died.

• The insurance was already included on my loan application so it wasn't really explained to me until I asked about it.

• Right before I signed the paper the man said I had life insurance to pay for my car in case of death.

• Required by loan company.

• Number eleven was probably the only serious thought I had at the time.

• Mandatory.


• In case of my death, my wife wouldn't have to worry about the loan.

• If anything should happen to me my cosigner will not have the burden of car payments. She is sixty five.

• I may have understood that it was required.

• I have since asked for a consultation. I feel that the three hundred sixty six dollars is excessive.

• I did not know I had purchased it until after loan was fmalized.

• I case of death I don't want to burden wife and kids with bills.

• Because of my bankruptcy three years ago, I was required to by credit life.

• At my age I did not want my wife to have a fmancial burden.

• We had a death in our family and I had to take over the payments.

• The amount of the debt was my main concern in carrying the credit life insurance.

• It was required on my loan because it was over 36 months.

• I was told that the bank really suggested that I have this insurance.

• Have already had dealings with credit life insurance when my spouse passed away.

• I feel in case of death, my family would not be burdened with paying the loan.

• To protect me and my family in case of death to payoff loan only.

• The insurance was in the process papers. But I got the insurance because if I am ill or death comes it will pay.

• I was given the impression that I had to have it. It was already in the loan payments and not discussed before hand.

• Great idea. Does fmance organization have this kind of protection for itself?

• Mter the application had been drawn up it was already included in the loan amount so it was like a requirement to have this.

• Refused for person purchasing vehicle.

• For a home we bought the bank told us we can get it cheaper through our home insurance.

• Was forced to by ***. • The policy was like you want this? Was mentioned right after buying an

extended warranty which led me to believe the policy was part of the extended warranty. I since got a refund of nine hundred dollars on the policy.


• The dealer already had it in the loan papers and whisked me through the delivery of my vehicle.

• My answers to the previous questions. I was told I HAD to have credit life in order to get this loan I infonned them I will have full coverage on my vehicle and I also have life insurance through work.

• I wasn't asked it was just added Then I was told about the out of work part.

• I was told that I was required to purchase credit life insurance.

• I purchased credit life unknowingly when signing my other purchase papers at closing. I then used my option to cancel the credit life.

• I had to purchase this as a part of a special loan agreement.

• I got it because this was my first credit purchase, and I was told it was a must.

• I do not understand If this was an option, then why was I not given a choice.

• Get this insurance because everybody else gets it. It was the only smart thing to do according to the Sales Manager.

• Didn't think I had an option.

• Because of my income and possible risk, he made it seem as if I couldn't receive a loan without it.

• After signing all papers for the auto loan, then the credit life insurance contract was typed up with this cost already figured into monthly payments. Signed up for it really to not be burdened with doing everything allover again.

• This was required to get a loan from my bank.

• The bank won't make loans without it.

• It was automatically included in my loan papers. No discussion.

• I said I wanted my pay date to be 15th since I had many obligations on the 1 st

already, and they just stuck it on and pushed my pay date 30 days beyond the one I was asking for.

• Got loan for my daughter. She pays me back for making payments.

• Was told must have in order to obtain loan. Would not have taken otherwise.

• Was a condition for loan approval; buy the insurance or no loan.

• I was told it was a part of the standard requirements.

• Just don't have no one to pay my bill and don't want to owe someone.

• Told I had to get it.


• Cost too much for what you are receiving Most items I don't accept it. I didn't feel like fighting to not have it

• Officer said non-collaterallized loans required credit life. I did not have time to debate subject.

• Our credit ruined anyway plus we were duked by *** in Ogden Utah and *** in Salt Lake City, Utah. If you want more information, let me know.

• Was under impression some form of insurance or security was needed for loan.

• Was told would not get loan without taking out the credit life insurance.

• The loan officer said I had to have it to get the loan. After I got the loan, I called the lender and received a refund.

• Since this was my first credit application after a bankruptcy one year ago. I was made to feel that I could not get the loan if I did not buy it. I was not given a choice.

• Pressured into getting this insurance.

• I was told that it was required or *** would not finance me.

• I wanted to have a second party's name on title.

• I knew it was a crummy deal, but had poor credit so paid off credit manager with the purchase of insurance. It took him two weeks to get me a loan.

• I had to get it.

• I assumed it was necessary.

• Contract contained the insurance. Somewhat became an instrument toward getting the loan.

• Told I could not get the loan without it.

• Required for loan.

• Loan would not be approved without credit life.

• These people don't even tell you it's not required, and they also add credit disability at additional cost.

• Was required.

• They said I had to buy in order to get the loan.

• They pressured me into buying the credit life insurance.

• I was told that the insurance was a condition of loan approval.

• Disliked being told I must buy it to get loan, and then fmd out you do not and still you cannot get rebate.


• Required to obtain low interest loan.

• I was told by the general manager that if did not purchase credit life, my in-terest rate would be higher.

• I was not given the option.

• I plan to leave my estate secured.

• Pressured and told that without the insurance could not obtain loan.

• I thought it was a requirement for the loan.

• Credit life insurance is something that everyone should have.

• In case of my death, all my bills would be paid off so my wife would have less to worry about.

• Because a percentage of our loan was unsecured, they strongly preferred we purchase insurance.

• Age.

• I purchase credit life insurance only if the loan a substantial amount, such as loan for automobile. I don't take out credit life on small loans such as a signature loan of $2000.

• I didn't want it but got it because the typist put it in, and I would have a delay to have it retyped.

• Lower interest rate.

• It was my option to buy but it was already figured into my loan and I think everything would have had to be refigured taking more time.

• Personal discussion.

• Lower interest rate.

• If something should happen to me my family would still have the use of a vehicle.

• I did not want the credit life and was told that in order to get the advertised low interest rate, the insurance was required. I feel I was forced to purchase credit life.

• To negotiate low interest rate. Credit life and disability were then canceled once credit terms were fmalized.

• Death is a part of life, and I do not want to leave any bills for my children to have to pay if I should expire.

• Why was my name picked for this questionnaire?

• Pressure from lender.


CATEGORY III

(Comments on reasons for not purchasing made by those who did not actually purchase credit life insurance and perceived that they had not.)

• Was not mentioned or thought about Benefit restrictions (small print).

• Not offered to me.

• Loan was too small.

• It wasn't offered, and I don't know anything about it or its cost.

• It was a temporary loan for only two months.

• I'm an insurance agent.

• I feel it is a rip off if you die it does not matter if it is paid for. The best point of it is, if you are unable to work and payments are made.

• I answered 16 17 18 because I wasn't offered, nor was I interested because I have sufficient insurance (life).

• Credit life is a rip off.

• Corporation purchase.

• Over sixty five of age - sixty seven. I was informed that Alabama has an age limit.

• Not offered.

• I am almost sixty nine and *** did not offer the insurance because of that.

• Why loan was guaranteed? Use that ifl die!

• Was not even talked about at all.

• Just another way for cards to rip you off, i.e. interest rates, another statement, stuff, and mainly hidden costs.

• It would have cost as much per month as my payments on the loan.

• I prefer to have my estate administrator decide whether credit is paid off or payments are continued. Credit life insurance with the lender as payee is more to protect the lender than the borrower.

• I just don't need it, and I think it's just a basic rip off.

• I have sufficient death insurance to pay any debt, and my will stipulates all indebtedness be paid.

• Better ways than credit life insurance to protect oneself.

• Never found it necessary.

• If I make a loan, I am responsible until my death. No one else.


• Age 67, heart trouble.

• Having sold credit life insurance in a previous position, I feel that it is a form of consumer fraud.

• One for one collateral loan.

• I do not expect to use the line of credit. I have it for over draft protection only.

• I am an insurance agent.

• Credit life insurance doesn't make sense when a person already has life insurance. It is a ploy to earn insurance companies more unnecessary profit.

• I am single and don't care.

• When buying insurance I want *** or my beneficiaries to be able to say what the money is for.

• They are discriminating on age.

• So many different companies were sending out this option for credit insurance and it actually confused me even more.

• Credit companies try to get as much money from you as possible. I look at this as just another gimmick sent in the mail. They don't fmd out about your circumstances, whether you need it or not. It's just BUY.

• Cost versus benefit ratio is very, very poor.

• Cost for amount coverage provides.

• This was my second auto loan, and my fIrst loan I did take out insurance because of the high cost of the van. I also purchased a tractor which I also took out insurance for.

• Worked in banking ten years and all the people I have ever known considered it an unnecessary and costly rip off.

• Why purchase credit life on an asset that will always have a value - the loan amount.

• Why have that amount of money added to the loan plus pay interest on it. That's crazy.

• Why double premium through fmancing?

• Too costly. I'm single with no dependents. If I pass they can have the car back, no charge.

• This one is easy. When I am dead, they can have the truck back if it's not yet paid for.

• This insurance would have been fmanced along with the purchased item, I don't believe I should pay interest on life insurance.


• The price per thousand of credit life coverage is astronomical compared to other types of life insurance.

• The cost of credit life is extremely expensive in relationship to the amount of coverage

• Term life can be obtained cheaply.

• Sole survivor of family. Only survivors would be nieces and nephews. My burial is pre-paid.

• Rip off. Cost is about ten times or a thousand percent too high. I am purchasing a hundred thousand, five-year term for three hundred twenty seven dollars per year at age fifty. Credit life is higher on ten thousand.

• Our policy never to buy insurance. We figure that it's another cost.

• No dependents which it would cover.

• News release by Bob Arnot state that credit life insurance was not necessary according to my understanding of Good Morning America.

• Licensed life agent.

• It's a poor value for money.

• If you wanted insurance you could buy term life a lot cheaper.

• If I am dead, my credit standing will not be that important to me.

• If death occurs on a leased vehicle, I will not be affected by situation.

• I request no credit life.

• I knew quite a bit about credit insurance for my husband dealt with that for a living. I feel I'm already adequately insured.

• I have enough insurance.

• I feel I have adequate insurance to cover all my expenses in case of my death. Why pay interest rate costs on money for additional coverage? I also feel very strongly that if my heir does not want to use insurance money to payoff a car loan then the car.

• I do not enter into debts which I can not pay.

• I do not believe in life insurance. When I die my husband will have my property. Let him pay for it.

• I believe credit life insurance is a ripoff.

• I am the principal borrower, but the co owner is over age.

• I am in the life insurance business and credit life is by far the most unnecessary form of insurance.


• Heart medication. Wanted credit life but could not because of heart attack in 1984.

• Didn't want it.

• Did not want. Could pay for car, but only did loan for credit rating.

• Did not want added expense. If I die no one would want the vehicle anyway.

• Did not purchase it because I did not really need it.

• Did not purchase because we felt the surviving spouse would be able to con-tinue making the loan payments.

• Did not [mance a large amount and could afford to pay it off if necessary.

• Could not afford my payments to be any higher than they already were.

• Could not afford it.

• Cost main factor.

• Consider it to be a rip off.

• Cheaper elsewhere.

• Because credit life insurance of $15,000 was automatically included without our having to pay for it. But it is soon to be no longer given because of price.

• Barely could afford the car.

• At time [mance was not available. Had considered it for a later date.

• At our age we felt we did not need it. We are a young couple, and if one died there would be 2 cars, and losing one wouldn't matter.

• They said we were too old.

• We were told that I could not put my name along with my spouse. Only me for disability.

• Time to find another scam. This one is used up.

• The loan office said they did not feel that it was in your best interest to purchase life insurance on this loan. He suggested that we increase or obtain more coverage through an insurance company.

• Only good for one year.

• No need paying for a term life policy in addition to repayment of loan.

• Many of us are insurance poor.

• Loan was already secured by collateral in a savings account for the amount of the loan to build credit.

• Length of loan.


• Just too expensive for what it insures.

• It was more economical to purchase reducing debt or regular life insurance from my insurance company.

• In my opinion credit life is a rip off. You can take the same premium dollar and purchase much more valuable protection to payoff loan and to leave family to make adjustments in changing life style after passing of the insured.

• If I died and my wife went back to work, she would want the mortgage in place as a tax write off.

• I only buy quality term insurance.

• I have confidence in my [mancial situation, and this insurance is therefore unnecessary .

• I don't buy something until I know I have the means to pay for it with a comfortable margin if things should go awry.

• I don't care once I am dead.

• I am on Social disability.

• Credit life is essentially for the insurance companies, and I consider it a rip off.

• Credit life insurance is unnecessary if one already has life insurance I believe Cll is relatively expensive also.

• Credit life and insurance in general is nothing but expensive gambling. We are opposed to the insurance industry in the majority.

• Credit insurance compared to life term is higher.

• Cost too high.

• Mter I signed the paper, a few days later I noticed I had insurance. I asked why - said because of my age. I never knew that.

• Over insuring oneself is a poor money management skill.

• Only a 12 month loan.

• More interested in protection in the event of disability.

• It's a ripoff of me, the customer.

• It was far more expensive than term life insurance.

• I'm a gambler and the odds that you'll need it before the loan is paid off is the factor not to purchase it.

• If something happened to me, my family said they would be responsible.

• I hear that it's a waste of money, and it's a scam like car insurance.


• I borrowed the money in connection with a household move. I intended to repay after house sale not more than 30 days later.

• Credit insurance is a rip off for someone who is healthy and is 25 years old. Already have 250,000 whole life.

• A previous loan officer told us credit insurance was standard in response to my question if it was required.

• With adequate life insurance coverage I think it is extra money that will unlikely be used for the purpose it serves.

• On other loans, cost of insurance was front end loaded. I had to pay interest on it.

• Young with no health problems. Wasted money.

• Would have been more interested in disability or wage loss insurance.

• When I die, who cares? I am here now. Why throw money away?

• When I die I don't care about this unsecured debt. If auto loan take the car.

• The loan was for a small amount so it wasn't needed. If it was for a substantial amount, I probably would have purchased the insurance.

• That word insurance turned me off. Our insurance system is such a rip off to the point that I refuse to buy any insurance that I feel is not an absolute necessity.

• Term insurance is much cheaper and can be paid with one annual premium.

• Short term loan.

• Problems collecting on disability insurance.

• Personal reasons.

• Just another amount of money to tac on a loan to rip off the consumer.

• Insurance is an additional way to make money without earning it. I do not believe in buying insurance for any and everything.

• Insurance companies are rich enough.

• If one has adequate life insurance, and has not maxed his credit limit, one does not need it.

• I think it is a rip off.

• I feel this particular type of insurance is a scam, or rip off, or both.

• I can get better rates with term life through my own selection of companies.

• Credit life is a rip off.

• Loan I had three months to go.


• No dependents.

• The person tried to sell me credit life without telling me. I knew what to look for though.

• The business manager tried to slip the credit insurance into the transaction along with extended warranties without my knowledge. He automatically figured those extras into the contract, but I refused them when I asked why the premiums were more.

• Rip off.

• It was too costly for a young man like myself and I can get twenty five thou-sand dollars life insurance cheaper.

• I thought it was a little high in that it decreased in value as loan matured.

• I think it's a scam for someone my age.

• Rates are extremely too high. The reason is the dividend that lender receives at year end due to losses. Losses are very, very few.

• Prefer to use green life insurance companies. Book Investing from the Heart by Brill and Reder, p. 325, is the major factor.

• At $1000 for 4 years of coverage it is robbery.

• Purchase was substantial 5-year loan. I wanted my payment to stay down.

• It's a rip off.

• The policy was well explained, but it is expensive and my assets far outweigh my debts.

• Present day economics force people to take [mancial risks.

• Do not believe credit life insurance is needed for low value items.

CATEGORY IV

(Reasons to purchase given by those who thought they had purchased credit life insurance but in fact had not)

• If I didn't know I had it, I wouldn't get it.

• Protect family.

• I work in a factory, and it is very easy to get hurt or disabled.

• I bought it for myself in the form of whole life and plan to keep for future purchase.


• I purchased insurance not realizing regular tenn insurance is half the cost therefore I canceled the above insurance and bought tenn insurance for the loan.

• Because interest rate was lower with credit life making it a better deal.

• Was declined accident & disability insurance on hOOle loan because I drive a truck.

• I chose the free limit.

• I canceled insurance the next day.

• There was a requirement for a medical exam.

• Purchased when under 70.

• Possibly to obtain additional loans. The loan office, it seems, was required to push the credit life as the loan company is owned by the insurance company.

• I felt a lot of pressure.

• I was told I had to purchase it.

• Would like to know if a credit plan! company exists to cover all personal credit.

• Was told the insurance was in the loan to protect the lender.

• Was pressured into it.

• On a high loan with lower interest, I feel it is good investment. But on small loan with high interest, not important, unless you are married.

CATEGORY V

(Reasons not to purchase given by those who thought they had not purchased credit life insurance but in fact had.)

• In 1986 my husband and I were disabled by illnesses. Unable for either of us to work for a fifteen month period and this resulted in past due bills. Depleted our savings.

• Wanted more infonnation.

• Refmanced auto. Dropped insurance for above rationale.

• To protect my family member who put up her savings as security.

• Was not explained to me. In fact, not even mentioned.

• My father says I do not need credit life insurance that it is an unnecessary expense. I need life insurance after I have dependents.


• I forgot about it. Slipped my mind.

• Age factor.

• Insurance for everything in this day and age. Sick of it.

• Was not interested at the time. All I wanted was the car.

• I am a diabetic so life insurance is not offered to me.

• I purchased the insurance to make payments in the event I am unable to work.

• We are just 26 and don't expect to die soon.

• Only purchase insurance I have to have by law.

• My attitude: if I die, they can do all the paperwork required to secure their claim. I will not pay them for something which is their cost of doing business.

• Loan was too small to consider insurance.

• Credit life is too high.

• Employed by military, therefore no need for insurance.

• Didn't have the expense.

• Small loan payoff soon. Didn't need.

• Not a good value.

• Low probability and high cost. We do have an interest in some sort of mortgage payoff protection program however.

• If I die **** the loan company.

• I have no dependents, not an abundance of assets, etc. If I die, only the lender looses.

• I had been declined for additional life insurance due to a high cholesterol problem. Insurance companies pick up on declinations through the insurance companies computer network. I believe this is the reason I was declined. I did want the insurance for my wife.

• Could not fit into budget.

• Being told what my total payment would be, then rmding out that it included credit life as if it was automatically added, was a major factor in my refusal of it.

• Because of decreasing value of policy, I would rather have as set amount life insurance policy that paid the same amount in one year or 15 years later.

• At one time previously, I was told a loan would not be given to me without it.


• Anybody would be stupid to buy credit life insurance unless medically you cannot get regular life insurance

• Age 62.

• 18 major factor.

• I have so much insurance to cover my fmancial debts.

• Had enough life insurance to cover it.

• Wasn't offered any insurance. In fact, it wasn't even mentioned.

• Waste of money.

• Short duration loan.

• Not a factor.

• The cost, especially for two people. Want it for payment in case of work layoff.

• The rate does not decrease but the coverage does.

• My age. I will work through the loan and can not see spending the money for something I will never use.

• Must pay interest on the credit life insurance.

• I was offered accidental death and dismemberment insurance. I don't want that. It's too restrictive. I would like an inexpensive term life that would pay off the mortgage even if I died peacefully in my own bed.

• Can get enough life insurance for half the cost of credit life and pays twice as much as cost of home.

• The person tried to pressure me into it.

• Waste of money.

• It was a routine policy that credit insurance would be purchased at this bank.

• I get phone calls very frequently and some of the people are rude, pushy, and hang up once I say I am not interested.

• At age 30 do not feel I needed it.

• Single with no direct heirs or an estate. Don't buy life insurance either.

CATEGORY VI

(Comments from the sample of those who either indicated that they could not recall their purchase decision or for whom the perceived purchase decision could not be ascertained as certain questions were left blank.)


• I did not realize that I had purchased it. I feel that I have enough insurance and plan to follow up on this with the bank:.

• Not interested in insurance.

• Also I believe that my children should not be held to hold the bag, so to speak, when I go.

• Number 18. Age a defmite feature on mortgage protection life insurance.

• So it would not be a fmancial burden.

• I wanted my wife to have protection if something happens to me.

• I don't think it had a hearing.

• My major reason for purchase was number eleven, but as I look over this questionnaire, section numbers eight, six, ten, and twelve may have been major factors without realizing it at the time.

• I have a $200,000 insurance policy to already cover any and all debts. Credit life is really not necessary but I felt pressured by loan company to take it.

• I did purchase credit life insurance.

• Age seventy-four years.

• I don't know if I got life insurance on my car.

• I don't know if I even have the coverage. Nothing was explained.

• I asked for the insurance but was turned down. Thank: you.

REFERENCES

The American Council of Life Insurance. 1992. 1992 Life Insurance Fact Book. The American Council of Life Insurance.

Ausubel, Lawrence M. 1991. "Failure of Competition in the Credit Card Market." American Economic Review (March): 50-81.

Boyer, Paul F. 1973. "The Regulation of Consumer Credit Insurance." Spectator Volume 191, (October): 23-24,33.

Bratter, Herbert H. 1957. "Credit Life Insurance." Banking (October): 90-91. Brobeck, Stephen. 1993. "Credit Insurance: Why Reform May Serve Lenders."

Credit World 81 Issue 5 (May/June): 32-33. Brostoff, Steven. 1994. "Consumer Groups Contend Credit Life Still Costly." The

National Underwriter: Life, Health, and Financial Services Edition 98 Issue 23, (June 6): 46.

Burfeind, William F. 1990. "Consumer Credit Insurance: Serving a Need." Position paper. Consumer Credit Insurance Association: 2.

Burfeind, William F. 1990. "Credit Life Insurance is Often a Good Deal." USA Today (June 7).

Burfeind, William F. 1993. "A New Sparkle for Credit Life." Best's Review 94 Issue 3 (July): 43-44.

Burfeind, William F. 1994. "The Case for Component Rating for Credit Insurance." The National Underwriter: Life, Health, and Financial Services Edition 98 Issue 48 (November 28): 19-20.

Consumer Federation of America. 1992. Press release. (May 20). "Credit Life Insurance: A Crucial Issue in 1968." 1968. Industrial Banker 34

(January): 5-6, 18. Cymak, Anthony W. and Canner, Glenn B. 1986. "Consumer Experiences with

Credit Insurance: Some New Evidence." Federal Reserve Bank of San Francisco Economic Review Number 3 (Summer): 5-20.

Durkin, Thomas A. 1975. "Consumer and Credit Insurance: Results of a New Survey of Borrowers." Personal Finance Quarterly Report (Fall): 84-86.

Durkin, Thomas A. and Elliehausen, Gregory E. 1978. 1977 Consumer Credit Survey. Washington, D. C.: Board of Governors of the Federal Reserve System (December).

Ehrlich, Isaac and Becker, Gary S. 1972. "Market Insurance, Self-Insurance, and Self-Protection." Journal of Political Economy 80 (July/August): 623-648.

Eisenbeis, Robert A. and Schweitzer, Paul R. 1979. Tie-Ins Between the Granting of Credit and Sales of Insurance by Bank Holding Companies and Other Lenders. Staff Study 101. Washington D.C.: Board of Governors of the Federal Reserve System (February).

Fagg, Gary. 1986. Credit Life and Disability Insurance. Springfield, Ohio: CLICO Management, Inc.

Fischer, Stanley. 1973. "A Life Cycle Model of Life Insurance Purchases." International Economic Review 14 (February): 132-152.

156 References

Goudzwaard, Maurice B. 1969. "The Economic Impact of Credit Insurance Charges." The Journal of Risk and Insurance 36 Number 5 (December): 515-523.

Hubbard, Charles L., (ed.). 1973. Consumer Credit Life and Disability Insurance. Athens,OH: Ohio University College of Business.

Huber, Joel C. 1978. Consumer Perception of Credit Insurance on Retail Purchases. Monograph #13. West Lafayette, IN: Credit Research Center, Purdue University, Krannert Graduate School of Management.

Hudson, Mike. 1994. "Credit Insurance: Overpriced and Oversold." New York Times: Late New York Edition (July 3): 8 (Section 3).

Morris, Arthur J. 1973. "No Man's Debts Need Live After Him." Spectator (October): 18-19,34.

The National Underwriter. 1975. "Truth-in-Lending Act Changes Seek Stricter Credit Insurance Disclosure." The National Underwriter: Life and Health Edition 79 (April 12): 1,5.

Otis, L. H. 1993. "NAIC Adopts Updated Draft of Credit Insurance Model." The National Underwriter: Life, Health, and Financial Services Edition 97 Issue 40 (October 4): 49.

Otis, L. H. 1993. "Regulators Clash on Credit Insurance Issues." The National Underwriter: Property, Casualty, and Employee Benefits Edition 97 Issue 39 (September 27): 38.

Pels, Mary Ann. 1993. "When Credit is Due: Credit Insurance." Credit Union Executive 33 Issue 3 (May/June): 22-25.

Quackenbush, R. Donald. 1974. "The Myth of Coercion-The Fallacy of Reverse Competition." Spectator 182 (September): 52-56.

Trumfio, Ginger. 1993. "Be Sure about Insurance." Sales and Marketing Management 145 Issue 12 (October): 149.

Yaari, Menahem E. 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer." Review of Economic Studies 32 (April): 137-150.

INDEX

accident, 6, 16, 20,48, 61, 120 African-AJnerican,31, 33, 35-38,40,

43,47-50,43-54,68,78,71-72,75, 84,86,94,96-97,99,112,120,123

age, 2, 8, 10, 12, 28, 31, 33-34, 36-38, 40,43,44,47-48,50-53,61,68, 72,75,84,94,96,99,112,120

AJnerican Council of Life Insurance, 4 Asian-AJnerican, 33, 35-36, 39, 50, 75 attitude, 2-3, 5-9, 14, 19,24,28,34,40,

51,53,80-82,96,123 aversion, 31-32, 34, 36, 38, 42, 46, 49-

50,52,68,72,75,84,94,99,112 aware/awareness, 3, 13,20,29-30,61,

63-64,66-67,69,97,121-122 Burfeind, 1,4 cancellation, 97-100 Canner, 5, 7,15 coercion, 2-3, 9, 17,20-21, 27,53, 79-

100, 122-125 Consumer Federation of AJnerica, 1-4 Consumer Protection Act, 5 convenience, 2, 39-40,42-43, 54, 111,

114-115, 121-125 credit accounts, 1,5-7,13,61 Credit Research Center (CRC), 2-3, 5-

6,8-10,12-14, 17,21,23-26,52-53,61,64-67,86,109,119

creditor type, 44, 68, 70, 110, 115-117 creditors, 5,8, 13, 15, 18-19,21,23,

41,48,61,69,81,86,97, 107, 110, 116, 119, 124

Cymak, 5, 7, 15 decision, 3, 8, 11, 13-14,27-29,34-37,

39-40,44,48-49,54,61-69,74-75, 79-80,82-83,88,92, 107, 115, 119-122, 124

demand, 14,27-34,39-40,48-49,51, 53,74-75,88, 119

demographic, 8, 22, 27,29,36-53,68-70,79,82,92-95,97,110-111, 113-117

dependents, 8, 11,27-54,68,72,75, 84,94,97,99,112,121,125

education, 3, 8, 10, 12, 17,30-53,68, 71-72,75,84,86,94,96,99,112, 120, 124-125

Eisenbeis, 5, 7, 15 error, 13, 17,53-54,61-74,79,81,109,

115,121-122 ethnic, 31-54, 61, 71-72, 75,84,94,96-

97,107,120 Federal Reserve Board (FRB), 5,7-10,

12-15,18,24,51,64 Ffispanic, 33, 35-36,43,47,50,53,68-

69,71-72,74-75,84,86,94,96, 99, 112, 120, 122

Hubbard, 5,14 Huber,5,14 insurance, defmed

credit disability, 1 credit life, 1 credit unemployment, 1

marginal, 34-38, 50, 68, 72-73, 84-85, 88,93,99,112-113, 115-116

marketing practices, 3, 18,87-88, 90-95, 115-117, 123, 125

medical exam, 2, 39-40, 42-43, 54, 114, 121

mistaken, 3 National Association of Insurance

Commissioners (NAIC), 1 Native AJnerican, 33,35-36,39,50,53,

75-76 Ohio University, 5-6, 8, 11,13-15,65-

67 participant, 19 predict, 27, 29-31, 34-35, 37-38, 51, 53,

55-56,88,93, 110, 119

158 Index

pressure, 3, 5, 8-9,14-15,17-18,20-21, 24,27,53-54,79,86-98,100-102, 116-117,122-125

prima/acie, 18,22,26,41,55, 101, 107-111,113-117,124-125

Princeton Swvey Research Associates, 64, 76

probit, 34-36, 39, 42-44, 46-47, 49-50, 55-56,68-70,72-76,82,84-85,88, 92-95,97,99,102,110,112-117

Purdue University, 2, 5-6,8, 13-15 race, 8, 10, 12,51,53,56,76 regulatory, 2,26,55, 107, 124 respondent, 6-16, 18,21-21,23-25,29,

32-34,36,38-40,44,49,51,53-56, 61-63,65-70,74,76,80-83,86-88, 90-98,100-101,107,109-110,113-117,119-122

risk, 31-32, 34-38, 40, 42, 46, 49-54, 68,72,75,84,86,92,94,96-97, 99, 112, 121, 123

sales tactic, 3,13,17-19,79,90,92, 116, 125

sample, 3, 5-9,12-14,17-24,27,32-26, 39,43-44.47-53,61-64,66,68-70, 74,80,86,88,90-93,97-98,100, 107-109,113-117,119-120,125

sampling, 5, 13, 17-18,20,23,51,53, 66-67, 107, 122

satisfaction, 5, 9-10, 17,79,80,82,84-85,97, 115-116, 122

Schweitzer, 5, 7, 15 Swvey of Consumers, 7,18,51 tinting, 18,21,87,91, 109, 111 unaware, 2, 63, 67 underwriting, 1, 107 University of Michigan, 7, 51, 56 white, 12, 33, 35, 69, 71, 96, 123

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