Professional Documents
Culture Documents
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:
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.
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.
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.
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)
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.
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
If you PURCHASED credit life insurance, please rate the importance of EACH of these possible
reasons for buying the insurance:
If you DID NOT PURCHASE credit life insurance. please rate the importance of EACH of these
possible reasons for not buying the insurance:
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.
24. You are: 25. Do you own your own home or condominium?
o Male DYes
o Female o No
26. You are: 27. What is Ihe highest grade of school or year of college
o White Ihat you completed? Please check one:
o Black o 0-8
o Hispanic origin o 9 - 11 grades
o Asian o High school diploma
o American Indian o Some college
o Other o College degree
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
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 pur-
chased 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 deci-
sion 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.)
• 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.
Responses to Open-End Survey Questions 137
• 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 in-
surance 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 an-
other 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.
138 Responses to Open-End Survey Questions
• 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.
Responses to Open-End Survey Questions 139
• Insurance was already filled in on loan agreement when I received it for sig-
nature 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 op-
tional, or that they felt pressured to purchase credit life insurance, or that they
thought it would help their chances obtaining the loan.)
• The dealer already had it in the loan papers and whisked me through the de-
livery 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 ve-
hicle 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 con-
tract 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 1st
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.
142 Responses to Open-End Survey Questions
• 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.
Responses to Open-End Survey Questions 143
CATEGORY III
(Comments on reasons for not purchasing made by those who did not actually pur-
chase credit life insurance and perceived that they had not.)
• 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 pur-
chase 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.
148 Responses to Open-End Survey Questions
• 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 out-
weigh 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)
• 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.
Responses to Open-End Survey Questions 151
• 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 com-
pany.
• 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.)
• 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 re-
call their purchase decision or for whom the perceived purchase decision could not
be ascertained as certain questions were left blank.)
154 Responses to Open-End Survey Questions
• 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." Posi-
tion 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 Insur-
ance." The National Underwriter: Life, Health, and Financial Services Edi-
tion 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 Fran-
cisco Economic Review Number 3 (Summer): 5-20.
Durkin, Thomas A. 1975. "Consumer and Credit Insurance: Results of a New Sur-
vey of Borrowers." Personal Finance Quarterly Report (Fall): 84-86.
Durkin, Thomas A. and Elliehausen, Gregory E. 1978. 1977 Consumer Credit Sur-
vey. 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 Fed-
eral 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." Inter-
national Economic Review 14 (February): 132-152.
156 References
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