Reform of Credit Insurance

December 22, 2009 by
Filed under: Other Insurances, Personal Loans 

Recently, Christine Lagarde, Minister of Economy Industry and Employment has introduced a plan of reform to substantially change the current laws that allow banks to require borrowers to their insurance policies at a mortgage application.

Recall that this insurance is to cover the borrower in case of death, incapacity, disability and sometimes loss of employment. This reform will allow and, in 2010, all borrowers to choose their insurance loan only if the proposed contract includes guarantees equivalent to those offered him the bank.

For information, 85% of borrowers subscribe today their contract with the lender. Another very important aspect of reform: to increase transparency. Consumers who wish to subscribe an insurance credit will be now put a sheet of advice and information.
The government has prepared this document in consultation with the insurance professionals in partnership with consumer groups. And for the first time, consumers have been involved in creation of panels that have helped test and improve substantially the paper.

The form of advice and information is a unique setting that will prevail at all and should be completed jointly by the borrower and the dealer (banker, insurer, broker …). It enables consumers to be better informed of their rights and duties, which, it must be admitted, was lacking until now.

Finally, consumer credit will display the price of credit insurance. This should be expressed in euros per month. Recall that the market for credit insurance is a very active market with over 4 million contracts sold in 2007 (mortgage and business) for a turnover of over 6 billion and a half euros. Today over 30% of households who own an insurance contract borrower is more than eight million.

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