The legislation applying to loan insurance has been in the “common sense” for a few years now. In favor of the consumer, this regulation aims more a greater opening to competition on the market of insurance of loan still strongly dominated by the banking institutions and their insurance contract group.
Possible since the entry into force of the Lagarde law, on 1 September 2011, the credit insurance delegation is still faced with the discretionary power of the banks, which can refuse it to a customer when they consider that the guarantees outsourced contract are not equivalent to the original group contract.
The Financial Sector Advisory Committee (FSAC) issued an opinion on January 13, 2015 in order to provide leads and to submit the concept of equivalence of guarantees to clear regulations.
Equivalence loan insurance: a persistent problem
If with the Lagarde law, the borrower can resort to the delegation of insurance to guarantee his credit, according to the article L312-9 of the Code of the consumption, the lending organization can, him, refuse the individual insurance contract presented by his client if the level of guarantee is not equivalent to that of the group contract he has proposed when issuing the loan offer. However, no law clarifies this concept of equivalence of guarantees and its assessment, which allows the banks to maneuver very comfortably and thus gives them the means to refuse without a lot of difficulty a delegated contract whereas is almost identical to the group contract, simply by pressing a detail.
This problem has not been solved by the Hamon law. Indeed, the 2014 Consumer Law merely allowed the borrower to cancel his loan insurance contract during the first year of subscription so that he could replace it with the one he chose. While this right provides the insured with a means of finding a better offer from an insurer outside the bank, it is, however, opposed by the bank’s freedom to judge for itself whether the new contract meets the equivalence of guarantees. .
The CCSF was therefore tasked by the Minister of Finance to study the issue and issue proposals to make the comparator of loan insurance more objective.
Regarding the basic guarantees of credit insurance (death and disability), the CCSF has drawn up a list that includes 18 possible comparison criteria among which the bank will have to select the 11 of its choice then make them public. Thus, the borrower will know exactly what criteria the notion of equivalence of collateral covers and the bank will not be able to refuse a contract respecting them. See the advice of the CCSF .
Since the unemployment benefit is optional, the CCSF has selected 8 criteria from which the banks will select the 4 of their choice.
Standardized form and reasoned refusal: bank bonds
Since the coming into force of the Hamon law on March 17, 2014, banks are required to issue to the borrower, from the first simulation, a standardized information sheet. This must include all the essential elements that the borrower must know about credit conditions and related insurance. The CCSF proposed that the bank’s requirements for equivalence of collateral should be added to this sheet, indicating the criteria used. For example, a new version of the standardized information sheet was published in 2015.
If the bank considers that the equivalence of guarantees is not respected by a contract presented by its client, then it can refuse its implementation by specifying in writing what is the motivation.
Entry into application
Since May 1, 2015, banks are no longer able to refuse a delegation of insurance based on the criteria they have chosen.