Some markets have banned sale of insurance alongside lending
Another way to deal with the problem of competition in credit life is to simply not permit the sale of insurance at the same time as the loan. This means that more providers will have an opportunity to make the sale since the lender doesn’t have the ability to slip the product in alongside the loan.
- Overall this will increase acquisition costs as it is extremely cost efficient to distribute along with the loan granting process.
- The lender is still in the best position to follow up with an outbound sales lead in the days or weeks after the loan has been granted (unless they are prohibited from selling at all, which is another option that can be considered)
- Lenders may not be prepared to lend without the protection of credit life in place
- The reality remains that for some lenders, for some loans and for some credit life policies, the product acts as a source of revenue rather than a risk mitigant. Without that extra revenue, the loan might not be viable due to risks and expenses of collecting the installments.
So this approach is not without its own troubles.