Tuesday, October 30, 2007

Texas secures $15.7 million settlement against insurance firms

Texas Attorney General Greg Abbott has reached a settlement with two auto credit insurance companies his office claims did not provide required refunds to policyholders who had paid off their car loans in advance.

Under the terms of the settlement, more than 46,000 Texas vehicle owners who bought credit insurance from Service Life and Casualty Insurance Co. in Austin will receive refunds totaling $14.4 million from the company.

In addition, another 6,500 vehicle owners will receive $1.3 million in refunds from Old United Life Insurance Cos. in Mission, Kan.

Officials with Service Life and Old United could not immediately be reached for comment on the settlement.

The refunds apply to vehicle owners whose loans terminated between 2002 and 2006.

These policies were sold to cover vehicle payments in the event the borrower died or became disabled.

According to the Attorney General's Office, the companies' customers bought single-premium policies that were paid in a lump sum, usually when the customers bought the vehicles. The full cost of the credit insurance was then bundled into the buyer's vehicle loan, which in some cases was as long as six years.

Under state law, Service Life and Old United were obligated to refund unearned portions of the insurance premiums to those customers who paid off their loans ahead of schedule. However, the state claimed the companies never refunded the unearned portion.

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