# AZ Circular Letter 1987-06: AZ Circular Letter 1987-06: Credit Insurance > Arizona · Agency guidance · In force URL: https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1987_06 ## Section - **Citation:** AZ Circular Letter 1987-06 - **Heading:** AZ Circular Letter 1987-06: Credit Insurance - **Jurisdiction:** Arizona - **Kind:** Agency guidance - **Status:** In force - **Text as of:** August 14, 2026 - **Source:** Compiled text - **Location:** Arizona Department of Insurance and Financial Institutions Bulletins / AZ Circular Letter 1987-06: Credit Insurance ## Text STATE OF ARIZONA DEPARTMENT OF INSURANCE JANE DEE HULL 2910 NORTH 44th STREET, SUITE 210 CHARLES R. COHEN Governor PHOENIX, ARIZONA 85018-7256 Director of Insurance 602/912-8456 (phone) 602/912-8452 (fax) Former Director Vern R. Pierson issued the following Circular Letter on December 14, 1987: Circular Letter 87-6 CREDIT INSURANCE December 14, 1987 It has come to the attention of the Arizona Department of Insurance that there exists a practice affecting the transfer of credit insurance without prior consent and reenrollment of the individual certificate holder. The purpose of this circular letter is to advise all insurance companies issuing credit insurance that the Department considers such practice to be in violation of Arizona insurance law. A.R.S. § 20-452.01 states: No person engaged in the business of financing the purchase of real or personal property or of leading money on the security of real or personal property, and no trustee, director, officer, agent or other employee, or affiliate of, any such person shall require, as a condition precedent to financing the purchase of such property or to lending money upon the security thereof, or as a condition prerequisite for the renewal or extension of any such loan or for the performance of any other act in connection therewith, that the person for whom such purchase is to be financed or to whom the money is to be loaned, or for whom such extension, renewal or other act is to be granted or performed, negotiate any insurance or renewal thereof covering such property through a particular insurer or person transacting insurance. It is clear that the intent of this statute is to prohibit the conditioning of a loan or a renewal of a loan upon the purchase of a particular type of insurance. However, this statute also provides some bearing on the situation now under review. A.R.S nted or performed, negotiate any insurance or renewal thereof covering such property through a particular insurer or person transacting insurance. It is clear that the intent of this statute is to prohibit the conditioning of a loan or a renewal of a loan upon the purchase of a particular type of insurance. However, this statute also provides some bearing on the situation now under review. A.R.S. § 20- 452.02.2, states that the above-referenced section shall not prevent, Any lender from recommending to any borrower or prospective borrower the placing of insurance with a specified Circular Letter 87-6 December 14, 1987 Page 2 insurer, or through a specified insurer or person transacting insurance, as long as such recommendation does not violate the provisions of § 20-452.01. Furthermore, A.R.S. § 20-452.02.03 also states that § 20-452.01 shall not prevent, “the free choice of insurer or person transacting insurance by any borrower or purchase at any time.” It is the opinion of the Department that credit life and credit disability insurance must at all times be the choice of the borrower. This applies not only to the initial loan application in which the borrower is given the option of securing credit insurance at the time the loan is obtained, but also occurs during the life of the loan when a change in insurer may be requested or recommended by the lending institution. This is an especially troublesome area when the question involves group credit life or disability insurance in which the lending institution is the policyholder and the borrowers are issued certificates of insurance at the time they obtain the loan. While the lending institution is the “insured” under the master policy, A.R.S. § 20-452.02.3 states clearly that the free choice of insurer belongs to the “borrower” and not necessarily the “insured.” Consequently, it is the opinion of the Department that under individual or group policies, no change in insurer may be made without the prior approval of the borrower the time they obtain the loan. While the lending institution is the “insured” under the master policy, A.R.S. § 20-452.02.3 states clearly that the free choice of insurer belongs to the “borrower” and not necessarily the “insured.” Consequently, it is the opinion of the Department that under individual or group policies, no change in insurer may be made without the prior approval of the borrower. If a lending institution has obtained the requisite statement of authorization described in A.R.S. § 20-452.03 at the time an insurer is changed, then the Department, according to the statute, will consider that to be prima facie evidence of an violation of A.R.S. § 20- 452.01. Absent such authorization, however, the Department will exercise its authority granted under A.R.S. § 20-452.04 and investigate such continued activity on a case-by- case basis. Vern R. Pierson DIRECTOR OF INSURANCE ## Nearby sections - [AZ Circular Letter 1981-02 AZ Circular Letter 1981-02: Department Investigation of Workers' Compensation Insurance Replacement](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1981_02.md) - [AZ Circular Letter 1981-03 AZ Circular Letter 1981-03: Reasonableness of Benefits in Relation to Premium Charged](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1981_03.md) - [AZ Circular Letter 1985-02 AZ Circular Letter 1985-02: Intentional Misquoting of Personal Lines Property and Casualty Rates](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1985_02.md) - [AZ Circular Letter 1987-06 AZ Circular Letter 1987-06: Credit Insurance](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1987_06.md) - [AZ Circular Letter 1988-01 AZ Circular Letter 1988-01: Testing of Officers and Employees of Title Insurance Agents](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1988_01.md) - [AZ Circular Letter 1989-02 AZ Circular Letter 1989-02: Unclaimed Property](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1989_02.md) - [AZ Circular Letter 1990-01A AZ Circular Letter 1990-01A: Cancellation or Nonrenewal of Homeowners' Policies](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1990_01A.md) - [AZ Circular Letter 1990-04A AZ Circular Letter 1990-04A: AIDS/HIV Testing and Consent Form](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1990_04A.md) - [AZ Circular Letter 1990-05A AZ Circular Letter 1990-05A: Arizona House Bill 2181 (Chapter 394)](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1990_05A.md) - [AZ Circular Letter 1990-07A AZ Circular Letter 1990-07A: "Moving" Auto Insurance Policyholders to New Companies](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1990_07A.md) - [AZ Circular Letter 1992-01 AZ Circular Letter 1992-01: Medicare Open Enrollment](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1992_01.md) - [AZ Circular Letter 1992-03 AZ Circular Letter 1992-03: Use of United States Drug Enforcement Administration (DEA) Registration Numbers as Physician Identification Numbers](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1992_03.md) - [AZ Circular Letter 1992-05 AZ Circular Letter 1992-05: Joint State/Federal Statement on Regulation of MEWAs](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1992_05.md) - [AZ Circular Letter 1994-02 AZ Circular Letter 1994-02: Premium Credit for Subscription to Fire Protection Service](https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1994_02.md) --- Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/AZ_INS_CL_1987_06. Check the current official text before relying on it. Not legal advice.