Printable Format16a-4-106. (UCCC) Unconscionability. (1) In applying the provisions of this act on unconscionability to a separate charge for insurance, consideration shall be given, among other factors, to:
(a) Potential benefits to the consumer including the satisfaction of his obligations;
(b) the creditor's need for the protection provided by the insurance; and
(c) the relation between the amount and terms of credit granted and the insurance benefits provided.
(2) If consumer credit insurance otherwise complies with this article and other applicable law, then neither the amount, the term of the insurance nor the charge of the insurance is unconscionable.
History: L. 1973, ch. 85, § 66; L. 2024, ch. 6, § 85; January 1, 2025.
KANSAS COMMENT, 2010
1. It may be shown that an agreement about insurance, like any other term of a consumer credit contract, is unconscionable, and the effects of such a showing are those specified in K.S.A. 16a-5-108 and 16a-6-111. This section lists only some of the factors to be considered for unconscionability, and indicates that a balancing of benefits, needs, and costs is required. In general, the creditor's need for insurance protection and the debtor's potential benefit are more patent in connection with extensions of credit that are substantial as to amount and time; the expense of providing exceptional coverage is suspect in relation to relatively small extensions of credit. The relation between the credit terms and the insurance terms must be taken into account in applying this section.
2. One aspect of credit insurance that has produced widespread complaints is the phenomenon of "reverse competition." In most credit insurance, the creditor keeps a portion of the premium as a commission. The effect of this practice is to encourage creditors to seek out insurers who charge the highest rates for the same coverage. This reverses the normal market forces, and prices are driven to their highest, rather than lowest, levels. Creditors seldom advise consumers who buy credit insurance that the same coverage is often available at a lower price. In Browder v. Hanley Dawson Cadillac Co., 379 N.E.2d 1206 (Ill. App. 1978), the court held that failure to disclose the availability of cheaper, but comparable, credit insurance constituted an unfair or deceptive practice trade under the Illinois consumer deceptive practices act by concealing, suppressing, or omitting a material fact. To the same effect is Matter of Dickson, 432 F.Supp. 752 (W.D.N.Car. 1977). Failing to disclose the availability of cheaper insurance may be a violation of K.S.A. 40-2403 et seq. It could also be a factor in making a determination of unconscionability under this act.
Attorney General's Opinions:
Consumer credit insurance; property and liability insurance. 87-3.
Consumer credit transaction; blanket single interest insurance programs. 89-54.