Credit life insurance, which repays some or all of a borrower's outsta
nding debt in the event of death, has been a controversial subject for
many years. Critics assert that, despite regulations that limit tied
sales, pressure on loan officers to generate fee income through cross
selling creates an incentive for coercion of borrowers. Allegedly some
sales techniques leave the consumer with the false impression that th
e purchase of credit insurance was necessary to obtain the loan. This
article measures the frequency with which creditor efforts to sell cre
dit insurance transform the sales message from persuasive to coercive.
A methodology is developed for measuring the impact of coercive selli
ng pressure applied to borrowers at the point of sale. Data used to me
asure the effect of coercive pressure are taken from an extensive surv
ey of borrowers conducted during 1993. Not only are public policy conc
erns about coercion in the selling of credit insurance addressed, but
more generally the article offers a methodology to quantify the influe
nce of the customer's point-of-sale experience on the decision to purc
hase any financial service. (C) 1995 John Wiley & Sons, Inc.