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MetLife (NYSE:MET) has entered the credit card insurance market through its partnership with Citigroup (NYSE:C). The company has launched a credit card account insurance product, which will provide coverage for unemployment, disability and death. [1] MetLife is the largest insurance company in the U.S. and this new product line will add to its extensive portfolio of insurance products, retirement plans and annuities. The company competes with other insurance providers like AIG (NYSE:AIG), Hartford Financial (NYSE:HIG) and Prudential Financial (NYSE:PRU).

We have a price estimate of $49 on MetLife’s stock, implying a premium of about 20% over the current market price.

How Credit Card Insurance Works

Like any other insurance policy, the owner of the credit card insurance policy pays premiums and the insurance company provides protection against unforeseeable events. There are three basic types of coverage under credit card insurance:

  • Unemployment protection, which covers the minimum payments due if a policyholder is voluntarily or involuntarily unemployed.
  • Disability protection, which covers the minimum payments due after a medical disability.
  • Life protection, which covers the entire credit card debt at the time of the policyholder’s death.

(Chart created using Trefis' app)

How Will it Benefit MetLife?

Credit card insurance has been in the market for many years now, but it is generally provided by the card companies themselves. There are few instances of an insurance company venturing into the credit card insurance market. The growth in the number of credit cards in circulation presents a huge market opportunity for credit card insurance. The Center for Economic Justice estimates that credit card insurance generates over $2 billion in revenue each year. [2]

Although the impact of this newly launched credit card insurance policy on MetLife’s share of the U.S. life & health insurance market will be minimal, if MetLife receives a positive customer response, it may decide to partner with several other banks and introduce a series of card insurance policies. This could have a sizable impact on its market share and provide some upside for the company’s shares.

Notes:

  1. MetLife (NYSE:MLG) To Launch Credit Card Insurance, eMoneyDaily
  2. Credit card insurance: don’t believe the hype, CreditCards.com

Disclosure: No positions

Source: MetLife Partners With Citi in Card Insurance Market