If you haven’t heard about force-placed insurance before, there’s a pretty good chance you will be hearing a lot about it soon.
Though the practice has been around for several years, it’s only recently been making headlines in numerous national publications as regulators have finally decided it was high time to crack down on what only can be called self-dealing and fraudulent activities.
Force placed, as the name suggests, is a bank insurance product that big banks, lenders and loan servicers essentially force homeowners to purchase if they either allow their own policy to lapse – often the result of financial difficulties – or if the lender determines that the insurance the homeowner does have in place is insufficient.
And therein lies the rub: While force-placed insurance premiums initially were supposed to be lower, so that the homeowner could afford to maintain the required insurance, investigations revealed that premiums were two to ten times higher and the force-placed insurance provided far less protection than any policy the homeowner would purchase were they able to afford it in the first place.
Last week, New York Gov. Andrew Cuomo announced that his state’s Department of Financial Services reached a settlement with one of the country’s largest forced-placed insurers – Assurant Inc.
According to a press release agreement calls for Assurant to do the following:
- Make a $14 million settlement payment, without admitting or denying any wrongdoing
- Modify certain lender-placed business practices consistent with new regulations expected to be issued by the NYDFS that will apply to all New York-licensed lender-placed insurers of properties in the state.