March 21 New York state regulators said they
have reached a settlement with Assurant Inc over
"force-placed" insurance policies, with the insurer agreeing to
pay $14 million in civil penalty, refund some home owners and
modify certain business practices.
The much-anticipated agreement with New York State
Department of Financial Services (DFS) comes as a blow for
Assurant, which has justified the high premium rates all this
while, citing the greater risk that lender-placed insurance
Force-placed policies are typically taken out by banks or
other lenders on homes where the owner does not have sufficient
or any coverage. Regulators in the past have accused insurers of
dramatically overcharging for such policies.
The settlement follows the agreement that a unit of the
specialty insurer reached last year with the California
Department of Insurance to reduce the premium rates for its
lender-placed hazard insurance product by 30.5 percent.
"The force-placed insurance industry has for too long been
plagued by an intricate web of relationships between insurers
and banks that pushed distressed families over the foreclosure
cliff," Governor Andrew Cuomo said.
Last February the DFS subpoenaed Assurant, requesting
information regarding its lender-placed insurance business.
The investigation, launched in October, found that insurers
and banks built a network of troubling relationships and payoffs
that helped drive premiums sky high, in some cases ten times
higher than premiums for voluntary insurance.
The investigation also found that Assurant competed for
business from banks and mortgage servicers through what is known
as "reverse competition."
"Rather than competing by offering lower prices, the
insurers competed by offering what is effectively a share in the
profits," the regulator said in a statement.
"The higher the premiums, the more that the insurers paid to
The regulator noted that JPMorgan Chase has made
about $600 million since 2006 by taking 75 percent of the profit
from the force-placed business it gave Assurant.