By Karen Freifeld
NEW YORK, April 18 New York state regulators
said they have reached a settlement with QBE Insurance Group
over "forced-placed" insurance, with the insurer agreeing to pay
a $10 million penalty, make restitution to harmed homeowners,
and reform business practices.
Forced-place 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
overcharging for the policies.
QBE's settlement with the Department of Financial Services
comes a month after Assurant Inc, the country's largest
forced-place insurer, agreed to pay $14 million over an
industry-wide probe launched in October 2011 by DFS.
Regulators found that QBE, the nation's second-largest
force-placed insurer, created incentives for banks to buy its
costly insurance, and in turn, pushed the higher costs onto
borrowers, according to Benjamin Lawsky, superintendent of DFS.
Lawsky also said QBE paid commissions to affiliated brokers
and insurance agencies to win this business, even though little
work had by done to earn such payments.
"We're kicking the kick-backs out of this industry," Lawsky
said at a conference in New York on Thursday.
QBE acquired the forced-placed insurance of Bank of America
Corp subsidiary Balboa Insurance Company's in 2011.
The settlement resolves the conduct relating to
force-placed insurance issued by Balboa with a $6 million
penalty and by QBE with a $4 million penalty.
Bank of America also signed onto the settlement, the state
"QBE resolved this matter solely to put it behind them,"
said Washington attorney Andrew Sandler, who represents QBE.
"QBE does not agree that its practices were illegal."
A Bank of America spokesman said the bank was "pleased to
put this matter behind it and move forward."
Lawsky credited the relative youth of his agency for its
ability to move quickly. The DFS was created in 2011 through the
merger of two existing state agencies.
"Sometimes financial regulators find that moving in a new
direction is akin to turning a battleship in a bathtub.
Institutional inertia can stymie even the most well-intentioned
of watchdogs," Lawsky said in prepared remarks.
"We're nimble and we're agile and we're able to take a fresh
look at issues across the financial industry - both new and
old," he said, pointing to the forced-placed insurance deals and
Standard Chartered Plc last August agreed to pay
$340 million to the regulator over transactions linked to Iran.