New York State officials last month proposed a comprehensive set of rules to reform the “force-placed” – also known as “lender-placed” or “creditor-placed” – insurance industry in the state.
The proposed reform would apply to all current and new force-placed insurers in New York State. It is modeled on agreements reached earlier this year with major force-placed insurers doing business in New York – including Assurant, QBE, and other companies.
“Our investigation uncovered a kickback culture in this industry that inflated premiums and did serious damage to struggling homeowners,” New York’s Financial Services Superintendent Benjamin Lawsky said. “These new rules will help ensure that homeowners remain protected and force-placed insurers don’t simply slide back to the bad old practices of the past.”
Proposed rules include the following major requirements:
- Force-placed insurers shall not issue force-placed insurance on mortgaged property serviced by a bank or servicer affiliated with the insurers.
- Force-placed insurers shall not pay commissions to a bank or servicer or a person or entity affiliated with a bank or servicer on force-placed insurance policies obtained by the servicer.
- Force-placed insurers shall not reinsure force-placed insurance policies with a person or entity affiliated with the banks or servicer that obtained the policies.
Force-placed insurers shall not pay contingent commissions based on underwriting profitability or loss ratios, and shall not provide free or below-cost, outsourced services to banks, servicers or their affiliates.
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