Citigroup and insurance company Assurant have agreed to pay $110 million to settle charges that it forced thousands of homeowners to purchase expensive property insurance in order to profit from kickbacks and commissions.
The agreement, which awaits court approval, also forbids Citi from accepting commissions or any other kind of compensation for lender-placed flood or hazard insurance for the next six years. The proposed settlement was filed Thursday in a New York federal court.
The settlement would put an end to a class-action lawsuit that centers on Citi’s practice of buying property insurance on behalf of homeowners after their policies lapse. Citi and other banks have benefited from force-placed insurance by passing the cost of expensive policies on to homeowners and investors while accepting commissions and other forms of compensation from insurers.
The $110 million sum would go to homeowners who were charged a total of $952 million in hazard, flood and windstorm insurance premiums. Class members who were charged for force-placed hazard insurance will receive 12.5% of the premium upon submitting claims, while those charged for flood and windstorm insurance will receive a payment equal to 8% of the premium.
Citi is also barred from accepting free or below-market-rate services from insurers in exchange for sending them business under the terms of the agreement.
"We are pleased to have reached an agreement to conclude this claim, and we anticipate approval by the court,” Citi spokesman Mark Rodgers said in an email.
JPMorgan Chase reached a similar settlement over force-placed insurance in September. The lender and Assurant agreed to pay up to $300 million to overcharged homeowners and refrain from accepting commissions on force-placed insurance for at least six years.