The New York State Department of Financial Services has reached a settlement agreement with Assurant, a provider of forced-placed insurance, which calls for a $14 million penalty to be paid to the state. Restitution will also be made to consumers who had policies issued by two Assurant subsidiaries.
In a press release, the superintendent of financial services, Benjamin Lawsky, said “Our investigation found that insurers and banks built a network of troubling relationships and payoffs that helped drive premiums sky high. Those improper practices created significant conflicts of interest and saddled homeowners, taxpayers, and investors with millions of dollars in unfair and unnecessary costs. This settlement includes major reforms that will put a stop to those practices at Assurant, provide restitution to homeowners who were harmed, and save millions of dollars for homeowners, taxpayers, and investors going forward through lower rates.”
In its own release, Assurant said it does not admit or deny any wrongdoing. Gene Mergelmeyer, president and CEO of Assurant Specialty Property, said that with the matter resolved, “We look forward to filing our next generation lender-placed product as we continue to meet the needs of our clients and our customers in New York.”
Among the accusations is that Assurant competed for business from banks and mortgage servicers by offering a share in the profits rather than through lower prices. Because of profit sharing, DFS said banks and mortgage servicers had an incentive to buy forced-placed insurance with high premiums.
The settlement includes a series of best practices for non-flood business, including for Assurant to file a premium rate with a permissible loss ratio of 62%. This will reduce homeowners’ premiums, DFS said.
DFS called the reforms a model for other force-placed insurers to adopt.