Assurant Sees Growing Need for 'Voluntary' Property Insurance

Somewhere between standard homeowners insurance and lender-placed coverage, a new niche of "voluntary" insurance coverage exists and the market is growing, according to Assurant Specialty Property.

Assurant is providing the coverage to borrowers who may have trouble obtaining standard homeowners insurance in the market but are willing to buy a policy themselves rather than leaving the lender to resort to lender-placed coverage. The company's two offerings, CHOICE and FirstSelect, allow servicers to offer voluntary insurance options to their customers before assigning forced-placed coverage.

Patrick Sullivan, a product line executive with Assurant who manages voluntary coverage, said the product's popularity has grown strongly since it was introduced several years ago. Mr. Sullivan said the CHOICE and FirstSelect programs were started in response to demand from lenders for some option in addition to lender-placed coverage that could be offered to homeowners or homebuyers who are having difficulty qualifying for standard homeowners insurance.

Servicers can offer the policies to borrowers whose homeowners policies are about to expire. In addition, the policies can be offered at origination to borrowers who have been turned down for standard policies.

He said Assurant offers simple, fast decisions on the policies to lenders trying to close a loan for a borrower who has been turned down by the major carriers. "We can write coverage over the phone off a pretty limited underwriting profile," Mr. Sullivan said.

The CHOICE option is designed for "nonstandard" borrowers and is close in terms of pricing and coverage to a standard homeowners policy. The FirstSelect option is geared more toward those who need "substandard" policies, which have greater restrictions on liability and personal property coverage.

"The FirstSelect product still beats lender-placed," Mr. Sullivan said. "It's your policy rather than the lender's policy."

Consumers can be turned down for coverage for any number of reasons, and Mr. Sullivan said the underwriting criteria used by the property and casualty insurance industry has expanded to include factors such as credit scores. Geography plays a role in whether or not standard policies are available, with many major companies cutting back on coverage to areas at risk for hurricane damage, for instance. The age or condition of the property also plays a factor.

But other issues creep into the decision making as well. A homeowner with two Rottweilers, for instance, may be turned down for a standard policy, as might someone who has filed frequent insurance claims in the past.

Mr. Sullivan said that the policies serve borrowers who are often in transition, the hope being that by the time their CHOICE for FirstSelect policy is set to expire, they may be eligible for a standard homeowners policy. On the negative side, some borrowers may transition into a lender-placed policy if they are unable or unwilling to renew a voluntary policy.

"This is a transitional product. We don't expect folks to renew this product at the rate that they do in the primary market," he said.

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