Assurant Group defended its force-placed insurance business practices and relationships with mortgage servicers Wednesday, as its stock fell 11% following publication of an American Banker story examining the company's niche.
Before that story was published, Assurant had provided a broad defense of its force-placed business, also known as lender-placed insurance, and the competitiveness of its pricing. But on a conference call hosted by Sterne Agee & Leach (and scheduled that day after the stock began to fall), the company went further, saying its average force-placed premium was around $2,000 annually and that it considered itself to be the low-cost leader among the specialty insurers in the force-placed business.
"Assurant has been in the lender-placed insurance business for over 20 years and we are committed to it being a value added and valuable product for all of its constituents," said Gene E. Mergelmeyer, Assurant Specialty Property's president and chief executive officer. "Lender-placed insurance is only issued after extensive efforts to have the borrower obtain their own insurance coverage."
Mergelmeyer also defended the industry practice of providing compensation or risk sharing opportunities to servicer clients.
He said that Assurant's reinsurance deals — flagged in American Banker's story as potentially aligning a servicer's interest with insurers instead of borrowers and investors — were both appropriate and only in place with a "very small minority" of its clients.
It is more common for the company to pay commissions on the insurance, he said, and its commission rates are "generally comparable to the voluntary homeowner's insurance market."
During a question-and-answer period, Mergelmeyer suggested that Assurant's already-regulated status in the states where it operates implies that its rates had already been deemed appropriate.
Another analyst asked whether the company was worried that mortgage investors might "seek to require or incentivize the servicers to seek more cost competitive solutions here?"
Mergelmeyer responded that the company already worked closely with the dominant players in the market, government-controlled Fannie Mae and Freddie Mac.
American Banker is a sister publication to National Mortgage News.
