LPI Provider Declares FHFA Must Do More

There is one provider of lender-placed insurance products which said the recent Federal Housing Finance Agency notice on the topic did not go far enough.

OSC, part of Breckenridge Insurance Group, said it believes the LPI practices mentioned by FHFA “create significant conflicts of interest,” and should be looked into by regulators and those in the insurance business.

“OSC supports last week's action from the FHFA to investigate certain compensation arrangements that are prevalent in today's LPI market,” said Tracey Carragher, CEO of Breckenridge. “However, we believe that it should go further. For instance, if the LPI sector were to be opened up to further competition, premiums could be better aligned with actual loss ratios and hundreds of millions of dollars per year could be saved nationwide.”

OSC/Breckenridge said it was part of the Fannie Mae November 2012 program that was looking to cut the cost of LPI. That program was rejected by acting FHFA director Ed DeMarco in February.

Last month, the New York Department of Financial Services entered into a $14 million settlement with one LPI provider, Assurant.

The settlement included 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.