More Force-Placed Insurers Settle with New York

The New York Department of Financial Services has reached an agreement with the remaining four force-placed insurance providers who do business in the state to agree to reforms of the business which the two largest, Assurant and QBE, had already agreed to.

Under the DFS settlement agreement with American Modern Insurance, the insurer will pay a $1 million penalty and make restitution for homeowners. It will also have to lower its premium rates going forward. The other three companies—Chubb, Fidelity and Deposit Co. of Maryland—were not found to have engaged in the kickback arrangements that the other insurers entered into settlement on. However, they agreed to sign “proactive codes of conduct implementing New York’s reforms,” a DFS press release said.

DFS alleged the force-placed insurers competed for business from banks and mortgage servicers by offering them a share of the profits, instead of lower prices. These arrangements drove up the cost of this coverage because it reportedly incented purchases of policies with high premiums.

In the release, Benjamin M. Lawsky, superintendent of financial services, said: “These reforms will now cover all of the New York market, but more can and should be done. Unless other regulators across the country move swiftly to crack down on the kickbacks and payoffs we found in the force-placed insurance industry, millions of Americans will remain at risk. We’re continuing to urge other regulators to implement the reforms New York helped pioneer so that every single homeowner is protected.”

Recently, Wells Fargo and QBE agreed to pay $19.3 million to settle claims that they overcharged homeowners in Florida on lender-placed insurance policies.

DFS will soon issue regulations that include force-placed insurance reforms, which would cover any company—present or future—that decides to offer force-placed insurance in New York.