California came in second for the state with the most premiums collected.
According to sworn testimony regarding force placed insurance, before the United States Judicial Panel, Florida has the largest share of premiums from these policies.
Its share was 35 percent of the entire country in 2011, equaling about $1.2 billion.
The state was among the highest for home foreclosures in the country, and the majority of people whose mortgage payments defaulted also stopped paying their insurance premiums. This meant that many people had the force placed policies imposed in order to reinstate coverage.
According to Kevin McCarty, the Insurance Commissioner for the state, the lenders do this to help recoup losses.
However, this form of coverage has been the subject of significant concern among commissioners, federal regulators, and homeowners, as the premiums are frequently much more expensive than the coverage that is sold directly to individuals.
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Many force placed insurance policies are sold with perks to the mortgage companies.
According to consumer advocates, this type of lucrative commission or other advantage to the lenders, or the existence of unregulated rates, can mean that the policies that are sold can come with a much higher price tag than necessary. These same consumer advocates say that this is a worrisome conflict of interest. Commissioner McCarty agrees that “That’s something that needs to be investigated.”
McCarty also expressed that he anticipates that a rate hearing will be held after American Society – one of the two largest force placed insurance companies in Florida – proposes its new rates later in 2012. He has said that the other largest insurer, Balboa, decreased its own rates in 2010 by 15 percent, decreasing the premiums it collected by $250 million.
The Commissioner explained that “we’re taking care of business”. As McCarthy is also the National Association of Insurance Commissioners president, he has also ordered another hearing that will occur in Atlanta next month on the topic of force placed insurance coverage. According to experts, the problems with these policies are only making the mortgage issues in the country worse. Considering the state of the housing market and the economy as a whole, there is no mystery as to why the correction of this issue should become a priority.