Homeowners to see some relief from ultra high premiums.
The top financial regulator in New York state has ordered that forced placed insurance on homeowners policies be provided at a lower price, following a probe that determined that companies had been overcharging their customers.
The deadline for the changes to the premium rates has been set at July 6, 2012.
Benjamin M. Lawsky, the superintendent of the Department of Financial Services set the deadline for the filing of new price on the coverage for homeowners in New York, within this sector of the industry. The dominant insurers within this area are specialty units from QBE Insurance Group Ltd. and Assurant Inc.
A spokesperson from Assurant has stated that the unit from that company is in full cooperation with the regulators of the state and that “we are prepared to revise our lender-placed offerings to reflect mortgage market conditions and meet the needs of New York homeowners, lenders and investors.” QBE could not be reached for comment at this time.
The orders made by Lawsky were in response to accusations that had been made against banks and insurers in May 2012, involving an “intricate web of relationships” that was capable of driving families already in financial distress into foreclosures, and causing harm to investors in mortgage bonds.
It is typically required that homeowners carrying a mortgage must also have homeowners policies to provide their properties with coverage, and which can also serve as loan collateral. Should a customer fail to purchase this coverage or if it is left to expire, mortgage lenders are able to use forced placed insurance, to reinstate the coverage at the expense of the homeowner.
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At the May probe, Lawsky claimed that this had been a highly profitable business for insurers and banks, and that his office had discovered that for every dollar of premiums collected, less than one quarter was used for claims payouts. Comparatively, their most recent rate submissions show that 55 cents are used for that purpose.
According to the state, both QBE and Assurant have maintained the same rates since 1994.
Officials from the state have said that some of the forced placed insurance rates are as high as three to ten times those of standard homeowners coverage.
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