New York insurance regulators are pressuring Citigroup to comply with a subpoena regarding investigations into force-placed insurance. Force-placed insurance has long been a source of controversy. These policies require homeowners to purchase coverage that is much more expensive than conventional policies. This is often done for the sake of lenders who hold sway with insurance companies and the tactic is used to secure returns on these investments. The New York Department of Financial Services has been investigating a number of insurance companies and financial institutions that may have been conducting this sort of business in the state since the beginning of the year.
Regulators are targeting the mortgage arm of Citigroup known as Citimortgage. The insurer has been resisting the subpoena was issued in early January, but has not released any official statement declaring opposition. Regulators have grown weary of this resistance and are now demanding that the company submit to investigation. The state’s Department of Financial Services is keen to put an end to what it believes is an abuse of the insurance industry and consumers and will likely pursue more aggressive action if Citigroup continues its resistance.
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One of the most condemning pieces of evidence comes in the fact that many of the force-place insurance policies are sold by companies that are owned by the lenders that the policies are trying to protect. Regulators consider this a gross conflict of interests and will continue investigating the matter until it is thoroughly resolved.
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