Florida regulators will grill Praetorian execs as well as those from two insurers.
Regulators in Florida will be questioning executives of two insurers and Praetorian Insurance Company this week regarding their policies and behaviors regarding force placed insurance policies.
Significant controversy has been growing around this form of coverage.
These policies are imposed on homeowners by lenders when coverage on the mortgaged property has been allowed to lapse or expired, as they are often sold by companies whose rates are unregulated, by surplus lines insurers, or by companies that are connected with the lenders, causing prices charged to the homeowners to be significantly higher than would be paid if the homeowners sought out their own coverage.
Some homeowners claim that they had no warning regarding the expiration of their policies.
They simply had the force placed insurance coverage imposed upon them without any prior notice. Others already had coverage while they were also being charged for this additional coverage from their lenders.
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The purpose of the policies is to protect the lenders against losses that could occur on the homes for which the loan was made. Though Praetorian is seeking to lower the rate by 2.2 percent, the Office of Insurance Regulation released a statement that says that this “change is not uniform and some areas are subject to higher rates.”
New Fannie Mai loan requirements are causing QBE Specialty Insurance Co., and Balboa Insurance Co., the regulated affiliate of that surplus lines company to move their force placed insurance policies to Praetorian. This is because the regulation says that Fannie Mae’s loans won’t include unregulated surplus lines companies selling this type of coverage. The rate proposal states that those two companies have approximately 115,000 of these policies across Florida.
At the moment, the force placed insurance rates at QBE are 10.5 percent higher than those at Balboa.
The proposal stated that Praetorian would be using the lower of the two sets of rates. The regulation office’s statement said that it is common for it to review this type of filing, which is different from many of the states which have not performed any of this type of review in years.