New York regulators have ordered three major insurers offering “force-placed” homeowners insurance in New York to submit proposals for new premium rates.
The state’s Department of Financial Services (DFS) said last month the order was sent out after regulators determined that the insurers overcharged New York homeowners “to the tune of millions of dollars.”
The department held public hearings on the subject in May and heard testimonies from various parties including the insurers, homeowners and consumer advocates.
The order was sent to three companies: American Security Insurance Co. (Assurant), QBE Insurance Corp., and American Modern Home Insurance Co. These insurers make up over 90 percent of the force-placed insurance market in New York, and they are also the major players in the U.S. as a whole. The insurers have until July 6 to submit their new rate proposals.
A bank or mortgage servicer places force-placed insurance on a homeowner’s property when the homeowner fails to maintain insurance as required by the terms of the mortgage.
Regulators allege that rates for force-placed insurance can be as much as ten times the cost of normal homeowner’s insurance.
The Department of Financial Services said the evidence of higher-than-necessary insurance premiums was made clear at the hearing.
N.Y. Financial Services Superintendent Benjamin Lawsky said that “Our hearings suggest a lack of competition, high prices, and low loss ratios, all of which hurt homeowners. Based on what we learned at the hearings, it is now appropriate for insurers to propose new rates along with justifications for those new rates.”