North Carolina Insurance Commissioner Wayne Goodwin announced an agreement with two insurers that will result in consumers receiving $1.6 million in refunds.
American Modern Home Insurance Co. and its affiliate American Family Home Insurance Co. have agreed to pay the refund along with a $260,000 penalty after an investigation revealed the insurers used questionable policy features and pricing when selling mobile home and renters’ insurance policies.
The North Carolina Department of Insurance’s Consumer Services said it initiated the investigation based on a September 2011 consumer compliant. Regulators found that American Modern Home and American Family Home used an incorrect policy deductible when setting rates for 26,682 mobile home policies it sold in the state between 2008 and 2012. Those policyholders will be refunded an estimated $1.6 million in premiums.
American Modern Home also failed to follow certain North Carolina Rate Bureau methodologies when calculating premiums on 4,809 renters’ policies it sold between 2009 and 2011, according to state officials. As a result, those consumers will receive roughly $52,000 in premiums.
American Modern Home also did not include a consent to rate disclosure to 73 renters between 2007 and 2012 as required by law. Some $7,000 in premiums will be returned to policyholders.
The insurer also placed a waterbed liability rider on 21,684 renter’s policies between 2007 and 2012 regardless of whether or not the policyholders owned a waterbed. Those policyholders will see a refund of $475,000.
Finally, the insurers will have to pay a $260,000 penalty to the state that will be divided among the state’s public school districts.