N.Y. Reaches Settlement With QBE Over ‘Force-Placed’ Insurance Business

New York officials announced this morning that a New York State Department of Financial Services (DFS) investigation produced an additional settlement with a major “force-placed” or “lender-placed” insurer, QBE.

The settlement with QBE, the nation’s second-largest force-placed insurer, follows an earlier similar deal with the country’s biggest force-placed insurer Assurant Inc. on March 21.

The QBE settlement includes restitution for homeowners who were impacted, a $10 million penalty paid to the State of New York, and a set of wide-ranging reforms — first agreed to last month by Assurant in a DFS settlement.

New York officials said these reforms would save homeowners, taxpayers, and investors millions of dollars going forward through lower rates.

Officials announced that — together with DFS’s previous settlement with Assurant — the agreement with QBE means that companies responsible for at least 90 percent of the force-placed insurance market in New York have now signed onto the N.Y. Gov. Andrew Cuomo administration’s reform effort.

QBE has been the second-largest force-placed insurer both nationally and in New York since it acquired Balboa Insurance Company’s force-placed insurance business in 2011, officials said.

Gov. Cuomo said, “The kickbacks and payoffs in the force-placed insurance industry used to be a dirty little secret that pushed far too many families off the foreclosure cliff, but my administration’s investigation is helping put a stop to those abuses.”

“The nation-leading reforms that we’re putting in place will mean lower home insurance costs and better protections for many working New Yorkers,” Gov. Cuomo said.

New York State’s Financial Service Superintendent Benjamin Lawsky added that the “momentum behind New York’s force-placed insurance reforms is continuing to build.”

“We urge other regulators to pick up the ball and run with it by implementing New York’s reforms nationwide — so that all homeowners, regardless of where they live, are better protected from abuse,” Superintendent Lawsky said. Earlier this month, Lawsky sent a letter to other state insurance commissioners urging them to implement New York’s force-placed insurance reforms nationwide.

New York regulators released the following investigative findings concerning QBE:

Key Terms of Settlements

The settlement includes restitution for homeowners who were affected by QBE and Balboa, a $10 million penalty to be paid by QBE, and a set of major reforms. Key terms of the settlement include:

To lower the cost of force-placed insurance going forward for all non-flood business:

To put a stop to the practices found in DFS’s investigation:

The agreed-upon reforms will also apply to Balboa as its policies are run-off and should they write new force-placed policies in the future.

To provide restitution, refunds will be provided to consumers through a claims process and a third-party administrator selected by DFS and paid for by QBE for homeowners who have been force-placed at any time after Jan. 1, 2008 and meet the eligibility criteria for one of the following three categories of claimants:

Additionally, under the terms of the settlements, QBE will provide improved disclosures and notices to homeowners; and ensure that the amount of coverage force-placed on any homeowner shall not exceed the last known amount of coverage, provided that if the last known amount of coverage did not comply with the mortgage, then the amount of coverage shall not exceed the replacement cost of improvements on the property.

QBE Issues Statement on Settlement

QBE North America also issued a statement today concerning its settlement agreement. The company said that the settlement is “neither an admission of liability nor a judicial finding,” adding that its management team can now return its full attention to growing the insurer’s overall U.S. insurance business.

“QBE is pleased to have resolved this matter,” QBE North America CEO David Duclos said.

“We value our regulatory relations in the U.S. and remain very engaged and cooperative with all our 50 U.S. state regulators and federal agencies that regulate mortgages. As a relatively new entrant to the U.S. lender-placed insurance (LPI) market, we are keenly interested in determining its future shape and course,” Duclos said.

“With this settlement completed,” he said, “our management team can now return its full attention to growing our overall U.S. insurance business.”

QBE North America Chief Legal Officer Pete Maloney added, “QBE elected to settle the matter to avoid protracted litigation and the need for continuing management attention on this long-running regulatory proceeding.”

QBE said that as required by law, the company filed its premium rates in New York and had them approved by the New York State Department of Financial Services. QBE added that the company has paid commissions as allowed by New York law.