New York officials announced that the state’s “force-placed” insurance reforms will now cover 100 percent of the New York market after the New York State Department of Financial Services (DFS) reached agreements with the four remaining New York force-placed insurers that had not yet agreed to implement those reforms.
These four additional insurers are American Modern Insurance, Chubb, Fidelity and Deposit Company of Maryland, and FinSecure. The latest agreements follow regulators’ earlier settlements with Assurant and QBE announced in March and April respectively. Assurant and QBE control at least 90 percent of the force-placed insurance market in New York.
New York Gov. Andrew Cuomo’s administration said the force-placed insurance reforms will help better protect homeowners from abuse; eliminate the kickbacks DFS uncovered in this industry; and save homeowners, taxpayers, and investors millions of dollars going forward through lower rates.
“These reforms will now cover all of the New York market, but more can and should be done,” New York’s Financial Services Superintendent Ben Lawsky said in his department’s May 30 announcement.
“Unless other regulators across the country move swiftly to crack down on the kickbacks and payoffs we found in the force-placed insurance industry, millions of Americans will remain at risk. We’re continuing to urge other regulators to implement the reforms New York helped pioneer so that every single homeowner is protected.”
DFS’ reform settlement with American Modern Insurance includes a $1 million penalty and restitution for homeowners who were harmed.
Chubb, Fidelity and Deposit Company of Maryland, FinSecure — which had each written relatively smaller volumes of force-placed insurance and were not found to have engaged in the kickback arrangements uncovered at other companies — voluntary agreed to sign proactive codes of conduct implementing New York’s reforms.
New York’s force-placed insurance reforms include the following prohibitions:
- Force-placed insurers shall not issue force-placed insurance on mortgaged property serviced by a bank or servicer affiliated with the insurers.
- Force-placed insurers shall not pay commissions to a bank or servicer or a person or entity affiliated with a bank or servicer on force-placed insurance policies obtained by the servicer.
- Force-placed insurers shall not reinsure force-placed insurance policies with a person or entity affiliated with the banks or servicer that obtained the policies.
- Force-placed insurers shall not pay contingent commissions based on underwriting profitability or loss ratios.
- Force-placed insurers shall not provide free or below-cost, outsourced services to banks, servicers or their affiliates.
- Force-placed insurers shall not make any payments, including but not limited to the payment of expenses, to servicers, lenders, or their affiliates in connection with securing business.
DFS said it will soon issue regulations that include the Cuomo administration’s force-placed insurance reforms, which would cover any company — present or future — that decides to offer force-placed insurance in New York.
Source: New York State Department of Financial Services
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