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Consumer advocates and financial services industry officials clashed Thursday over whether banks and insurers are getting paid fairly in the force-placed insurance market.
August 9 -
Officials in Florida, the largest force-placed insurance market in the U.S., are investigating whether banks get kickbacks from insurance firms when they buy the coverage for homeowners behind on their premiums, Insurance Commissioner Kevin McCarty says.
August 6 -
Discussions could lead to a common policy with Fannie Mae and set the stage for a force-placed industry overhaul.
July 10 -
The National Association of Insurance Commissioners will hold a hearing on possible abuses in August. Yet a key regulator doubts the industry is seriously troubled.
July 3
After a series of regulatory and legal challenges to force-placed insurance, the Securities and Exchange Commission asked Assurant (AIZ), the leading specialty insurance carrier, to quantify the potential financial impact.
The correspondence, detailed in Assurant's second-quarter earnings report filed with the SEC and first reported by Bloomberg, dates back to mid-June. In it, the SEC asked Assurant to reveal its revenue from force-placed insurance in New York and California, the first two states to probe the industry. (
Company's financial position, results of operations, or cash flows."
Force-placed insurance, also known as lender-placed insurance, is hazard coverage bought by mortgage servicers on the homes of borrowers who allow their own coverage to lapse. While such purchases are by themselves uncontroversial, banks and force-placed insurers have come under fire for allegedly inflating the price of such insurance. Critics have alleged that the commissions banks collect on the policies are essentially unearned kickbacks, a view endorsed by some state regulators.
While the SEC's interest is significant, its questions have now been addressed in Assurant's second-quarter earnings filing. Assurant earned $123 million in premiums from California last year, and $63 million from New York. In recent weeks, Florida's insurance commissioner disclosed that his state was investigating force-placed insurance costs and would be asking Assurant to justify its rates. Florida is the country's largest market for force-placed insurance, and it has already asked an Assurant competitor, QBE, to lower its premiums by 35%.
In its response to the SEC, Assurant
In an emailed statement to American Banker Wednesday, an Assurant spokesman wrote that its correspondence in the second quarter related to two disclosure matters that "were part of the normal review and response process."
The company has frequently noted the importance of regulatory decisions in its filings, he said, though he argued that such exposure is secondary compared with the possibility of losses from claims.
"We see an illustration of that today in the Gulf, where our teams are preparing to assist customers impacted by Hurricane Isaac," he wrote.
