Thanks to the combined pressure of the Securities and Exchange Commission, insurance regulators from Florida and four other states, the National Association of Insurance Commissioners and consumers, Assurant Inc. recently shared sales data for its force-placed insurance line. The company said it had collected $90 million in premiums from two of the four states that have questioned force-placed rates.
Force-placed insurance -- also called lender-placed insurance -- is property insurance purchased by lenders when a borrower's own policy lapses or expires. We have discussed some of the issues with force-placed policies in several posts since the first of the year, but the primary complaint has been that insurers are overcharging. Florida, in fact, has been dubbed "Ground Zero" for the trend.
The term came up at an NAIC hearing in August. The executive director of the Center for Economic Justice presented his take on force-placed insurance, pointing out that Florida's rates have more than tripled since 2004. He further contended that insurers' profits and losses over the years did not justify the hikes -- especially when compared to insurance companies that sell directly to homeowners.
Not only is force-placed insurance more expensive, but that premium buys less coverage. The lender is only interested in protecting its own interests, so the force-placed policy covers damage to the property purchased with the mortgage loan. Homeowners insurance also includes personal injury coverage as well as coverage for personal property. So, if your house burned down, the force-placed insurance would cover the house. Claims for furniture, the family china, clothing or anything else that was not part of the structure would likely not be paid.
The CEJ presentation included other information about force-placed insurance, and we will discuss that in a future post.
Live Insurance News, "Force-placed insurance sales information released by Assurant following inquiry," Colleen Jeremy, Sept. 10, 2012
NAIC Market Regulation and Consumer Affairs Committee Public Hearing, "Overview of Lender-Placed Home Insurance," Birny Birnbaum, Center for Economic Justice, Aug. 9, 2012
Our firm helps individuals and families with homeowners insurance claim disputes like the one described in this post. To learn more about our practice, please visit our Miami homeowners insurance claims page.