Bank Insurance Agency Management
Community Banks and Insurance
Compliance and Risk Management
Wealth Management
Insurance Product Marketing

Friday, September 20, 2013

New York DFS Proposes Rules to Reform Lender-Placed Insurance

Yesterday, the New York Department of Financial Services (DFS) released proposed rules to address the usage of Lender-Placed Insurance (Forced-Placed Insurance).

According to the DFS, "the proposed rules include the following requirements to help eliminate the kickback culture that pervaded this industry and lower premium rates:"
• "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.
• "Force-placed insurers must provide adequate notification requirements to ensure homeowners understand their responsibility to maintain homeowners insurance, and that they may purchase voluntary homeowners insurance coverage at any time.
• "Force-placed insurers must not exceed the maximum amount of force-placed insurance coverage on New York properties.
• "Force-placed insurers or affiliates must refund all force-placed insurance premiums for any period when there is overlapping voluntary insurance coverage.
• "Force-placed insurers are required to regularly inform the Department of loss ratios actually experienced and re-file rates when actual loss ratios are below 40 percent – helping make sure that premiums are not inflated."

Read the NY DFS Press Release.