The New York Department of Financial Services last week finalized several restrictions on lender-placed insurance. These restrictions will prevent insurers from issuing policies on mortgaged properties serviced by banks affiliated with the insurer and paying commissions contingent on underwriting profitability or loss ratios.
The American Bankers Insurance Association (ABIA) opposed the new rules, noting that they fail to recognize the cost to servicers of using licensed insurance agencies. “It is important here to distinguish between valid insurance commissions and the pejorative term ‘kickback,’ which consumer advocates often use to refer to commissions paid in connection with the force placement of insurance,” ABIA said in its comment letter.
ABIA also warned that the rules will shift the costs of LPI from defaulting borrowers to all the borrowers in a servicer’s portfolio.
Read the final rules.
For more information, please join the ABIA Lender-Placed Insurance Task Force.
The purpose of this Task Force is to work with
regulators and government entities, such as the CFPB and FHFA, on the
regulation of lender-placed insurance to either maintain the current regime or
influence reform proposals to accommodate our members’ interests. For more information or to join this task force, please contact Sarah Ferman.