The New York Department of Financial Services (DFS) issued Proposed Regulation No. 202, which creates new regulations concerning lender-placed insurance (forced-placed insurance) in the State. This new regulation was published in New York State Register on October 15, 2014 and will take effect on November 14, 2014 (30 days following the publication).
The NY DFS issued this regulation "to set forth rules for the rates for and placement of force-placed insurance and to prohibit certain practices related to force-placed insurance in order to protect homeowners and investors from harm caused by excessive force-placed insurance rates, questionable business practices and relationships in the force-placed insurance industry, and inadequate notice of force-placed insurance." Learn more from NY DFS. Read more about the regulation on the Bank-Insurance Connection.
Last year, when New York first published the proposed regulation, ABIA and other trade organizations submitted comments to the DFS. The Department has also published a summary of the comments they received and addressed following publication of the initially promulgated regulation. ABIA is identified as the "bank organization" and one ABIA comment was addressed. Read the ABIA Comment letter to NY DFS.
The bank organization commented that the Department should not prohibit insurers, insurance producers,or affiliates from paying commissions or sharing risk with servicers or affiliates of servicers. The New York consumer coalition commented that it strongly supported those provisions of the proposed rule.
The Department’s investigation of force-placed insurance found that rates were excessive and that payments by insurers, producers, and affiliates to servicers and servicer’s affiliates contributed, directly and indirectly, to the excessive rates. Consequently, the Department did not change the rule to address this comment.
ABIA is currently reviewing the changes made by the DFS and will discuss this on our Government Relations (GR) Working Group call on Friday, October 17th. If you are a member of the ABIA and would like to participate on our GR Working Group, please contact Renee Galbraith for an invite.