Most force-placed insurance following new rules
TALLAHASSEE, Fla. – April 14, 2014 – The Florida Office of Insurance Regulation (FOIR) has issued a Consent Order to Praetorian Insurance Company, Florida's second largest lender-placed insurance (LPI) provider, requiring the modification of its business practices related to property insurance policies that lenders apply to homeowners whose private insurance has lapsed.
American Security Insurance Company, Florida's largest lender-placed insurer, already follows similar rules following a Consent Order issued in October 2013. FOIR says the new requirements will now impact more than 90 percent of the LPI market in Florida.
In its review, FOIR found practices that potentially and practically hurt insurance consumers. A Consent Order is not an admission of violating insurance laws or rules.
Lender-placed (also known as force-placed) insurance is a commercial policy purchased by a bank, lender or mortgage servicer. It covers the lender and sometimes the borrower when a borrower does not maintain property hazard insurance as required under the terms of his mortgage or other lending document. Often, force-placed insurance is much more expensive than the borrower had been paying, and the borrower must pay the higher cost.
In addition to agreeing to submit annual rate filings for its LPI program until further notice, Praetorian agrees to implement a number of business reforms within six months. They include:
• Notifying all current borrowers by mail, and within 120 days of the execution of the Consent Order, about alternative options available for LPI coverage
• Prohibiting commissions to a mortgage servicer on LPI policies obtained by that servicer
• Prohibiting contingent commissions based on underwriting profitability or loss ratios to any entity affiliated with a servicer
• Prohibiting the issuance of LPI policies on mortgaged property serviced by an affiliate
• Prohibiting the issuance of reinsurance on LPI policies with a captive insurer of any mortgage servicer
• Prohibiting free or below-cost outsourced services to a mortgage servicer
• Prohibiting payment of any incentive to a mortgage servicer as an inducement to secure LPI business
Praetorian Insurance Company is an insurer headquartered in Pennsylvania and licensed in Florida. It has more than 126,336 Florida policies in force.© 2014 Florida Realtors®