New York State is demanding that insurers of lapsed home-loan borrowers submit new rate proposals after hearings last month showed firms charged too much for the coverage.
“Our hearings suggest a lack of competition, high prices and low loss ratios, all of which hurt homeowners,” Department of Financial Services Superintendent Benjamin Lawsky said today in an e-mailed statement. “It is now appropriate for insurers to propose new rates along with justifications for those new rates.”
Assurant Inc. (AIZ:US)’s American Security Insurance Co. unit, QBE Insurance Group Ltd. (QBE) and American Modern Home Insurance Co. were sent the order and are required to respond by July 6, according to the statement. They make up more than 90 percent of the so- called force-placed insurance market in New York.
Mortgage borrowers are required to pay for the coverage when they lapse on their existing policies to protect mortgage investors against vandalism and storm damage. The insurers often pay out less than 25 cents for every dollar in premiums they collect on the policies, Lawsky said at the hearing in May, compared with about 63 cents on a typical homeowner’s policy.
Shawn Kahle, a spokeswoman for Assurant, said the company is “prepared to revise our lender-placed offerings to reflect mortgage market conditions and meet the needs of New York homeowners.” E-mails sent to Sydney-based QBE and American Modern Home Insurance weren’t immediately returned.
New York Governor Andrew Cuomo, who announced the Department of Financial Services order, said the cost of such insurance “can push a family over the foreclosure cliff because they have no choice than to pay a lot more for a lot less.”
Force-placed coverage is often more expensive than standard policies because insurers can’t inspect the properties, and the homes they cover are frequently in areas more prone to hurricanes and other natural disasters, John Frobose, president of American Security Insurance, testified at last month’s hearing.
Assurant gained 0.2 percent to $33.39 at 3:32 p.m. in New York and the American depositary receipts of QBE rose 1.6 percent to $12.40.
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