Insurance reforms pushed by the New York Department of Financial Services now cover 100 percent of the New York force-placed insurance market. The Department of Financial Services recently announced settlements with four New York force-placed insurers (American Modern Insurance, Chubb, Fidelity and Deposit Company of Maryland, and FinSecure), that had not previously agreed to accept changes in the way they do business in New York. The most recent agreements follow regulators’ earlier settlements with Assurant and QBE, reached in March and April 2013. Assurant and QBE have more than 90 percent of the force-placed insurance market in New York and are the dominant players in the market nationally.
New York’s force-placed insurance reforms include the following prohibitions:
- Force-placed insurers may not make any payments, including but not limited to payment of expenses, to servicers, lenders, or their affiliates in connection with securing business.
- Force-placed insurers may not issue force-placed insurance on mortgaged property serviced by a bank or servicer affiliated with the insurers.
- Force-placed insurers may not reinsure force-placed insurance policies with any entity affiliated with the lender or servicer that obtained the policies.
- Force-placed insurers may not pay contingent commissions based on underwriting profitability or loss ratios.
- Force-placed insurers may not pay commissions to a lender or servicer or a person or entity affiliated with a lender or servicer on force-placed insurance policies obtained by the servicer.
The Department of Financial Services regulations will cover any company - present or future - that offers force-placed insurance in New York. The reforms were badly needed and should be followed by other states.