) and the New York Department of Financial Services have entered
into an agreement related to lender-placed insurance sold by the
company's Specialty Property unit
Lender-placed insurance is also known as forced-placed
insurance. It is the coverage purchased by the mortgage servicer
on behalf of homeowners in the event of expiration or
cancellation of the customer's insurance or in case the proof of
insurance is not validated. Lender-placed insurance coverage is
necessary to protect the lender's interest in the property if
damage was to occur and the customer had not maintained adequate
coverage. It is comparatively more expensive than the insurance
coverage the customer purchases because it must cover all
properties, in all locations and in all conditions.
However, Assurant had sold the Lender-placed insurance policy
to distressed homeowners at grossly overcharged rates.
Now, units of Specialty Property - American Security Insurance
Company (ASIC) and American Bankers Insurance Company of Florida
(ABIC) have been ordered to make a penalty payment of $14
million. As per the agreement, Assurant will have to refund the
excess premium charged from homeowners and lower its rates as
Assurant is also required to make changes to its lender-placed
business practices to make it more compliant with the new
regulations by the financial services department of New York.
Assurant will have to apply for its new lender-placed program
and new rates in N.Y
Assurant faced a similar ruling from the California Department
of Insurance last year and finally had to reduce premium in that
Assurant currently carries a Zacks Rank #3 (Hold). Other
insurers such as
Assured Guaranty Ltd.
Radian Group Inc.
), all carrying a Zacks Rank #2 (Buy), are worth considering.
ASSURED GUARNTY (AGO): Free Stock Analysis
ASSURANT INC (AIZ): Free Stock Analysis
CIGNA CORP (CI): Free Stock Analysis Report
RADIAN GRP INC (RDN): Free Stock Analysis
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