"We did not find that to be a compelling argument," said Lawsky.

He noted that almost all the carriers involved in force-placed insurance—insurance coverage that is imposed by lenders on individuals that have failed to secure insurance for their property—are making huge profits. Traditionally, such huge profits would attract competitors. Instead, the market is dominated by two carriers in New York. Lawsky seemed to indicate that the hearings have not produced a reasonable answer as to why there is not more competition.

Lawsky said the insurance department may need to better job monitoring rates.

He did note that, so far, insurers have been "quite open" about the issues and have shown a willingness to find solutions.

Representative from J.P Morgan Chase and Select Portfolio Serving said at the hearing that they try to keep customers out of the lender placed insurance market, stating that, in their portfolio of mortgages, the number of customers with force-placed insurance amounts to less than 2 percent.

The representative also said that if a borrower does secure homeowners coverage after being put into the force-placed insurance market, the customer will receive a refund after the lender receives proof of insurance.

The executives did not offer an opinion on why there was so little competition in the market, but said they were open to working with the department to resolve any issues.