Highlights of the proposal related to the insurance industry include:

Defining lender-placed insurance—CFPB's definition of the coverage excludes both lender-placed flood insurance and renewals of borrower insurance by servicer. Note that conflicting information within the rules regarding flood will hopefully be clarified when finalized in 2013.
Application of lender-placed insurance—A reasonable basis to place coverage is established when the lender does not receive a renewal invoice for premium or receives a notice of cancellation or non-renewal from the borrower's primary insurance carrier.
Clarifying and acknowledging escrow's impact on lender-placed coverage—Proposed rules require that servicers with escrow accounts continue to pay the borrower's insurance (even if the borrower is delinquent) rather than obtain lender-placed coverage. This is a significant development for the independent agent, ensuring higher retention rates on property policies sold to customers with escrow accounts. The rules also incentivize servicers without escrow accounts to work with borrowers to renew property coverage. This will help increase agent's retention rates on property coverage.
Establishes a 45-day notice period where borrowers must be notified twice in writing (at least 45 and 15 days, respectively) before lender-placed coverage is applied and their loan charged. This letter cycle applies to both initial placement as well as the renewal of lender-placed coverage.
Provides model forms for letters—CFPB's letters include recommended verbiage as well as the use of bold text where appropriate. When applicable, the letters show how the good faith estimate of lender-placed premium should be disclosed to the borrower.
Removal and refunding of lender-placed premium—Once the borrower provides the lender with a policy number and contact information for the agent or carrier, the lender must confirm the existence of coverage. In cases where the servicer will only accept this information in writing, it must disclose this above-mentioned letters. CFPB also proposes requiring that lender-placed policies be cancelled and premium refunded within 15 days of servicer obtaining borrower's acceptable property insurance.

Read "NAIC Promises Greater Focus on Force-Placed Insurance as CFPB Proposes Rules" by Mark E. Ruquet.

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