The New York Department of Financial Services proposed new rules today that will prohibit forced-placed insurers from placing such coverage on mortgaged property serviced by an affiliated bank or servicer. Force-placed carriers would also be prohibited from paying commissions on, or reinsuring, force-placed insurance with an affiliated mortgage service.
The rules are meant to address a practice wherein banks and servicing companies entered into profit-sharing agreements with force-placed insurers, thereby incentivizing those companies to seek insurance with higher premiums. This, in turn, drove up homeowners costs for consumers. It also spurred a probe in 2011 by the DFS against Assurant and QBE, the two largest carriers of forced-placed insurance.
Superintendent Lawsky described the profit sharing practice as a "kickback culture" that inflated premiums unnecessarily and caused serious harm to struggling homeowners.
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