(AIZ - Free Report
) 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 well.
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 state.
Assurant currently carries a Zacks Rank #3 (Hold). Other insurers such as Assured Guaranty Ltd.
, Radian Group Inc.
(RDN - Free Report
) and CIGNA Corp.
(CI - Free Report
) , all carrying a Zacks Rank #2 (Buy), are worth considering.