California Regulator Hammers Underwriter Peddling Force-Placed Insurance With 30.5% Rate Reduction; Homeowner Savings Estimated At $42.7M

The California Department of Insurance recently announced:

• Insurance Commissioner Dave Jones [] announced a 30.5 percent rate reduction, for "lender-placed" (also called force-placed) homeowner insurance coverage offered by American Security Insurance Company (an Assurant Inc.-owned company). The reduction will result in an estimated $42.7 million savings to homeowners, with an average savings to policyholders of $577 annually.
  
  Force-placed insurance has been subjected to controversy because, under certain circumstances, homeowners are forced to purchase the policies. These policies are primarily intended to protect the lender's interest in the property and typically come with exorbitant costs that are often much higher than standard homeowners insurance policies.
  
  In March, Commissioner Jones contacted the state's largest "lender-placed coverage" insurers to express his concerns about apparent excessive rates. He directed insurers to submit new rate filings with the California Department of Insurance (CDI) to determine if rates could be reduced.
  
  Force-placed insurance has been the subject of national scrutiny and there have been investigatory hearings regarding this insurance in the states of New York and Florida, as well as at the annual meeting of the National Association of Insurance Commissioners (NAIC).
  
  At the Commissioner's direction, CDI carefully examined the insurers' annual financial statement data, and found many cases of low loss ratios. The low loss ratios (the percentage of every premium dollar an insurer spends on actual claims) were a flag to Department officials that rates charged by insurers may be excessive. Insurers were directed to provide a response to CDI by April 1, 2012.
  
  Today's rate reduction is a result of the efforts taken by the Commissioner earlier this year. American Security is the first insurer to lower rates based on the Commissioner's action.

For the California Department of Insurance press release, see Insurance Commissioner Dave Jones Announces $42.7 Million Rate Reduction For Policyholders Of "Force-Placed" Mortgage Insurer (Warns Consumers Not to Let Homeowners Insurance Lapse).