Assurant to Compensate Homeowners - Analyst Blog
26 March 2013 - 1:50AM
Zacks
Assurant Inc. (AIZ) 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. (AGO),
Radian Group Inc. (RDN) and CIGNA
Corp. (CI), all carrying a Zacks Rank #2 (Buy), are worth
considering.
ASSURED GUARNTY (AGO): Free Stock Analysis Report
ASSURANT INC (AIZ): Free Stock Analysis Report
CIGNA CORP (CI): Free Stock Analysis Report
RADIAN GRP INC (RDN): Free Stock Analysis Report
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