By Erik Holm and Leslie Scism
New York's financial regulator Thursday said it reached a deal
with additional insurers as it nears an end to its campaign to
overhaul the market for a type of home insurance that is sold when
borrowers drop their original coverage.
The New York Department of Financial Services said it had
reached agreements with four insurers that sell limited amounts of
the so-called force-placed insurance. They agreed to adopt reforms
that previously were accepted by the two biggest sellers of the
insurance.
In addition, a U.S. subsidiary of insurer Munich Re (MUV2.XE,
MURGY) called American Modern Insurance, agreed to pay a $1 million
penalty to the state and offer restitution to some homeowners.
The three other sellers of the coverage--Chubb Corp. (CB),
Fidelity & Deposit Co. of Maryland and FinSecure--"agreed to
sign proactive codes of conduct implementing New York's reforms,"
state regulators said.
The overhaul efforts by the superintendent of the Department of
Financial Services, Benjamin Lawsky, were aimed at lowering the
cost of home insurance sold when borrowers drop their original
coverage. The reforms include prohibitions against paying
commissions to insurance agencies and brokers that are affiliates
of mortgage servicers.
The latest effort follows individual settlements between DFS and
the two biggest force-placed insurers, Assurant Inc. (AIZ) and QBE
Insurance Group Ltd. (QBIEY, QBE.AU). Assurant agreed to pay a $14
million penalty and cut rates in March, while QBE agreed to pay $10
million and file for reduced rates in April.
Last year, Mr. Lawsky grilled Assurant, QBE and various banks
about their relationships with each other. The state maintained
those relationships have been highly profitable for the companies
at the expense of consumers.
Write to Erik Holm at erik.holm@dowjones.com and Leslie Scism at
leslie.scism@dowjones.com
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