TALLAHASSEE, Fla. – The Office of Insurance Regulation (Office) has disapproved the proposed rate filing submitted by American Security Insurance Company (American Security) on March 1, 2013 and ordered a 10% rate decrease, which will result in an estimated $51 million cost savings for its consumers. This rate decrease applies to American Security’s property collateral protection program, also known as “lender-placed” or “force-placed” insurance. This form of insurance is taken out by a bank, lender or mortgage servicer when a borrower does not maintain the insurance required by the terms of the mortgage or other lending document.
The company requested an overall average statewide proposed rate change of 0%. After a review of the filing, and following a public hearing held by the Office on May 13, 2013, the Office and American Security entered into a Consent Order disapproving the proposed rates and requiring that American Security resubmit a rate filing to the Office reducing its lender-placed insurance (LPI) rates by 10%. The company must also submit annual rate filings to the Office for its LPI program until further order of the Office.
In addition, American Security agrees to implement a number of business reforms within a year to include:
· Notifying all current borrowers by mail and within 120 days of the execution of the Consent Order to inform them about alternative options available for LPI coverage;
· Prohibiting the payment of commissions to a mortgage servicer on LPI policies obtained by that servicer;
· Prohibiting the payment of contingent commissions based on underwriting profitability or loss ratios;
· Prohibiting the issuance of LPI policies on mortgaged property serviced by an affiliate;
· Prohibiting the issuance of reinsurance on LPI policies with a captive insurer of any mortgage servicer;
· Prohibiting the provision of free or below-cost outsourced services to a mortgage servicer; and,
· Prohibiting the payment of any incentive to a mortgage servicer as an inducement to secure LPI business.
As these business practices are phased out over the coming year and the business reforms agreed to are instituted, LPI rates should decline even further.
To review previous press releases and learn more about this topic, visit the lender-placed insurance page on the Office website.
American Security is an insurer domiciled in Delaware which is licensed as an admitted insurer in Florida. American Security has the largest market share of lender-placed policies in Florida with more than 142,000 policies in force representing a total premium of $508 million.
American Security Rate Filing Information:
File Log #13-04125 - This rate filing can be accessed via the I-File Forms & Rates Filing Search system using the following search criteria: file log number or company name. When the selection appears, scroll to the bottom of the results page for the most recent filing information.
About the Florida Office of Insurance Regulation
The Florida Office of Insurance Regulation (Office) has primary responsibility for regulation, compliance and enforcement of statutes related to the business of insurance and the monitoring of industry markets. For more information about the Office, please visit www.floir.com or follow us on Twitter @FLOIR_comm.