Office Orders Praetorian Insurance Company to Modify its Business Practices for Lender-Placed Insurance in Florida
TALLAHASSEE, Fla. – The Office of Insurance Regulation (Office) has issued a Consent Order to Praetorian Insurance Company, Florida’s second largest lender-placed insurance (LPI) provider, requiring the modification of its business practices related to this type of coverage.
Similar reform measures are already being implemented by American Security Insurance Company, which is Florida’s largest lender-placed insurer, based on a Consent Order issued in October 2013. With these two Orders, the Office will have instituted new requirements for more than 90% of the LPI market in Florida, ensuring a level playing field exists for a majority of LPI insurers in the state. In its review of the LPI market in Florida, the Office found practices that potentially and practically hurt insurance consumers. A Consent Order is not an admission of violating insurance laws or rules.
Lender-placed (also known as force-placed) insurance is a commercial policy purchased by a bank, lender or mortgage servicer that covers the lender and sometimes the borrower when a borrower does not maintain the property hazard insurance required by the terms of the mortgage or other lending document. Often, this type of insurance is much more expensive than the borrower had been paying and the cost is passed back to the borrower.
In addition to agreeing to submit annual rate filings for its LPI program until further notice of the Office, Praetorian also agrees to implement a number of business reforms within six months 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 to any servicer or entity affiliated with a servicer;
· 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.
Praetorian Insurance Company is an insurer domiciled in Pennsylvania and is licensed as an admitted insurer in Florida. Praetorian has the second largest market share of lender-placed policies in Florida with more than 126,336 policies in force representing a total premium of approximately $422 million as of March 31, 2012.
To review previous press releases and learn more about this topic, visit the lender-placed insurance page on the Office website.