NU Online News Service, May 18, 2:32 p.m.EDT

New York's chief regulator indicated he is not satisfied withinsurers' answers about why force-placed-insurance rates are sohigh when losses continue to be low.

In his remarks this morning before the start of a second day oftestimony, Benjamin M. Lawsky, superintendent of Financial Servicesfor New York, said department officials had a “robust discussionwith insurers” during yesterday afternoon's hearing.

He said when insurers were asked why rates are so much higherthan homeowners insurance purchased on the admitted insurancemarket, the response was that “things might get worse in thefuture,” and the higher premiums would be justified at a futuredate.

“We did not find that to be a compelling argument,” saidLawsky.

He noted that almost all the carriers involved in force-placedinsurance—insurance coverage that is imposed by lenders onindividuals that have failed to secure insurance for theirproperty—are making huge profits. Traditionally, such huge profitswould attract competitors. Instead, the market is dominated by twocarriers in New York. Lawsky seemed to indicate that the hearingshave not produced a reasonable answer as to why there is not morecompetition.

Lawsky said the insurance department may need to better jobmonitoring rates.

He did note that, so far, insurers have been “quite open” aboutthe issues and have shown a willingness to find solutions.

Representative from J.P Morgan Chase and Select PortfolioServing said at the hearing that they try to keep customers out ofthe lender placed insurance market, stating that, in theirportfolio of mortgages, the number of customers with force-placedinsurance amounts to less than 2 percent.

The representative also said that if a borrower does securehomeowners coverage after being put into the force-placed insurancemarket, the customer will receive a refund after the lenderreceives proof of insurance.

The executives did not offer an opinion on why there was solittle competition in the market, but said they were open toworking with the department to resolve any issues.