New York insurance regulators are urging other states to use itssettlement agreement with Assurant, Inc. as a template for anational policy on the issue.

Under the March 21 deal with the New York Department ofFinancial Services, Assurant paid a $14 million fine, and agreed tocut its rates and institute other reforms.

It also agreed to make refunds to eligible homeowners who feelthey were “forced in error” to buy force-placed insurance any timeafter January 1, 2008.

“We urge other commissioners to implement these reformsnationwide to help root out the kickback culture that has pervadedthe force-placed insurance industry and lower rates forhard-working homeowners,” Benjamin Lawsky, superintendent of thestate Department of Financial Services, says in a statement issuedat the quarterly meeting of the National Association of InsuranceCommissioners (NAIC) in Houston.

Lawsky says the DFS is continuing its investigation, andencouraging other force-placed insurers and mortgage servicersoperating in New York to adopt the reforms to which Assurant hasagreed.

“New York stands ready and willing to assist any state that isconsidering moving ahead with similar reforms,” Lawsky said.

Regulations that will soon be issued by the agency will apply toall New York-licensed forced-placed insurers of properties in thestate, says Lawsky.

Assurant agreed to limit premium so its maximumgross-profit-plus-expenses is limited to 38 percent of premiums,Lawsky explains.

It will also be required to pre-file its rates for review everythree years, and to re-file its rates for the next year if itsactual rates in any year result in an actual loss ratio of lessthan 40 percent for the immediately preceding calendar year.

It must also report annually to DFS on its actual loss ratio,earned premiums, itemized expenses, losses, and reserves.

New York, California and Florida have led a recent effort toreduce the cost of force-placed insurance to distressed homeownershurt by the recent downturn in the economy.

California is pressuring insurers to cut rates, includingAssurant and QBE. QBE recently agreed to reduce rates by 35 percenteffective March 15.

Investigative hearings have been held in New York and Florida onthe issue, and the NAIC has held hearings on the issue, and soughtto have insurance departments nationwide re-examine their policiesas well as the cost of this type of insurance in each state.

The DFS statement said its probe had found that Assurantcompeted for business from the banks that were foreclosing ondistressed properties, and mortgage servicers of these properties,through what is known as “reverse competition.”

That is, rather than competing by offering lower prices, theinsurers competed by offering what is effectively a share in theprofits, Lawsky's statement says.

Regarding the rebate program with New York, Robert Byrd, aspokesman for Assurant in Atlanta, says the company's force-placedsubsidiaries agreed to participate, “as it has always been ourpolicy to issue refunds in the event a policyholder was somehowcharged erroneously.”