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

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

In his remarks this morning before the start of a second day of testimony, Benjamin M. Lawsky, superintendent of Financial Services for New York, said department officials had a "robust discussion with insurers" during yesterday afternoon's hearing.

He said when insurers were asked why rates are so much higher than homeowners insurance purchased on the admitted insurance market, the response was that "things might get worse in the future," and the higher premiums would be justified at a future date.

"We did not find that to be a compelling argument," said Lawsky.

He noted that almost all the carriers involved in force-placed insurance—insurance coverage that is imposed by lenders on individuals that have failed to secure insurance for their property—are making huge profits. Traditionally, such huge profits would attract competitors. Instead, the market is dominated by two carriers in New York. Lawsky seemed to indicate that the hearings have not produced a reasonable answer as to why there is not more competition.

Lawsky said the insurance department may need to better job monitoring rates.

He did note that, so far, insurers have been "quite open" about the issues and have shown a willingness to find solutions.

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

The representative also said that if a borrower does secure homeowners coverage after being put into the force-placed insurance market, the customer will receive a refund after the lender receives proof of insurance.

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

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Lawsky Dissatisfied with Answers on Force-Placed Insurance Rates

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