Insurer Provides Refunds to More Than 4,500 Massachusetts Homeowners
BOSTON – (RealEstateRama) — Following an investigation and audit by Attorney General Maura Healey’s Office, a major Massachusetts insurance company is paying more than $6.3 million in refunds to more than 4,500 homeowners who were improperly charged for property insurance.
The total amount of refunds was established by an audit performed by AG Healey’s Office into the practices of American Security Insurance Company, a subsidiary of Assurant, Inc. The audit was part of a prior settlement AG Healey reached with the company regarding force-placed insurance policies. Homeowners charged for unnecessary coverage were sent settlement checks last week.
“Our investigation found that this insurance company was charging consumers for costly and duplicative coverage,” AG Healey said. “As a result of our audit, 4,500 homeowners will be getting a check in the mail after being forced to pay for products they did not need.”
Although force-placed insurance is only intended for circumstances in which the borrower has failed to adequately insure the mortgaged property, the Attorney General’s audit of Assurant found thousands of cases of duplicative insurance coverage for Massachusetts homeowners. Borrowers eligible for settlement money were previously required by their mortgage servicer to purchase force-placed insurance from Assurant, or were overcharged for force-placed insurance because they were mistakenly sold commercial policies rather than less expensive residential policies. The average settlement payment for affected homeowners is $1,400. Assurant cooperated fully with the audit.
Force-placed insurance is a type of property insurance that mortgage servicers can purchase on behalf of borrowers if they fail to maintain adequate homeowners insurance coverage on mortgaged properties. Mortgage servicers often hire insurance companies like Assurant to monitor whether borrowers are maintaining adequate homeowners insurance coverage and to issue force-placed insurance policies when appropriate homeowners coverage is not in place.
Premiums for force-placed policies are high—often two or three times as expensive as regular homeowners insurance—and the coverage provided is quite limited. Some mortgage servicers accept commission payments from force-placed insurers, which contribute to the high cost of force-placed insurance and create conflicts of interest for mortgage servicers.
AG Healey is a national leader on the issue of force-placed insurance. In February 2016, the AG’s Office entered into a $4 million settlement with HSBC to resolve allegations that HSBC had accepted kickbacks relating to force-placed insurance. In September 2016, the AG’s Office reached a settlement with the another force-placed insurance provider, QBE Insurance, regarding duplicative coverage and force-placed insurance overcharges. In April 2017, AG Healey sued Ocwen relating to its alleged force-placed insurance abuses, among other things.
This case was handled by Assistant Attorney General Tim Hoitink, Investigations Supervisor Arwen Thoman, Mathematician Burt Feinberg, Legal Analyst David Lim, and Division Chief Glenn Kaplan, all of AG Healey’s Insurance and Financial Services Division.