Florida’s largest provider of insurance policies that banks buy for struggling homeowners must cut its rates 10 percent, below a 50 percent slash some advocates wanted but saving consumers an estimated $51 million, regulators said Tuesday.
The state’s Office of Insurance Regulation rejected a zero percent change in rates proposed by American Security Insurance Co., part of the Assurant Group. Regulators said the company also agreed over the coming year to stop paying certain commissions to mortgage servicers.
It puts a dent in a lucrative business that makes money from homeowners already in trouble. More than 142,000 Florida customers pay more than $500 million in annual premiums to the company, accounting for one in five dollars spent on this kind of insurance across the country.
Consumer advocates wanted a rate cut closer to 50 percent, arguing insurers and banks split huge sums through what amount to kickbacks. The money comes from homeowners who fall behind on payments and let insurance policies lapse. To protect their investment, banks are allowed to choose “lender-placed” or “force-placed” coverage for those homes, but the policies have sometimes cost up to five times or more above normal.
“We appreciate the OIR getting Assurant to stop some of the kickback schemes with mortgage servicers, but wringing out the excess expenses due to such kickbacks should result in a bigger rate cut than 10 percent,” said Birny Birnbaum, executive director of the Center for Economic Justice, a consumer advocacy group.
Attempts to reach American Security for comment Tuesday were not successful, but company officials argued at a May hearing their rates should reflect the risk they face in a state at high risk for storms and foreclosures.
Also on Tuesday, the president of state-run Citizens Property Insurance Corp. told a Florida House panel he wants to introduce a “managed repair” program in 2014 to cut losses from non-storm claims such as water-leak damage. One idea is to use “preferred vendors” to fix damage, a concept that makes some contractors, adjusters and lawyers wary.
Litigation for water damage in Miami-Dade, Broward and Palm Beach counties accounts for a high percentage of all such lawsuits the company faces, raising bills for everyone, Gilway said.
Lawmakers on the House insurance and banking subcomittee asked no questions about a controversial $52 million deal Citizens made with a donor to a committee affiliated with Gov. Rick Scott, Heritage Property and Casualty Insurance Co. House Speaker Will Weatherford called for a review of laws governing such deals in May.
“Our expecation is we will take it up but we just haven’t done it yet,” said Ryan Duffy, spokesman for the speaker’s office. “It’s not going to be this week.”
In other action, State Farm Florida Insurance Co. is asking for a 35.1 percent rate increase for rental dwellings at a hearing Wednesday. Premiums would go up by a lower amount, 25.6 percent, because the company is also reducing certain deductibles.