N.Y. Comp. Codes R. & Regs. tit. 11 § 227.0
Current through Register Vol. 46, No. 45, November 2, 2024
(a) The purpose of this Part is to set forth rules for the rates for and placement of force-placed insurance and to prohibit certain practices related to force-placed insurance in order to protect homeowners and investors from harm caused by excessive force-placed insurance rates, questionable business practices and relationships in the force-placed insurance industry, and inadequate notice of force-placed insurance.(b) An investigation by the department found that the rates for force-placed hazard insurance bore little relation to insurers' actual loss experience, resulting in high profits, a portion of which insurers commonly passed on to mortgage servicers and their affiliates through commissions, other payments, and reinsurance arrangements, to the detriment of homeowners and investors. The department also found that homeowners often failed to receive adequate notice that insurers and servicers were force-placing insurance policies on their homes. Section 227.2 of this Part sets minimum adequate notification requirements to ensure homeowners understand their responsibility to maintain homeowners' insurance, and that they may purchase voluntary homeowners' insurance coverage at any time.(c) The department's investigation found that insurers offered financial incentives to mortgage servicers and their affiliates, including commissions to servicer-affiliated insurance producers who performed little or no work, and entered into arrangements that transferred a significant percentage of force-placed insurance profits to affiliates of servicers. In addition, one insurer provided force-placed insurance on mortgages serviced by an affiliate of the insurer. These practices not only artificially inflated premiums charged to homeowners, but created a conflict of interest in that servicers had an incentive to purchase more costly force-placed insurance where they earned a portion of the premiums or profits from the placement of force-placed insurance. Section 227.6 of this Part prohibits these practices.(d) Further, actual loss ratios for force-placed hazard insurance have been significantly lower than both the expected loss ratios insurers filed with the department and the actual loss ratios for voluntary homeowners' insurance. Insurers have failed to regularly update and adjust their rates despite these significant discrepancies. Section 227.7 of this Part requires insurers to regularly inform the department of loss ratios actually experienced and re-file rates when actual loss ratios are below 40 percent, and sets a minimum permissible loss ratio for rate filings to ensure that premiums are set at a rate reasonably related to paid claims.N.Y. Comp. Codes R. & Regs. Tit. 11 § 227.0