On August the 11th, Massachusetts Attorney General Maura Healey’s Office announced that a major Massachusetts insurance company would be paying more than $6.3 million in returns to some 4,500 homeowners, who were improperly charged. The announcement comes after an investigation and audit was carried out by the Attorney General’s Office into the practices of the American Security Insurance Company, which is a subsidiary of Assurant Inc. (NYSE: AIZ).
The total amount to be refunded was decided by Healey’s office after an audit. The audit was carried out in part of a prior settlement with the company linked to force-placed insurance policies. Homeowners that were charged for unnecessary coverages were sent settlement checks just last week. Attorney General Healey made a statement about the announcement.
“Our investigation found that this insurance company was charging consumers for costly and duplicative coverage. 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.”
Generally, force-placed insurance is only used for specific situations when the borrower has failed to sufficiently insure the mortgaged property. The audit of Assurant uncovered thousands of cases involving duplicative insurance coverage for homeowners in Massachusetts.
Some borrowers were forced by their mortgage provider to acquire force-placed insurance from Assurant. Others were overcharged for force-placed insurance after being mistakenly sold commercial policies instead of the far more affordable residential policies. On average, the impacted homeowners will receive $1,400. The Attorney General’s Office has confirmed that Assurant has cooperated fully.
Force-placed insurance is a unique insurance policy that mortgage providers purchase on behalf of the borrower, when they fail to maintain an adequate amount of homeowners insurance. Insurance companies are often hired to monitor the borrowers to ensure sufficient coverage is maintained. They can also issue such policies when appropriate coverage has not been acquired or maintained by the borrower.
Typically, the premiums for force-placed policies are two to three times higher than that of regular insurance. Simultaneously, the coverage is generally limited. Attorney General Healey has repeatedly gone after companies allegedly abusing force-placed insurance. In February of 2016, HSBC agreed to pay $4 million to resolve allegations that it had accepted kickbacks connected to force-placed insurance. Subsequently, the AG went after QBE Insurance in September of 2016. Finally, in April of 2017, Healey and her team sued Ocwen in relation to alleged force-placed insurance abuse.