Force-Placed Policyholders Get Rate Reduction

January 31, 2013

Some Californians just got wonderful news for their
homeowner’s insurance policy. Insurance Commissioner Dave Jones announced a 35
percent rate reduction for lender-placed (also called force-placed) homeowner insurance
coverage offered by QBE Insurance Corporation. The rate reduction will result
in an estimated $19.4 million savings to QBE policyholders, with an average
savings of $626 per policyholder annually.

Never heard of lender-placed coverage? Lender-placed
insurance, also known as creditor-placed insurance or force-placed insurance;
is an insurance policy placed by a bank or mortgage servicer on a home when the
homeowners’ own property insurance may have lapsed or where the bank deems the
homeowners’ insurance insufficient.

Force-placed insurance is controversial because, under
certain circumstances, homeowners are forced to purchase the policies. These
policies are primarily intended to protect the lender’s interest in the
property and typically come with costs that are often much higher than standard
homeowners insurance policies.

The Department of Insurance received complaints from
homeowners being forced into lender-placed policies at these expensive prices.
Commissioner Jones directed insurers to submit new rate filings. A subsequent
review of those filings, confirmed that rates were indeed excessive and needed
to be lowered. A second insurer, Great American Assurance Company, has also
reduced its lender-placed insurance premiums by 28 percent in its Mortgage
Protection Insurance Program. That reduction will save California policyholders
$1.26 million annually.

Last October, Commissioner Jones announced a $42.7 million
savings to homeowners by American Security Insurance Company. That premium
reduction was 30.5 percent, which is an average savings of $577 per
policyholder. Following that announcement, another insurer, American Modern Home,reduced their lender-placed premium rates by 21.3 percent saving an
additional $1 million for consumers. These reductions follow the Commissioner’s
efforts to protect California consumers from the high-costs related to
force-placed insurance by lenders.

The Commissioner had the California Department of Insurance
(CDI) carefully examined the insurers’ annual financial statement data, and
found many cases of low loss ratios. The low loss ratios are the percentage of
every premium dollar an insurer spends on actual claims. The CDI saw these were
excessive and insurers were directed to provide a response to CDI by April 1,
2012. Today’s rate reductions are a result of the efforts taken by the
Commissioner in early 2012.

If your insurer hasn’t renewed your homeowner’s policy
because you didn’t pay your premium, you may be able to get your insurer to
reinstate coverage if you bring your premium up to date. You can try to get
coverage with another insurer and if you need help doing that, Alandale Insurance can get you the coverage you need to get you out of a forced-placed situation.
They can get you quality coverage for your budget. Call Alandale at (888) 854-4501
or visit them online at

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