March 14 (Bloomberg) -- A California regulator has directed insurers to lower their rates for clients who lapsed on their previous residential policies amid reports of “questionable financial integration” between the companies and lenders.
Insurance Commissioner Dave Jones contacted the 10-largest providers of so-called lender-placed coverage in the state about his demand and told them to respond by April 1, his office said today in a statement.
Mortgage firms hire new insurance providers to shield against losses tied to storm damage or vandalism when borrowers fail to pay their premiums. Borrowers complained that they had to pay more for the forced coverage than if they obtained the policies on their own, Jones’s office said.
The state’s review found that “loss ratios are low, which typically points to excessive premiums and is evidence to support complaints about the absence of arm’s length transactions between lenders and forced-placed insurers,” Jones said in the statement.
Assurant Inc., one of the largest providers of the coverage, reversed gains after Jones’s statement and fell 71 cents, or 1.7 percent, to $42.16 today in New York.
The insurer has been discussing rates with California, Robert Byrd, a spokesman for the New York-based company, said in an e-mailed statement.
“As a regulated insurance provider in 50 states, we routinely work with regulatory authorities, and we look forward to continued discussions,” Byrd said .
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