Last week, the Attorney General's office for the Commonwealth of Massachusetts announced the results of a post-settlement agreement audit with American Security Insurance Company, a subsidiary of Assurant, Inc., where homeowners in the state will receive $6.3 million in refunds for improper "forced-place insurance" charges. The announcement explained:
"Force-placed insurance is a type of property insurance that mortgage servicers can purchase on behalf of borrowers if they fail to maintain adequate homeowners insurance coverage on mortgaged properties. Mortgage servicers often hire insurance companies like Assurant to monitor whether borrowers are maintaining adequate homeowners insurance coverage and to issue force-placed insurance policies when appropriate homeowners coverage is not in place.
Premiums for force-placed policies are high—often two or three times as expensive as regular homeowners insurance—and the coverage provided is quite limited. Some mortgage servicers accept commission payments from force-placed insurers, which contribute to the high cost of force-placed insurance and create conflicts of interest for mortgage servicers."
The settlement agreement was first announced in November, 2015. The latest announcement described the results of the audit:
"Although force-placed insurance is only intended for circumstances in which the borrower has failed to adequately insure the mortgaged property, the Attorney General’s audit of Assurant found thousands of cases of duplicative insurance coverage for Massachusetts homeowners. Borrowers eligible for settlement money were previously required by their mortgage servicer to purchase force-placed insurance from Assurant, or were overcharged for force-placed insurance because they were mistakenly sold commercial policies rather than less expensive residential policies..."
4,500 homeowners were improperly charged. The average refund per homeowner is about $1,400. Refund checks were mailed last week to affected homeowners.