JPMorgan Chase & Co and Assurant Inc., a major insurer, have agreed to a $300 million settlement to resolve accusations that they forced homeowners into over-priced property insurance and entered into kickback arrangements that inflated the policies’ prices. It was contended in the lawsuit being settled – one of several targeting large U.S. banks over force-placed insurance – that the improper practices unjustly enriched JPMorgan and the insurer by more than $1 billion since 2008.
JPMorgan says it has discontinued a reinsurance agreement with Assurant. The settlement calls for JPMorgan to stop accepting commissions for force-placed insurance. This settlement is the first nationally to result from several cases against banks that involve force-placed insurance pending in Miami federal court. The settlement is subject to court approval.
Banks have been under increasing scrutiny from regulators about force-placed insurance, which is placed by a bank or other mortgage lender to protect their interests in a property if the homeowner’s insurance lapses. Mortgage agreements give lenders the right to force-place insurance, but regulators have accused banks and insurance companies of pushing up policy prices with improper commission and reinsurance agreements.
Assurant, which is the nation’s largest force-placed insurer, placed about 1.3 million policies for JPMorgan Chase, collecting more than $2.4 billion in force-placed premiums since 2008, according to reports. In March, Assurant agreed to pay $14 million to settle an investigation by the New York state insurance regulator related to its business arrangements with banks and mortgage servicers.
The New York Department of Financial Services had accused Assurant of paying commissions to banks and other mortgage servicers that created an incentive for the banks to force-place higher-priced policies. Typically, Assurant entered into agreements that let reinsurance companies owned by banks take as much as 75 percent of the profit for sharing risks. In a statement announcing that settlement, New York Governor Andrew Cuomo said JPMorgan made about $600 million since 2006 by taking 75 percent of the profits from the force-placed business it gave Assurant.
Lawsuits from around the country over force-placed insurance are still pending in Miami against Citigroup, Wells Fargo, Bank of America and HSBC Bank (USA), which is part of London-based HSBC. A statewide Florida lawsuit against Wells Fargo and QBE Insurance Corp. was settled in May of this year for about $19 million. The JP Morgan case is Salvatore Saccoccio v JP Morgan Chase Bank N.A. et al. It’s pending in the U.S. District Court, Southern District of Florida.
Sources: Dina Aubin, Law360.com and the Insurance Journal
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