NEW YORK – The state of New York on Thursday proposed new rules for the force-placed property insurance industry, aimed at eliminating what the state calls kickbacks pushing premiums "sky-high" for homeowners.
Force-placed policies are typically taken out by banks or other lenders on homes where the owner does not have sufficient or any coverage. Regulators in the past have accused insurers of dramatically overcharging for such policies.
Among other changes, the new rules would limit insurers' ability to place such policies on mortgaged property serviced by a bank or servicer affiliated with the insurers.
The proposed rules come after a probe by the state Department of Financial Services, launched in October 2011, found that some force-placed insurers competed by offering a share of their profits.
"This profit sharing pushed up the price of force-placed insurance by creating incentives for banks and mortgage servicers to buy force-placed insurance with high premiums," the Department of Financial Services said on Thursday.
"That is because the higher the premiums, the more that the insurers paid to the banks."
New York state regulators earlier this year settled with Assurant Inc over force-placed policies.
(Reporting by Luciana Lopez; Editing by Nick Zieminski)