California Home Insurance Policyholders Get $1 Million Rate Reduction
Home insuranceÂ policyholders with American Modern Home Insurance Company are expected to receive a $1 million rate reduction in the near future, according to the California Department of Insurance (CDI). The policyholders eligible for the reduction are specifically individuals who receivedÂ force-placed insuranceÂ from the company and overpaid for coverage.
CDI Slows Force-Place Insurance Practices
The California Department of Insurance has been following an insurance practice that involves requiring homeowners to accept lender-placed — or force-placed insurance coverage — when financing a home.
Typically, when homeowners finance their homes, they are required to purchase a home insurance policy to financially protect the home in the event of a break-in or natural disaster. If the homeowner is not able to maintain home insurance coverage, then lenders have the right to impose coverage on the borrower at a rate it determines.
While this practice has taken place for years, insurance regulators began receiving complaints from borrowers saying they were being forced to accept high-cost force-placed insurance — even when they appropriately paid for their own coverage. The regulators also began noticing relationships between lenders and insurance companies imposing the costly coverage that indicated financial gain for both parties.
In recent years, regulators investigatedÂ force-placed insuranceÂ and found that some homeowners were being charged as much as 10 times more compared to seeking out their own home insurance with a private insurer. As a result, insurance departments required that force-placed insurers reduce home insurance rates.
Home Insurance Customers Receive 32 Percent Discount
The California Department of Insurance announced last week that customers of American Modern Home Insurance Company who received force-placed insurance policies will be granted a 21.3 percent reduction in their coverage costs that amounts to about $1 million.
When coupled with a separate 10.5 percent rate reduction from earlier this year, customers are expected to receive an average of $604 in savings on their annual premiums.
American Modern Home is the second company required by the CDI to lower its rates after Insurance Commissioner Dave Jones expressed concerns about excessive premiums.
In addition to offering the rate reduction, the commissioner said in a news release, “I urge homeowners to do everything they can to keep up their payments in order to protect their primary asset. Don’t let your lender force you into force-placed insurance.”