A state law passed this year restricts lender-placed insurance coverage for Florida homeowners starting Saturday.
House Bill 793 prohibits lenders from “double dipping”—forcing homeowners to buy insurance before their current policy expires—beginning July 1. Based on model legislation from the National Association of Insurance Commissioners, lender-placed insurance cannot take effect before the HO policy lapses and must terminate when the mortgagee secures new market coverage.
According to press reports, some homeowners rejected by their Florida insurance providers have complained about duplicate coverage and higher prices under force-placed plans. The bill sponsor noted several states had embraced the model statute in recent years.
The new law limits property coverage to the replacement cost “as best determined by the last known coverage amount.” The forced-placed insurer or agent must request past coverage from the insured. If that isn’t possible, the insurer’s replacement cost or the loan balance should be used.
This favors banks. Consumers do not need contents coverage or additional living expenditures.
HB 793, passed overwhelmingly in the Florida House and Senate this spring, also prohibits insurance companies and agents from placing lender-forced insurance on property they own, rewarding lenders, or giving commissions on their policies.
The Florida Office of Insurance Regulation must assess rates and lender-placed policies (collateral protection insurance). Insurers must file rates every four years. The statute requires insurers to submit their loss ratios, earned premiums, loss reserves, and other data to OIR by April 1 each year.
After several property insurance-related bills this year and last, the bill generated little Capitol debate, and some insurance brokers and lobbyists claimed they weren’t aware with it. The bill’s chief sponsor, state Rep. Juan Fernandez-Barquin, R-Miami, told a House subcommittee that it would set guardrails above federal regulations and ensure arms-length transactions between lenders and insurance companies that provide forced-placed policies.
The Florida Bankers Association lobbyist backed the bill in the panel.
The insurance industry had anticipated the bill would help consumers who lost coverage in Florida’s fragile market.
“This still puts the banks first,” said Bradenton insurance firm owner Lori Augustyniak, president of the Professional Insurance Agents of Florida. “Consumers do not need contents coverage or additional living expenses.”
Assurant, a major lender-placed policy provider, did not respond Thursday.
Legislative staff analyzed the measure here.