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OIR Scrutinizing Lender-Placed Insurance

OIR Scrutinizing Lender-Placed Insurance

The Florida Office of Insurance Regulation and Insurance Commissioner Kevin McCarty continue to take a close look at lender-placed or force-placed insurance.  In its most recent action, the OIR announced on Friday that it intends to disapprove a recent rate filing submitted by Praetorian Insurance Company (Praetorian).

Praetorian submitted a rate filing proposing a modest statewide decrease of 2.2 percent for its property collateral protection program.   The Office of Insurance Regulation held a public hearing on the rate filing to allow interested parties to comment.  Most readers will recognize the public hearing process as applying to rate filings exceeding a 15% statewide average.  However, the OIR has the discretion to hold public hearings in any circumstances, and it did so in the case of the Praetorian filing in light of the recent attention devoted to lender-placed programs.

In a press release accompanying the notice of intent to disapprove, the OIR said its calculation of the indicated rates shows the insurer should be reducing its rates by 35-36%.  The OIR cited four factors in its letter.  First, it said the rates appear to be excessive because the proposed rate levels would result in rates exceeding projected costs.  The OIR further said that the filing contained insufficient support that the indicated expenses are not excessive in relation to the associated services.  Specifically, as to reinsurance the OIR believes there is insufficient support for the allocation of reinsurance costs to Florida.  Finally, the OIR finds insufficient support for the loss trend selected.

“The Praetorian filing was meticulously reviewed and all testimony given by company representatives at the July 3rd public hearing carefully considered,” said the OIR’s Deputy Commissioner of Property and Casualty, Richard Koon. “Praetorian did not provide appropriate support for the rate decrease it requested.”

The OIR’s notice of intent to disapprove this filing follows a hearing of the National Association of Insurance Commissioners (NAIC) on lender-placed insurance at its current Atlanta meetings.