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August 23, 2012

New York force-placed insurance premiums will be reduced!

New York homeowners who let their home insurance policies lapse despite being required by a mortgage company to maintain home insurance on the dwellings got a break when insurance companies overcharged for the “force-placed” policies. Less expensive New York home insurance premiums will result.

The rollback was ordered by the state’s Department of Financial Services after a hearing that showed premiums were exorbitant. “The extra expense of force-placed insurance can push a family over the foreclosure cliff because they have no choice than to pay a lot more for a lot less,” Governor Andrew Cuomo said in June.

Force-placed home insurance has become big business in the last few years because of the massive scale of foreclosures caused by the subprime lending financial crisis. The situation was exacerbated in New York because only two companies offer the home insurance. The relative lack of competition allowed premiums to rise without challenge, a situation the Financial Services department detected and now is trying to mitigate.

The level of increase for New York home insurance force-placed policyholders varied from policy to policy in what has become a swollen market. The force-placed specialty insurance market swelled to $5.5 billion in 2010 from $1.5 billion in 2004, according to Financial Services.

The state has more than 19 million residents. Its attractions are numerous. New York boasts New York City, home of a huge swath of the finance industry of the nation and the New York Stock Exchange, the largest in the world. Publishing and printing is the city’s biggest enterprise with apparel manufacturing another big employment industry.

Upstate New York is home to vineyards, vegetable and fruit production, and the state legislature in Albany. Tourists flock to New York City to see the Yankees and Mets play, the Broadway lights, the United Nations building, and the memorial site where the Twin Towers fell. Upstate attractions include Niagara Falls, Cooperstown Baseball Hall of Fame, and West Point.

Homeowners reside in luxurious apartments overlooking Central Park, on Long Island estates, or in snug suburban homes alongside the roads leading to New England. To them, New York isn’t a place to visit. It is a place to retreat to get away from the visitors.