Your articles on forced-place homeowners insurance left out several significant bits of information:
• Most forced-place homeowners policies are only in effect for several months. Why?
• Because people have an incentive to go and get a regular policy after that. And most do.
• These policies also only come into force because a homeowner is neglectful in maintaining the insurance that is required to have as a stipulation of his loan.
• Typically, the insured gets warned in advance that the policy will be force placed. He has time to make other arrangements.
Any homeowner can avoid forced-place insurance. All they have to do is keep current on their insurance policy, which they have to do as a term of their loan.
As for any sort of long backdating, that's an abuse that needs to be corrected. But as for the other competitive dynamics of this industry, it would be impossible for a forced-place insurer to do business without compensating the mortgage servicer, whether through commissions, which should be disclosed, or via reinsurance treaties. Similar practices exist in other areas of insurance, including warranties and private mortgage insurance, both of which do not disclose the commissions.
In the interests of full disclosure, I am a shareholder of Assurant.
David J Merkel
Chief Executive Officer
Aleph Investments, LLC
Ellicott City, Md.