The state of Minnesota announced earlier this week that it is fining American Modern Insurance Group $1 million for overcharging Minnesota residents for force-placed insurance.
Force-placed insurance is also known as lender-placed insurance. When a homeowner needs insurance, but is unresponsive, the lender can reasonable place a policy and charge the property owner.
According to an announcement from the Minnesota Commerce Department, American Modern Insurance Group will also be required to cut its insurance rates by 43% and provide refunds to the affected homeowners.
“The Commerce Department investigation found that, for years, American Modern charged excessive rates to Minnesota homeowners who were forced to buy its policies,” said Minnesota Commerce Commissioner Mike Rothman, whose agency regulates the insurance industry. “This settlement will provide refunds to Minnesotans who were overcharged in the past, while protecting consumers against unfair and costly insurance practices in the future.”
According to Rothman’s office, a Commerce Department investigation found that American Modern charged “excessive rates” in a non-competitive market for force-placed insurance and submitted inaccurate information in support of its rates.
The Commerce Department settlement with American Modern Insurance Group covers force-placed insurance policies issued or active in Minnesota at any time from January 1, 2008, to March 22, 2016.
The Commerce Department estimates that this includes nearly 7,000 policies, Rothman’s office stated.
The settlement includes the following American Modern affiliates and subsidiaries:
American Family Home Insurance Company
American Modern Home Insurance Company
American Modern Select Insurance Company
American Southern Home Insurance Company
American Modern Surplus Lines Insurance Company
Midwest Enterprises, Inc. d/b/a/ Ameritrac
According to Rothman’s office, under the terms of the settlement, Minnesota homeowners who were overcharged or improperly charged for force-placed insurance policies have the right to submit a refund claim.
Rothman’s office stated that a notice with a claim form will be mailed later this year to Minnesota residents who had force-placed insurance policies issues by American Modern during the 2008-2016 period.
In a statement provided to the Minneapolis Star-Tribune, American Modern said it “cooperated fully with the Department of Commerce, and accepted the rate suggestions and implemented corrective actions suggested by the Department. American Modern is pleased to have reached this agreement in order to put any legacy issues behind it.”
