Starting Saturday, insurers and mortgage lenders for Florida homeowners will face some new restrictions on lender-placed insurance policies, thanks to a bill approved by state lawmakers this year.

House Bill 793 takes effect July 1 and it bars what some have called “double dipping” by lenders, or force-placing insurance before the homeowner’s previous policy has expired. The law, based on model legislation from the National Association of Insurance Commissioners, notes that lender-placed policies cannot take effect sooner than the date of lapse on the HO policy, and must terminate as soon as the mortgagee finds new market coverage.

Some homeowners, dropped by their Florida insurance companies, have complained that they have faced double coverage and much higher premiums under force-placed policies, according to news reports. The bill may be a reaction to those complaints. Several states have adopted the model law in recent years, the bill’s sponsor said.

Under the new law, the amount of coverage must be limited to the replacement cost of the property “as best determined by the last known coverage amount.” The forced-placed insurer or its agent must ask the insured for the previous coverage level. If that is unobtainable, the coverage should be based on the replacement cost of the home as calculated by the insurer or on the unpaid balance of the loan.

This still puts the banks first. It does not require contents coverage or additional living expenses for consumers.

HB 793, approved unanimously this spring in the Florida House and Senate, also bars insurance companies and agents from placing lender-forced insurance on property that the insurer may own, or compensating a lender or giving commissions on policies issued by the carrier.

The Florida Office of Insurance Regulation must review the rates and the lender-placed policies, also known as collateral protection insurance. Insurers that provide the policies must refile rates every four years. Insurers that write the coverage must annually provide their loss ratios, earned premiums, loss reserves and other information to OIR by April 1 each year, the law notes.

The bill, coming after a slew of other property insurance-related measures this year and last, received little debate in the Capitol, and some insurance agents and lobbyists said they weren’t that familiar with it. The bill’s chief sponsor, state Rep. Juan Fernandez-Barquin, R-Miami, told a House subcommittee that the bill would put up some guardrails – above what federal regulations require – and help would ensure arms-length transactions between lenders and insurance companies that provide forced-placed policies.

A lobbyist for the Florida Bankers Association supported the bill at the subcommittee meeting.

Some in the insurance industry had hoped the bill would go a step further to assist those who have lost coverage in Florida’s distressed market.

“This still puts the banks first,” said Lori Augustyniak, president of the Professional Insurance Agents of Florida and principal of an insurance agency in Bradenton. “It does not require contents coverage or additional living expenses for consumers.”

Officials with Assurant, one of the largest providers of lender-placed policies, could not be reached for comment Thursday.

A legislative staff analysis of the bill can be seen here.

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