The state of Minnesota levied the fine against American Modern Insurance Group. State commerce commissioner Mike Rothman also announced that American Modern would have to provide refunds to Minnesotans who were overcharged for force-placed insurance and lower its rates by 43%.
A lender or mortgage servicer generally obtains force-placed insurance at the borrower’s expense if a borrower’s own homeowner’s insurance lapses. Force-placed policies are often significantly more expensive than traditional homeowners’ insurance while providing less comprehensive coverage.
In American Modern’s case, an investigation by the Minnesota Commerce Department found that the company “charged excessive rates in a non-competitive market for force-placed insurance and submitted inaccurate information in support of its rates,” according to a press release.
“The Commerce Department found that, for years, American Modern charged excessive rates to Minnesota homeowners who were forced to buy its policies,” Rothman said. “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.”
The Commerce Department estimated that the settlement would affect nearly 7,000 policies. The settlement includes American Modern and several 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 (doing business as Ameritrac)
An insurance company has been slapped with a $1 million fine for overcharging consumers for “force-placed” insurance on their homes.