Judge Sides With Homeowners Ripped Off by Bank and Insurance Company
Cozy relationships sometimes exist between banks and insurance companies. It can be harmful to your financial health. A Florida federal judge has just certified a class action for homeowners who feel they've been ripped off by a bank and an insurance company.
More than 20,000 Florida homeowners can now sue Wells Fargo and an insurance company, QBE, for supposedly overcharging for insurance. The suit alleges that Wells Fargo and QBE colluded in a scheme to artificially inflate the premiums charged to homeowners. The bank force-placed the insurance in question. Force-placed insurance is insurance a homeowner is forced to buy. Mortgage lenders require there to be insurance on houses for their protection.
If a homeowner doesn't keep insurance in effect, the bank or other lending institution uses a clause in the lending paperwork to force the homeowner to buy a policy. In effect, it purchases the policy from an insurance company and passes the bill on to the borrower. That is well and good, unless the bank has a close relationship with or owns an insurance company and buys the policy from it at highly inflated prices. The cost of this force-placed insurance can be ten times the cost of an ordinary policy.
In the Wells Fargo and QBE case, the plaintiffs' attorneys accuse the defendants of secretly paying themselves unearned commissions. Guidelines from the National Association of Insurance Commissioners instructs insurers that they should set their premiums so that 60% of them are paid out on claims.
According to the plaintiffs, QBE paid out only 7.6% on claims while paying its own subsidiaries and Wells Fargo 40% in kickbacks. Force-placed insurance is widespread throughout the state, including here. If you have it, compare premiums to see if you've been ripped off. If so, you now have a way to get your money back.