Citigroup to Pay $110M to Settle Lawsuit Over Force-Placed Insurance

Citigroup

has agreed to pay $110 million to thousands of homeowners after they were charged expensive property insurance premiums, according to Reuters. The lawsuit filed in a New York federal court involves “force-placed insurance,” which is usually placed by a bank to protect their stake in a property. Banks are starting to come under more pressure from regulators over force-placed insurance. Agreements give lenders the right to force-place insurance, but regulators have accused banks and insurance companies of pushing up policy prices with improper commission The homeowners who were charged for force-placed insurance will receive back 12.5 percent of the premium upon submitting a claim; this was an agreement between Citigroup and the plaintiffs. The agreement calls for Citigroup to stop accepting commissions for force-placed insurance for a period of six years from the date of the settlement. Citigroup has also agreed to refund eight percent each of force-placed flood insurance premiums and force-placed wind insurance premiums, even though no commissions were paid to Citigroup or its affiliates on flood or wind insurance. According to the filing, the plaintiffs in total were charged about $758 million in hazard insurance premiums and $173 million in flood insurance premiums.