Three Regulatory Trends That May Impact Your Coverage

  Understanding current regulatory trends is key to ensuring your portfolios and insurance strategy remain compliant while meeting your borrowers’ needs. However, the myriad regulations and requirements involving property insurance are evolving so quickly that it can be difficult to keep up. Ignoring this changing landscape is a certain recipe for disaster. To help you understand what’s going on, we’ve outlined three major regulatory trends that could impact your business in 2022.   Federal scrutiny of servicers is growing   You should be aware that CFPB—as well as other federal agencies that regulate the mortgage industry—will be paying close attention to servicers in 2022 and are intent upon eliminating bad actors. After granting the industry some leeway to address homeowners impacted by the Covid-19 pandemic, several federal regulators last month jointly announced they will ramp up enforcement activities. That means servicers should make sure they are in full compliance with Regulation X of the Real Estate Settlement Procedures Act, which establishes standards and certain timelines that servicers must meet when ordering lender-placed insurance for their borrowers.   New state laws may be on the way   Lender-placed insurance is also regulated on the state level. And last month, the National Association of Insurance Commissioners formally adopted the Real Property Lender-Placed Insurance Model Act, which sets a legal framework for states to use for regulating lender-placed insurance. The NAIC’s efforts have been eight years in the making and were prompted by many high-profile reports of unfair competition in the lender-placed insurance industry. The model legislation prohibits certain practices when selling, placing and negotiating lender-placed insurance and is intended to maintain separation between lenders and servicers and insurers. Among other things, it covers the duration of lender-placed insurance coverage and how premiums should be calculated.   NFIP reform may be coming, too   You may have heard that Congress last month reauthorized the National Flood Insurance Program until February as part of its budget to prevent a government shutdown. That’s obviously good news. But there are also multiple bipartisan efforts on Capitol Hill to reform NFIP that could have a long-lasting impact on flood coverage. Several NFIP reform bills have been introduced over the past several months. A U.S. House bill, the NFIP Reauthorization and Reform Act of 2021, would cap premium increases at 9%, create an affordability program to ensure coverage for low- and middle-income families, and authorize $500 million annually for FEMA to modernize its flood mapping program. Florida Sen. Rick Scott has also authored three NFIP reform bills, one of which addresses rate increases that are believed to unfairly impact borrowers in coastal states. It should be noted that flooding has become the most frequent and expensive of U.S. natural disasters. Since 2000, flood-related disasters have caused more than $850 billion in damages and losses, according to Pew Charitable Trusts, which is also advocating for NFIP reform. There’s little doubt that the regulatory environment impacting property insurance will change over the coming year. That’s why it’s so important to have a trusted insurance partner at your side that not only ensures you stay compliant, but can help you see what lies ahead and help you adjust your coverage as needed. If you need help with lender-placed insurance, flood coverage, or anything else, please let us know. Just reach out to us at 866-300-7020 or  info@ILgroup.com.