'Force-Placed Insurance' and Wells Fargo: Cat's Out of the Bag

Have a look at Cora Currier's doozie of a story posted Friday on ProPublica, under the headline, "Banks Colluding with Insurers to Rip Off Homeowners, Lawsuit Alleges." Currier explains, "More than 20,000 Florida homeowners can now sue Wells Fargo and an insurance company, QBE, for allegedly overcharging for insurance. More than $50 million in insurance premiums are at issue, according to American Banker."

The big deal about the case isn't so much the specific dollar amounts or companies involved, but the fairly standard practice of what's called "force-placed insurance." Here's how Currier explains it:

"The case sheds light on the world of force-priced insurance, an industry that has grown in the years since the housing crisis. Among all the suits and scandals related to the crisis, troubles with force-placed insurance have flown largely under the radar. Force-placed insurance is just what it says it is -- insurance you are forced to buy.

"In some cases, American Banker reported, an insurance company appears to be paying a bank to do nothing except pass along customers. The bank, in turn, has an incentive to force insurance onto its borrowers."

This is a case that likely will drag on longer than a lot of us have to live, so who knows if and when we'll find out exactly what Wells Fargo did. But the point is, force-placed insurance still exists. Fascinating story.