2013
A recent article in the Wall Street Journal (March 26, 2013) talks about new regulations on banks that are apparently making money by “forcing” people to buy overly expensive homeowners insurance. The regulations will prohibit the fees banks receive from pushing this expensive insurance.
Outrageous right, the poor homeowner is once again being scammed by the banking and insurance industries.
According to the article, “such “forced” policies are imposed on homeowners whose standard property coverage lapses, typically because the borrower stops making payments. Critics say the fee system has given banks a financial incentive to arrange more expensive homeowners’ policies than necessary.
Regulators say some consumers don’t read warning letters that they will be subject to potentially more-expensive coverage if they don’t restore their original coverage or line up some other homeowners’ policy.
They only realize months into the new arrangement that the amount they are being billed is much higher than they previously paid for coverage.
So, let’s look at this from the left and right point of view.
Left; big business once again is taking advantage of people and it needs to be reigned in by regulation. It’s the governments job to protect people from this kind of “abuse.”
Right; people need to take responsibility for their actions. These policies only exist because people allow their required coverage to lapse. Homeowners are given adequate notice of what is going to happen, but frequently don’t pay attention. Homeowners may again obtain their own cheaper coverage at any time if they choose, but they often don’t.
Okay, where do you stand on this type of thing, left or right? To me this is a microcosm of 21st century America; finding the right balance between personal responsibility and government intervention to protect us from our own irresponsibility.
Perhaps no one should be forced to buy any homeowners insurance. After all, it’s only the mortgage holder who is really at risk. You know, just like some people feel about health insurance, I don’t plan on using health care, but if I do, someone will pay for what I need.
As many of you know too well, homeownership is far more than being able to make the mortgage payment. We should have better regulated the policymakers who pushed sub prime lending and tried to artificially boost homeownership so that they were required to notify borrowers of the cost of taxes, repairs and maintenance, and yes, adequate insurance of various types.
My word, what am I saying? Do we need a Department of Regulation of Common Sense and Responsibility?
QUINNSCOMMENTARY 
The article is about banning the fees and commissions that banks earn on forced policies, not banning the forced policies themselves. Obviously if a homeowner fails to maintain coverage the bank should be able to force coverage to protect itself. Having that process be a revenue generating activity provides an incentive for banks to favor that type of coverage and even select coverage based on how much they make as opposed to coverage that might be less costly.
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Of course that’s it, but that’s not the point. Any forced coverage by its nature will not be the most competitively priced; fees or not. If we banned commissions for brokers selling health insurance that would be cheaper too. The point was that we are using more federal regulation to protect people from something they are fully capable of avoiding themselves.
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