There have been a number of cases internationally where financial institutions have been obliged to refund policyholders for imposing force-placed insurance deals at the time of contracting for financial services.
Under the National Credit Act in South Africa, credit insurance must not be unreasonable nor at an unreasonable price and this is a good test for any credit-related insurance.
Take heed of the following US examples (besides some heavy fines in the UK):
- A US bank in January 2016 agreed to pay $32.3 million to settle a Florida class action accusing the bank of overcharging 130 000 homeowners for force-placed insurance for hazard, flood, flood-gap or wind insurance coverage forced on their properties. This follows nine similar force-placed insurance deals where refunds were ordered. The bank was also prohibited from inflating insurance charges imposed on mortgagors for five years.
- In May 2013 a bank and their insurer reached a similar settlement with a class of Florida homeowners and paid $19.25 million.
- In February 2014 another bank and insurer paid a $300 million settlement of a similar class action.
- In April 2014 a Florida court obliged a US bank to pay $228 million to settle a class action accusing the bank of overcharging homeowners for force-placed insurance.
- In October 2014 another bank and three insurers paid $32 million for a similar claim.
