By David Thompson, CPCU
Too many insurance professionals spend too much time in their day dealing with lenders who make requests or demands relating to insurance for a loan closing. Some of these demands, if complied with by insurance agency staff, violate Florida Statutes. For example, a common demand is that the evidence of insurance must state, “100 percent replacement cost.” Such wording in not supported in any property policy, and if the agency puts that wording on the evidence of insurance they have likely violated Florida Statute 616.9541(1)(a) dealing with misrepresentation.
Another common demand is that the amount of insurance must at least equal the loan amount. For example, consider a house with a replacement cost of $200,000 sitting on the Atlantic Ocean in a coastal community. With the land included, the “appraised” value might approach $1 million. A lender would likely loan well over $500,000 and demand that insurance coverage for the building be at least that much. Again, if agency staff complies with that demand they have likely violated Florida Statute 626.621:
626.621 Grounds for discretionary refusal, suspension, or revocation of agent’s, adjuster’s, customer representative’s, service representative’s, or managing general agent’s license or appointment.
The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant, agent, adjuster, customer representative, service representative, or managing general agent, and it may suspend or revoke the eligibility to hold a license or appointment of any such person, if it finds that as to the applicant, licensee, or appointee any one or more of the following applicable grounds exist under circumstances for which such denial, suspension, revocation, or refusal is not mandatory under s. 626.611:
(7) Willful overinsurance of any property or health insurance risk.
FAIA’s free Education Library has a wealth of articles relating to lender issues. Nearly two dozen articles are available to assist FAIA member agencies with common lender issues.
At times, it is good to hear how someone “in the trenches” deals with lender issues. Rob Norberg, AAI, of Arden Insurance near West Palm Beach is a “champion” of lender issues. Rob and two other agents have participated in FAIA’s “Lenders Gone Wild” webinar a half dozen times. For a limited time, an archived version of this 60-minute webinar is available.
Rob devoted some of his time out of an already packed work day to share his thoughts relating to how he approaches the issue of lender demands.
Inform yourself using these tools and do as Rob does: Stand firm against lenders.
Post your tips and tricks for dealing with lenders in the FAIA Community.
Copyright FAIA, 05/2017