London bank ordered to pay $2.7M over insurance practices

Thousands of Massachusetts residents will receive refunds after being improperly charged by the financial service

Insurance News

By Lyle Adriano

Massachusetts Attorney General Maura Healey announced Feb. 18 that residents who have been improperly charged for additional property insurance by HSBC Holdings PLC will be refunded. HSBC received commissions from an insurance company that sent the clients its way.

According to the attorney general, HSBC will pay refunds of up to $2.7 million to homeowners affected by the unfair charge, as well as an additional $1.4 million to the state.

HSBC managed to obtain the insurance from borrowers it alleged had inadequate homeowners’ coverage since they fell behind on their mortgage or other bills. These so-called “force-placed” insurance policies have rates that are as thrice as costly as regular ones, said Healey.

A subsidiary of HSBC purportedly obtained commissions from an insurance company, Assurant, Inc. for the sale of the policies. Healey said that the arrangement created an improper conflict of interest and violated state consumer protection laws.

Healy added that HSBC will not accept any commissions or profit-sharing from insurance companies it uses for the force-placed policies under the terms of the settlement.

A spokesman for HSBC confirmed reaching the settlement with the attorney general.

Assurant entered into an agreement with the attorney general’s office in November to refund premiums to homeowners demanded by HSBC to buy force-placed insurance policies.
 

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