At its core, the bill is trying to build a wall between the parties involved. Insurers and agents would be prohibited from issuing collateral protection insurance on properties that they, or their affiliates, own, service, or hold servicing rights to. The bill also bans compensating, including through the payment of commissions to, lenders, insurers, investors, or servicers on collateral protection insurance policies. Premium and risk sharing between the insurer and the lender, investor, or servicer that obtained the collateral protection insurance is off the table. So are contingent commissions, profit-sharing arrangements, and any payments tied to profitability or loss ratios flowing to anyone affiliated with a servicer or the insurer. Even outsourcing gets scrutiny – insurers cannot provide free or below-cost outsourced services to lenders, investors, or servicers, nor can they outsource their own functions to lenders, insurance agents, investors, or servicers on an above-cost basis.
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