Lenders Beware: New Restrictions in Effect regarding Force-placed Insurance in Missouri

ABSTRACT: Lenders servicing loans related to Missouri properties should be on notice of the new statute governing force-placed insurance, in effect as of August 28, 2023.

Earlier this week, Mo. Rev. Stat. § 379.1850 went into effect. The new statute regulates lender-placed insurance with respect to mortgaged homes in Missouri. The statue does not apply to mortgage transactions involving extension of credit for business, commercial, or agricultural purposes, nor does it restrict the voluntary acceptance of lender-offered insurance or instances where the lender-placed insurance does not result in a charge to the mortgagor’s account.

The Act defines “lender-placed insurance” as insurance secured by the lender/servicer when the mortgagor does not have valid or sufficient insurance on a mortgaged real property, and will include “insurance purchased unilaterally by the lender or servicer, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss, expense, or damage to collateralized property as a result of fire, theft, collision, or other risks of loss” that impairs such lender/servicer’s interest or adversely impacts the collateral, where such purchase is a result of a mortgagor’s failure to obtain required insurance under a mortgage agreement.

It is crucial for lenders to be aware of their own requirements under these new provisions. For instance, if lender-based insurance is placed on the mortgagor’s account, the earliest effective date is the first date of the lapse in the mortgagor's insurance. Additionally, no charges may be assessed against the mortgagor prior to the effective date of the lender-placed policy or following expiration of the term. Furthermore, lenders should consider that the lender-placed insurance premiums “should be based upon the replacement cost value of the property.” A copy of the certificate of insurance or policy must be mailed or delivered in person to the last known address of the mortgagor.

Insurers and insurance producers will also be prohibited from engaging in the following conduct: compensating lenders for issuing lender-placed insurance products, sharing premiums or risks with lenders, making payments dependent on profitability or loss ratios in connection with lender-placed insurance, or providing free or below-cost services or outsourcing in an effort to inflate the price of their product. 

The Director of the Department of Commerce and Insurance will enforce these new provisions and any violations could result in monetary penalties, suspension, or revocation of the insurer’s license. Therefore, lenders and mortgage servicers are advised to pay close attention to these new requirements in Missouri.