HB58 Alabama 2023 Session

Summary

Primary Sponsor

Corley EllisRepresentative

Republican

Session

Regular Session 2023

Title

Relating to insurance; to define lender-placed insurance on real property and provide a framework for regulating lender-placed insurance; to require separation between lenders and insurers and define unfair competitive practices in the sale, placement, solicitation, and negotiation of lender-placed insurance; to further provide for the term of the lender-placed insurance on real property and for the calculation of coverage and payment of premium; to provide for prohibited practices in the issuance of lender-placed insurance on real property; to require certain details of the insurance to be set forth in the policy or certificate of insurance; to require for the filing and approval by the Department of Insurance of the forms and rates to be charged for the insurance; to provide for the enforcement of the act and penalties for violations of the act; and to provide for judicial review of orders of the Commissioner of Insurance.

Summary

HB58 creates a regulated framework for lender-placed insurance on real property, separating lenders from insurers, curbing unfair practices, and requiring filing and rate approval, with borrower protections.

What This Bill Does

It defines lender-placed insurance on real property, sets when it can be placed and when it ends, and requires an individual policy with specific details. It requires insurers to calculate coverage and premiums using replacement cost value or last known coverage amount and to pay any excess coverage to the mortgagor after a loss. It requires filing and approval of policy forms and rates by the Department of Insurance, imposes rate-review standards, and establishes penalties and appeal rights for violations. It also prohibits certain conduct, such as conflicts of interest and improper compensation, and gives the Insurance Commissioner enforcement powers.

Who It Affects

• Lenders and mortgage servicers would implement the new framework, ensure the separation from insurers, and follow prohibitions on improper practices.
• Insurance companies and licensed producers would file forms and rates, ensure rates are fair and not discriminatory, and avoid conflicts of interest with lenders/servicers.
• Mortgagors/borrowers would receive lender-placed insurance only under defined conditions, get an individual policy detailing coverage and costs, and have protections around premium charges and how coverage is applied.
• Investors and mortgage holders would be protected from sharing premiums or risk with lenders and from certain abusive practices related to lender-placed insurance.
• The Alabama Department of Insurance would enforce the act, review rates for fairness, impose penalties, and handle appeals.

Key Provisions

• Defines lender-placed insurance and creates a legal framework to regulate it, including coverage for real property (including manufactured/mobile homes) and maintaining separation between lenders/servicers and insurers.
• Requires an individual lender-placed insurance policy or certificate with details such as property address, coverage amount, effective date, term, premium, and claim contact.
• Establishes when lender-placed coverage becomes effective and when it terminates, and prohibits charges before the effective date or beyond the policy term.
• Requires premium and coverage to be based on replacement cost value or last known coverage amount, with procedures if LKCA is unknown and rules for payments upon loss.
• Mandates filing and approval of policy forms and rates by the Department of Insurance, with separate rates for lender-placed and voluntary insurance and an annual filing cycle.
• Imposes prohibitions on conflicts of interest, compensation sharing, premium/risk sharing with lenders or servicers, contingent commissions, and outsourcing practices related to lender-placed insurance.
• Provides enforcement tools for the Commissioner, including penalties and license actions, and allows judicial review of Commissioner orders.
• Applies definitions and requirements to insurers and insurance producers involved in lender-placed insurance and sets scope to include related parties and programs.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Real property, mortgages, property insurance, lender-placed insurance, regulation by Insurance Department