The United States Department of Justice is investigating an Allstate-owned insurance company for allegedly imposing collateral protection insurance on hundreds of thousands of customers who already had their automobiles covered by other insurers.
The Justice Department filed a new case on July 24 accusing National General (NGHC), a home and auto insurance provider, of defrauding clients who financed their vehicles through Wells Fargo.
The agency claims that between 2005 and 2016, National General conspired to gain money from Wells Fargo by “force-placing” its collateral protection insurance on millions of autos, despite the fact that the business “knew or recklessly disregarded” that borrowers already had insurance.
“In fact, from 2008 to 2016, National General knew that it falsely force-placed insurance between 56 and 93% of the time,” according to the lawsuit. “These improper force-placements harmed borrowers — causing borrowers to pay money they did not owe, borrowers to default on their loans, vehicle repossessions, and negative impacts to borrowers’ credit scores.”
Consumers who financed their vehicles through Wells Fargo at the time were obliged to carry comprehensive and collision insurance, as well as collateral protection insurance. Wells Fargo worked with National General to determine whether a customer had the necessary insurance for their vehicle.
The lawsuit states that if National General did not provide proof of insurance, they automatically issued a certificate of insurance for their CPI product. “This was called ‘force-placing’ insurance because the cost of the CPI was subsequently added to a borrower’s loan, even though the customer did not affirmatively purchase the insurance from National General.”
According to the Justice Department, National General failed to contact insurance providers, agents, or borrowers to gather required information. The corporation also allegedly “failed to match insurance information in its possession with financed vehicles.”