Regulators in New York have proposed new force-placed insurance rules, after an investigation found homeowners were charged excessive premiums for involuntary cover.

The Department of Financial Services has acted after reaching agreements with insurers including QBE on restitution to consumers.

“These new rules will help ensure homeowners remain protected and force-placed insurers don’t simply slide back to the bad old practices of the past,” Superintendent of Financial Services Benjamin Lawsky said.

A QBE spokesman says principles covered in its agreement with New York regulators will apply on an industry-wide basis. “QBE has been complying with these agreements since we entered into them earlier this year,” he told insuranceNEWS.com.au.

Lenders take out force-placed insurance when borrowers do not maintain mortgage insurance. It is often costly due to the relationship between mortgage servicers and their affiliates and commissions paid by insurers.

The investigation found losses were low but homeowners were charged up to 10 times more than for voluntary insurance and often received less protection.

The new regulations prevent insurers issuing force-placed cover on properties serviced by affiliated lenders and set out rules on commissions and other payments.

They also strengthen customer service requirements, including advising homeowners of their responsibilities and their ability to buy voluntary cover at any time.

QBE was embroiled in the scandal after it bought Bank of America’s force-placed insurance arm Balboa in 2011. The company’s North American division agreed earlier this year to pay a $US10 million ($10.7 million) civil penalty and reimburse homeowners.