At MBA Servicing, HousingWire’s Diego Sanchez speaks with Mike Cox, from Proctor Loan Protector, about the evolving landscape of insurance in mortgage servicing. Mike shares his extensive experience in the insurance industry and breaks down the biggest risks servicers face today, from regulatory challenges to rising disaster-related claims.

The growing impact of insurance costs on homeowners

With insurance premiums soaring and natural disasters becoming more frequent, affordability is a critical concern for both homeowners and servicers. Cox explained that the combination of rising home values and increased claims has made securing coverage more difficult and expensive.

“Affordability is being impacted by the rising cost of insurance,” Cox said. “Not only do you have rate increases in states prone to natural catastrophes, but you also have rapidly increasing home values, which further drive up insurance costs.”

States like Florida and California have been hit particularly hard, leading insurance companies to reevaluate their participation in these markets. “Because of the size of these natural catastrophes, insurers are struggling,” Cox said. “Most insurance companies are for-profit businesses, and when they can’t generate an adequate return, they have to make tough decisions.”

Proctor Loan Protector ensures that lenders’ collateral remains protected even when homeowners fail to maintain their own insurance. “Our role is to help borrowers understand that maintaining insurance is a requirement of their mortgage,” Cox said. “If they don’t comply, we step in to insure the property on behalf of the lender.”

Navigating state-specific insurance challenges

One of the biggest hurdles for servicers is managing compliance across multiple states, where insurance regulations and policies vary widely.

“In our business, the mortgage requirements are pretty consistent across the country,” Cox explained. “But insurance coverage varies significantly by state, which can make compliance a challenge.”

“In a state like Michigan, your policy might have a single wind deductible,” Cox said. “But in Florida, you could have two deductibles — one for general wind damage and another for named storms, which is often much higher.”

California, on the other hand, is dealing with an increasing reliance on the state-backed FAIR Plan due to private insurers pulling out. “The State Fair Plan is insuring a lot of homes now,” Cox said. “But it has limitations, and servicers have to ensure homeowners are still meeting mortgage requirements despite the coverage gaps.”

Responding to natural disasters: Proactive steps for servicers

With climate-related disasters on the rise, Proctor Loan Protector has developed a structured approach to helping homeowners and servicers deal with the after effects of major events.

“When a homeowner has a loss, it’s a stressful situation,” Cox said. “For many, it’s their first time dealing with an insurance claim, and they don’t always understand what they agreed to in their mortgage documents.”

Proctor Loan Protector plays a key role in managing the insurance claim process. “When you buy a home and purchase an insurance policy, you have to add the lender as a mortgagee clause,” Cox explained. “That’s because the lender wants to ensure their collateral is protected if something happens to the property.”

The company helps homeowners navigate this process by clearly communicating requirements and offering tools to streamline claims. “We work closely with borrowers to make sure they understand what’s required and how to proceed,” Cox said.

On the lender-placed side, Proctor Loan Protector has a dedicated catastrophe response plan. “Whenever there’s an event, we deploy adjusters immediately,” Cox said. “We get them to the property as soon as possible, collect a full report, and then push funds out as quickly as we can.”

Getting money into homeowners’ hands quickly is critical, Cox emphasized. “For most people, their home is their biggest asset, and when it’s damaged, they need to get it repaired as soon as possible,” he said. “We do everything we can to facilitate that process.”

The future of home insurance: A volatile market ahead

As private insurers continue to withdraw from high-risk states, the future of homeowners insurance remains uncertain. Cox noted that regulatory changes and industry adjustments will be necessary to create long-term stability.

“In some states, insurance carriers have been very limited in how much they can adjust premiums,” Cox said. “You might have seen the headlines—State Farm just filed for an emergency 22% rate increase in California. That’s a significant number.”

To help mitigate losses and stabilize premiums, Cox believes stronger building codes could be a viable solution. “If you require metal or tile roofs instead of asphalt shingles in Florida, homes will be better prepared for hurricanes,” he said. “That could help reduce the frequency of claims and, ultimately, lower premiums.”

Despite these potential solutions, Cox warned that the next few years could be challenging. “A lot of people focus on the big-name disasters — Hurricane Ian, wildfires in California — but what they don’t realize is that we see an average of 75 catastrophes per year,” he said. “The insurance industry defines a catastrophe as any event that causes $25 million or more in losses. That means we’re constantly dealing with major claims, even if they don’t always make the news.”

Preparing for the challenges ahead

With insurance costs rising and availability shrinking, mortgage servicers must proactively protect their portfolios and ensure compliance.

“It’s going to take a lot of cooperation between insurers, regulators, and the industry to stabilize the market,” Cox said. “In the meantime, servicers need the right tools and strategies to navigate these challenges effectively.”

As insurance markets evolve, Proctor Loan Protector remains focused on helping servicers manage risk, respond to disasters, and support homeowners in securing the coverage they need.