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What: Shares of specialty insurer Assurant (NYSE: AIZ) were down as much as 17% as investors reacted to an article in American Banker alleging abuses in a key Assurant business line.

So what: Force-placed insurance -- or creditor-placed insurance as Assurant refers to it -- is homeowners insurance that's placed on a property by the creditor or servicer if the homeowner allows a policy to lapse. The product is essential -- most mortgages require homeowners to keep their homes insured so that if anything happens the collateral (the home) that the bank is lending against isn't impaired. The American Banker article, however, alleges that the industry is riddled with abuses that primarily revolve around insurers paying servicers for the right to provide their force-placed policies and then vastly overcharging for those policies.

Now what: While Assurant may find itself at the center of this controversy since it's a leading provider of force-placed homeowners insurance, if there's wrongdoing, it's not alone. This could also engulf major servicers such as Wells Fargo (NYSE: WFC), JPMorgan Chase (NYSE: JPM), and Bank of America (NYSE: BAC) (which has a captive force-placed group), as well as other insurers like QBE Insurance Group that provide force-placed insurance. Also bear in mind that at this point the wrongdoing is largely speculation and Assurant's management has already roundly denied that it's doing anything shady. However, at a time when regulators seem to be pretty quick on the trigger, this could cause some major headaches for Assurant and others. At this point, investors need to take a close look at the stock and carefully weigh out whether the current low valuation is worth the risk that's bearing down on the company.

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Assurant is a Motley Fool Stock Advisor selection. The Fool owns shares of Bank of America and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy assures you no Wookiees were harmed in the making of this article.