Will Your Insurance Carrier Have the Ability to Pay Claims?
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Has your carrier been 'red-flagged'? The Florida Association of Insurance Agents and other industry professionals warned the legislature about carrier financial instability, underwriting losses and reductions in surplus funds. Sarasota's Herald-Tribune reports that "Weak Insurers put Floridians at Risk" and notes that carriers in Florida are highly more leveraged than in other states.
The Herald-Tribune's investigation found:
- One third of homeowners rely on private insurance carriers that exhibit at least one sign of financial risk;
- More than 100,000 homeowners rely on companies that can barely pay claims for fires, let alone hurricanes or other casualties; and
- Almost one-third of the private carriers have decreased cash set aside for claims.
A presentation by Insurance Commissioner Kevin McCarty stated:
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A license to operate as an insurer should never be confused as a complete guarantee if financial health and profitability. These are private companies and sometimes economic conditions can create financial distress to one degree or another.
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Solvency regulation is designed to reduce financial risks for the policyholder by proactive early detection of potential insurer distresses; and
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Current market conditions have impacted insurers to varying degrees and will likely continue.
Herald-Tribune identifies six (6) carriers with red flags: Homewise Preferred; Magnolia Insurance; Northern Capital Insurance; People's Trust; Sunshine State; and Southern Oak Insurance. Coral Insurance and American Keystone insurance failed last year and Magnolia is reportedly under state supervision, but has not been liquidated.
Citizens' Insurance Corp., has become the primary insurer. However there is an understanding in the industry that premiums charged by Citizens are 40-60% below sustainable rates, leaving Floridians subject to assessments for casualty losses.
Community leaders are well advised to educate themselves about the financial stability of the carriers providing coverage to their communities and to understand whether FIGA provides any relief in the event of insolvency.
with this economy, times are defnitly tough.