Why are Home Insurance Companies Going Inslovent?

March 30, 2023 by Brad Davis, CIC

Several home insurance companies have gone insolvent in the last couple years.  Others are not writing new business or changing their guidelines to slow down new production.  Being an independent insurance agency that is located on the coast of South Carolina – we are seeing lots of this that is affecting coastal properties.

Home insurance companies going insolvent is a serious problem that can have a devastating impact on homeowners.  When an insurance company goes insolvent, it means that it is no longer able to pay out claims.  This can leave homeowners without any financial assistance to rebuild their homes or replace their belongings after a disaster.

 

What is insolvency?

Insolvency is a legal term that refers to a company or individual that is unable to pay their debts.  In the context of home insurance, insolvency occurs when an insurance company is unable to pay out claims on policies that have been purchased by homeowners.

 

What causes home insurance companies to go insolvent?

There are a number of factors that can contribute to a home insurance company going insolvent.  These include:

Inadequate reserves:  An insurance company must have adequate reserves to cover the cost of claims.  If an insurance company does not have enough reserves, it may be unable to pay out claims on policies that have been purchased by homeowners.

High claims:  If an insurance company experiences a high number of claims, it may not be able to collect enough premiums to cover the cost of those claims.  This can lead to insolvency.

Natural disasters:  Natural disasters can cause a high number of claims to be filed.  If an insurance company experiences a natural disaster, it may not be able to collect enough premiums to cover the cost of those claims. This can lead to insolvency.

Fraud:  Fraud can also cause an insurance company to go insolvent.  If an insurance company experiences a high number of fraudulent claims, it may not be able to collect enough premiums to cover the cost of those claims. This can lead to insolvency.

In the current situation, some insurance companies failed to forecast large increases in reinsurance costs and were not prepared to pay the renewal premiums.

 

What happens when a home insurance company goes insolvent? 

When a home insurance company goes insolvent, it means that it is no longer able to pay out claims.  This can leave homeowners without any financial assistance to rebuild their homes or replace their belongings after a disaster. 

Homeowners who have policies with an insolvent insurance company may be able to file claims with the state insurance department.  The state insurance department may be able to provide some assistance to homeowners who have been affected by an insolvent insurance company.

The South Carolina Guaranty Association has a fund to help insureds that had coverage with an admitted carrier gone insolvent.  For more information about recent insolvencies and the SC Guaranty Association you can visit -> South Carolina Property and Casualty Insurance Guaranty Association (scguaranty.com).

 

What can homeowners do to protect themselves from home insurance insolvency? 

There are a few things that homeowners can do to protect themselves from home insurance insolvency:

  • Choose a reputable insurance company:  When choosing a home insurance company, it is important to choose a reputable company that has a good financial rating.
  • Keep your policy up-to-date:  Make sure you have enough coverage to cover the replacement cost of your home and its contents.
  • Be prepared to file a claim:  If your home is damaged or destroyed, make sure you have all the necessary documentation, such as receipts for your belongings.

 

Conclusion: 

Home insurance companies going insolvent is a serious problem that can have a devastating impact on homeowners.  It is important for homeowners to be aware of the risks of home insurance insolvency and to take steps to protect themselves.

Davis Insurance Associates, Inc. Providing insurance for you personal or business needs in South Carolina.Why use an Independent Insurance Agent? | Davis Insurance - Local Myrtle Beach Insurance Agent
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Why Choose Davis Insurance Associates, Inc.?

We understand that every restaurant has unique risks and needs. Our team at Davis Insurance Associates takes the time to learn about your business so we can provide the best coverage options available. As an independent agency, we shop multiple carriers to find policies that offer great coverage at competitive prices.

After insuring several restaurants around Myrtle Beach and South Carolina, I thought there must be a better way. Restaurant owners are busy, and it was typical to have to speak to the owner or manager several times (about seven on average) just to get all the info needed to work up quotes. I created the form found in the below QR code to make it easier. The form takes about 10-15 minutes to complete, but that is way better than meeting and talking up to 10 times. Now don’t get me wrong. I still want to meet and even visit your restaurant, but this way is how to get it done quickly so I can respect your time and my time.

If you are reading this, I want to review your insurance and put together a proposal that I hope and think will provide better coverage (and hopefully at a lower premium). If you have 10-15 minutes to complete this form and provide me with your current insurance policies, I will work for about two full days to find you the right coverage. Included in that is speaking with the owner or manager to find out what pain points they may have revolving around insurance and what coverage is important to them. As mentioned, this should be tailored insurance for your restaurant!

The next step is easy, call us at 843-213-0000, or click below to start your insurance quote

We are your local independent insurance agency for Myrtle Beach providing you with peace of mind at a price that’s right for you. Let Davis Insurance Associates help you find affordable insurance in South Carolina and North Carolina.

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