| How high up the insurance companies were rated, | | | | The sales manner in which the insurance policies |
| seems to make little difference. Sometimes the | | | | were sold does not one single out one particular |
| downturns happened so rapidly that the rating | | | | method.. The troubled companies can not be |
| companies did not have time to react. Many of | | | | pinpointed to distribution of its insurance products. |
| the original agents that wrote the policies with | | | | There is a wide variety of different ways in which |
| that Insurance Company were no longer there. So | | | | policies were sold. Some were only available |
| who is going to notify the policy holders? Certainly | | | | directly from the home office. In other cases the |
| not the insurance companies. Of these companies | | | | home office used direct mail to solicit new |
| starting to sink, it includes some established over | | | | business. There were insurance companies that |
| 100 years ago. Others have only been formed a | | | | had a base of captive agents to sell and distribute |
| few years back. As market changes affect | | | | their policies. In different circumstances the policies |
| profitability, there are companies too sunk in | | | | were sold by independent agents and brokers. |
| tradition to quickly change or eliminate the sale of | | | | Other companies used a large combination of |
| certain products. Additional insurers are too quick | | | | distribution channels. |
| to test the hot markets where profitability and | | | | When insurance company liquidation comes there |
| stability of new style insurance coverage is not | | | | are many efforts first made to save the |
| yet proven. | | | | insurance company. An insurance company can |
| During the past 20 years all types of Insurance | | | | not even apply to go into bankruptcy. Insurance |
| Companies experienced difficulties in paying out | | | | regulation is done at the state level, with no |
| claims. Frequently the problem erupts when claims | | | | federal government intervention provided. This |
| pour in quicker than new premiums arrive and built | | | | means that one state has different consumer |
| up reserves are too low to handle claims | | | | protection amounts built in, than another will have. |
| received.. Intentionally, there are companies | | | | Also certain states step in quicker when they |
| offering policies at dangerously low prices. This | | | | spot a company violating sales practices or |
| purposely makes it more difficult for their | | | | operating in a financial insecure manner. |
| competitors to attract new clients. The practice is | | | | The first step is commonly to issue a state order |
| also know as buying customers, As a result the | | | | for the insurance company to suspend writing any |
| growth rate could be too fast. Also the amount | | | | new insurance. Upon further inspection, the state |
| of future claims is not properly calculated. Then | | | | insurance department may issue a rehabilitation |
| when claims started to rise, the premiums are still | | | | order. This means the insurance company is still in |
| set too low to offset incoming claim obligations | | | | business but now with the insurance commissioner |
| and policy reserves have not had sufficient time | | | | as rehabilitor, the power changes. The insurance |
| to build up. | | | | commission manages the company until the |
| The insurance industry was hardest hit by the | | | | financial conditions can be properly corrected. If |
| property and casualty insurance companies. These | | | | not, an order for the liquidation of insurance |
| make up a high percentage of the companies | | | | company starts. It begins with collecting as much |
| liquidated during the past 20 years. Often high | | | | of the company's remaining assets as possible. It |
| rated companies selling homeowner policies were | | | | is not uncommon for the liquidation process to |
| hit almost overnight by weather devastation. | | | | range from 5 years to 9 years. |
| Entire zip codes, metropolitan areas, and states | | | | More on how the consumer is protected and how |
| were declared disaster areas. Claim reserves | | | | much will be recovered will be handled is in an |
| were quickly depleted, along with the future of | | | | upcoming report. A big hint, HMO - health |
| the insurance company. Just look at the amount | | | | maintenance organizations, and PPO's - preferred |
| of harm Hurricane Katrina's rage put on people | | | | provider organizations ARE NOT covered by |
| and their insurance companies. Only a few years | | | | state guaranty payments. |
| earlier Hurricane Andrew left its mark on Florida. | | | | |