At the risk of jinxing anyone, it looks like we dodged another bullet (at least in Louisiana) with Tropical Storm Fiona. If we can escape this hurricane season unscathed, it will bring a much-needed break, not only to the Gulf Coast in general, but specifically to the insurance industry that protects it.
So far, eight insurance companies have become insolvent, and another dozen or so have withdrawn from the state completely. Many carriers that are still doing business here have severely restricted the risks, ages, and claim types they will cover in certain areas in the Bayou State. While the insurance commissioner is trying to attract new carriers to our state, or at least coax older ones into coming back, there is no guarantee that market conditions will improve or that options will increase. While there are several reasons why this may be the case (and I have written about these before), the fact is that doing business with carriers you can rely on is more important than ever.
Insolvence. Many of the carriers who went under were either poorly capitalized, poorly run, or took on undue risk. While the rates that many of them offered were among the cheapest in the state, they did not have enough reserve capital to adequately navigate back-to-back catastrophic storm seasons. In some cases, it was due to the fact that they were more concerned with bringing on new clients than they were in making sure they could take care of them in a worst-case scenario.
Withdrawal. Some of the companies that left did so because they were bought by big insurance conglomerates. These larger companies often buy smaller companies primarily to increase their cash flow and increase profit margins by being more efficient (AKA, firing service staff). In many cases, these sales are financed by private equity firms or other financial services providers who have little to no appetite to deal with customers when things go wrong. It is much easier for them to pay out their claims, cut their losses, and move to states that don’t have as much catastrophic exposure.
Finding the right coverage for you. It’s often been said that cost is only of major concern in the absence of value. Whether your policy is the cheapest or most expensive policy on the market, if it doesn’t cover your losses when you make a claim, you are flushing money down the toilet. How do you know if a company is well-capitalized? How do you know if they have a good process to handle claims quickly and fairly? You could trust Flo, the Gecko, or Jake from State Farm. Better yet, you can trust a local agent who has the ability to work on your behalf to find the best value for your home.
In it for the long haul. To borrow a phrase from another local business, the sweet taste of the lowest cost will be gone long before the bitter taste of a bad claims experience. Our job is to make sure that you are never left with a bitter taste in your mouth. With a combined 30+ years in the insurance business, our staff has been around through storms, and we plan to be here for the next one (hopefully that will be years and years down the road!). If we can help you, or just give you some free advice, feel free to give us a call or send us an email.