How Stable Is Your Homeowner Company?

Earlier this year, insurance agents – and Florida homeowners – received some unsettling news.  Due to the ongoing abusive practice of assignment of benefits (AOB) and some recent Florida Supreme Court decisions, Demotech, an organization that rates the financial stability of insurance carriers, announced they were suspending their company rating guidelines in Florida.

Florida insurance companies were told to bolster their financial balance sheets or risk being downgraded to a “B” rating, which could have caused thousands of Florida homeowners to default on their mortgages since Fannie Mae and Freddie Mac require insurance from an “A” rated carrier.

In mid-March, Demotech backed off after most of the companies facing downgrades fortified their claims reserves and policyholder surplus.  Rightly or wrongly, everyone collectively breathed a sigh of relief.

 Most of us living in the Sunshine State have homeowner policies issued through Florida domiciled insurance companies, some who opened for business following the 2004/05 storm seasons, breathing new life into a crumbling Florida property insurance market after many carriers left the state .  These days the ability to purchase a homeowner policy issued through a national insurance carrier is, in many cases, gone.  Even those with national name brands have carved off their Florida business into a separate company in order to shield the assets of the parent company from catastrophic hurricane losses.   Thankfully, we now have an abundance of options through Florida-only insurers, but some are better capitalized than others.

As a homeowner, what does this mean for you?   It means you should ask questions.   Ask how long the company has been in business.  Ask if they are rated by A.M. Best or by Demotech.   Ask if they write in other states besides Florida.  Ask to see their financial stability rating in writing, including claims reserves and policyholder surplus.  You pay good money (many say too much) for homeowner insurance.  Checking out the financial stability of your insurer is a critical step in securing a policy that protects arguably your largest investment. 

The financial health of your insurance company should be more important than whether or not they have the cheapest premium.  The cheap price won’t matter if they become insolvent.