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Why Do Insurance Companies Fail?

Why Do Insurance Companies Fail?

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Rex Lesueur, President Bancorp Insurance

Evergreen USA has the following  notice on their website: “After more than 20 years in the RV Park and Campground Industry, Evergreen USA Risk Retention Group, Inc. (Evergreen USA) will cease writing new policies immediately and will cease renewing existing policies effective July 15, 2014.”

Many of their policies holders are wondering why they are now in being forced to look for new insurance? The simple answer is claims. Insurance companies only make money if they collect more in premium then they pay out in claims. By the way insurers cannot just spend all that premium, by law they must keep part of it in an account to pay claims that may happen 10, 15 and even 20 years down the road. The trick with estimating how much to put aside depends on what type of claims your customer base has and how much the insurance company is likely to pay out.

I am sure you can see how hard it is to look into the future and make this type of calculation. In a large part the information used to determine the future claims is the past claims history or any given industry. Not always an accurate representation of what will occur 10 years down the road. Actuaries miss-calculate all the time. When that happens often an insurance carrier goes out of business.

Also in this case Evergreen it was a small under capitalized off shore insurer. There are state laws with minimum capitalization requirements for insurance companies, but if the insurance company is domiciled off shore many of the state laws do not apply. Therefore, before paying for an insurance policy you should ask your broker or agent for the insurance company’s financial rating. It should be an A+10 or better to make sure the company is financially viable and will be able to pay its claims.

So What Do You Need To Do If Your Insurance Carrier Goes Out Of Business?

If you are in a situation don’t panic there are laws in every state to protect policyholders. However if you have a claim that for whatever reason you have not turned into the carrier do it now. If you wait your claim may not get fully paid.

Do not wait until your current renewal date to start shopping for a new insurance carrier. Especially in a specialty line of business like RV Parks and Campgrounds. Many insurance companies do not insure this type of business because of the unique exposures. Every RV Park and Campground is a little different and many of them provide additional services like horse riding, boating, a swimming area etc.  The exposure or risk is not one size fits all.

Likewise not every insurance agent or broker is experienced at insuring RV Parks and Campgrounds, so look for a specialist. Someone who understands your business and the where to shop for the best insurer that will protect your financial investment in your business. There are a few brokers and agents who specialize in insuring RV Parks, Resorts and Campgrounds. Yes Bancorp Insurance is one of them. Go to our website and check us out. Bancorp Insurance works with AdvenSure and other insurer’s who know how to insure your type of business.  Give Rex a call 800-452-6826

Have a great day

Rex Lesueur

 

 

 

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