How Stable is your Homeowner's Insurance Company?

TAMPA, Fla., May 2, 2017 /PRNewswire/ -- In early 2017, insurance agents – and Florida homeowners – received some unsettling news, according to Kelly Overcash, a Private Risk Advisor for Lykes Insurance, a premier Florida-based insurance firm.

Overcash explains that due to the ongoing abusive practice of assignment of benefits 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," says Overcash. "This 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."

Fortunately, in mid-March, Demotech reversed their decision after most of the companies facing downgrades fortified their claims reserves and policyholder surplus. 

Most Florida homeowner policies have been issued through Florida-domiciled insurance companies, some of which opened for business after the 2004/05 storm seasons.  Overcash notes that this breathed new life into a crumbling Florida property insurance market after many carriers had left the state.  But there are some concerns.

"These days, the ability to purchase a homeowner policy issued through a national insurance carrier has been severely limited," she says. "Even carriers with national name brands have carved off their Florida business into a separate company 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 and have more claims handling experience in our State."

What does this mean for homeowners?  Overcash suggests they ask the following questions before purchasing a policy:

• How long the company has been in business: If they are a newer firm, there may be little to no history of their ability to handle and pay claims resulting from catastrophic events like the 2004/05 storm seasons. They may be perfectly fine, but it's something a consumer should know.
• Demotech or A.M. Best: A.M. Best reviews the financial stability of insurance companies once they have attained a certain size and number of years in business. Demotech analyses new, smaller insurance companies. An "A" rating from Demotech does not necessarily carry the same weight as an "A" rating from A.M. Best.
• Whether they write in states other than Florida: Writing property policies in other states allows for a greater spread of risk. Therefore, the success and profitability of a given insurance company does not rely solely on the mercy of Florida weather and State politics.
• Ask to see their financial stability rating in writing, including claims reserves and policyholder surplus. Checking out the financial stability of an insurer is a critical step in securing a policy that protects what is arguably the homeowner's largest investment.

"The reputation and financial health of your insurance company should be more important than whether or not they have the cheapest premium.  A cheap price won't matter if they become insolvent," says Overcash. "While options may be limited for Florida homeowners, ask your insurance adviser to help you make a better-informed decision so you can feel more comfortable about the insurance company you hire to protect your home."

About Lykes Insurance
Lykes Insurance was founded in 1925 by Lykes Bros. Inc., a 101-year-old privately held Florida-based company. As a premier commercial insurance firm with offices in Tampa, Fort Myers, Winter Park and Sarasota, Lykes Insurance focuses on building long lasting partnerships with companies and individuals, providing protection for businesses, managing risk and designing innovative employee benefit solutions. For more information, please visit www.lykesinsurance.com.

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Suzie Boland
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SOURCE Lykes Insurance