Car Insurance Financial Ratings, Including Auto Insurer Bankruptcy Advice and Info

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Banks and other lending and investment institutions are not the only ones in need of assistance as a result of the credit collapse. As the aftershocks of the credit meltdown reverberate throughout the financial corridors of Wall Street, the Dow Jones is behaving like a seismograph, with wild fluctuations as investors scramble for safety. Following the tenets of non-regulation set forth by Alan Greenspan, hardly any sector of commerce has escaped without suffering some level of destabilization or ruin. Car insurers with less than an AAA S&P rating may experience difficulty meeting some of their financial responsibilities. Some may do a lot worse. As third quarter 2008 financial reports come out, we may see that more insurers are in trouble than previously imagined.

Not Enough Aid to go Around
With the recent news that car insurers may be eligible to receive a portion of the $700 billion aid package, they have experienced a modest surge in stock performance, signaling a rebound in investor confidence. Now that the government may take measures to prop up the insurance sector, the Treasury is concerned that there will not be enough money to go around and will have to let the weaker insurers fold.

Your Coverage Will Continue
If a car insurer goes bankrupt, there will likely not be much of an effect felt by policyholders since most policies will be transferred to another company. Funds for claims may be slow in disbursement and adjustors may be less generous with their payment of claims.

Advice if Your Car Insurer Goes Bankrupt

  • Call to check the status of your policy and the company.
  • Contact your state insurance department to corroborate the information and receive advice.
  • Find out which insurer will be assigned to cover your policy.
  • Set up a new policy with the rescuing insurer.

Payment for Claims
If you file a car insurance claim just before your insurer claims bankruptcy, be assured that you will be reimbursed by a “state guaranty association” that will issue your payment through “state guaranty funds.” Similar to how the FDIC guarantees loans, almost every state has a way to cover car insurance claims. Every claim filed to an insurer who has come under state regulatory control will trigger an explanatory letter to be sent to the insured.

Find the Strongest Insurer
The financial strength of an insurer measures that company’s ability to pay its claims and contracts under the agreed terms. Insurance company financial strength ratings by Standard & Poor’s range from AAA for a company with extremely strong financial characteristics to CC, which signifies a company with extremely weak financial characteristics, unlikely to meet some of its financial obligations. Car insurance companies with an R rating are under “Regulatory Supervision” and are a poor risk for new customers looking for coverage. By using a tool such as the Standard & Poor’s Insurer Financial Strength Rating, a car insurance shopper can eliminate one more variable when it comes to choosing the best insurer.