Insurer Makes Big Profit On Homeowners Insurance

A.I.G. posted fourth quarter net income of $3.44 billion, even with the fall-out from 2005 claims, according to a New York Times story. Despite $390 million of claims from Hurricane Wilma alone, A.I.G. made almost 8 times as much this year as they did last year.

Now, don't get me wrong. As much as I think insurance can be a racket, and consumers can be the victims, you absolutely want your insurer to be doing well and making a reasonable profit. Why? Because when you file your claim, you want to be sure that your claim will be paid. A financially healthy insurer is your best insurance (all puns intended) that your claim will be honoured.

Insurance is a business after all. If your insurer goes out of business, your claim is worthless.

However, there are a lot of rustlings in the insurance industry about "retaining premiums" and reducing risk. This really means denying claims and getting rid of clients that make claims. Here is where the line between smart business operations and lack of ethics can become very blurry. And it's this blurry line where my concerns lie.

When you research your insurer (and you should), do not just check out their financial rating. You also want to know their consumer track record: whether they have had a lot of complaints and if those complaints were resolved quickly and fairly. To find out this kind of information, you really need to check out your Department of Insurance in the US. If you want this kind of information and you are not in the US, check your local or federal government listings.

Looking for insurance? We can help. Check out our sections on car, life, health, dental, homeowners and other types of insurance. We'll give you some straight facts and help you to be a smart consumer.

Monique L. Attinger
Posted by Nick on March 4,2007 at 11:02 PM
Posted by on March 2,2007 at 7:48 PM
Usually, when an insurer becomes insolvent, the government will appoint a "liquidator". The liquidator is responsible for paying out on the claims that the insurer has not paid. In most cases, a person will get pennies on the dollar for a claim. So, while not technically worthless, if you had a $1000 claim, you'll likely get $500 in a good situation. In a bad situation, you could get $100 or less.

There is no "insurer of insurers". The only fall-back position is the government, and the government rarely bails out an insurer or pays the claims left by an insolvent insurer.
Posted by WealthyGeek on March 2,2007 at 11:36 AM
Is it really true that "If your insurer goes out of business, your claim is worthless"? I always thought that there was such a thing as insurer's insurance—i.e., if your policy holder goes boobs up, there's another provider at the ready to cover you.
CarLifeHealthLong Term CareDisabilityDentalBusinessHomeOther