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How high up the insurance companies were rated, seems to make little difference. Sometimes the downturns happened so rapidly that the rating companies did not have time to react. Many of the original agents that wrote the policies with that Insurance Company were no longer there. So who is going to notify the policy holders? Certainly not the insurance companies. Of these companies starting to sink, it includes some established over 100 years ago. Others have only been formed a few years back. As market changes affect profitability, there are companies too sunk in tradition to quickly change or eliminate the sale of certain products. Additional insurers are too quick to test the hot markets where profitability and stability of new style insurance coverage is not yet proven.

During the past 20 years all types of Insurance Companies experienced difficulties in paying out claims. Frequently the problem erupts when claims pour in quicker than new premiums arrive and built up reserves are too low to handle claims received.. Intentionally, there are companies offering policies at dangerously low prices. This purposely makes it more difficult for their competitors to attract new clients. The practice is also know as buying customers, As a result the growth rate could be too fast. Also the amount of future claims is not properly calculated. Then when claims started to rise, the premiums are still set too low to offset incoming claim obligations and policy reserves have not had sufficient time to build up.

The insurance industry was hardest hit by the property and casualty insurance companies. These make up a high percentage of the companies liquidated during the past 20 years. Often high rated companies selling homeowner policies were hit almost overnight by weather devastation. Entire zip codes, metropolitan areas, and states were declared disaster areas. Claim reserves were quickly depleted, along with the future of the insurance company. Just look at the amount of harm Hurricane Katrina's rage put on people and their insurance companies. Only a few years earlier Hurricane Andrew left its mark on Florida.

The sales manner in which the insurance policies were sold does not one single out one particular method.. The troubled companies can not be pinpointed to distribution of its insurance products. There is a wide variety of different ways in which policies were sold. Some were only available directly from the home office. In other cases the home office used direct mail to solicit new business. There were insurance companies that had a base of captive agents to sell and distribute their policies. In different circumstances the policies were sold by independent agents and brokers. Other companies used a large combination of distribution channels.

When insurance company liquidation comes there are many efforts first made to save the insurance company. An insurance company can not even apply to go into bankruptcy. Insurance regulation is done at the state level, with no federal government intervention provided. This means that one state has different consumer protection amounts built in, than another will have. Also certain states step in quicker when they spot a company violating sales practices or operating in a financial insecure manner.

The first step is commonly to issue a state order for the insurance company to suspend writing any new insurance. Upon further inspection, the state insurance department may issue a rehabilitation order. This means the insurance company is still in business but now with the insurance commissioner as rehabilitor, the power changes. The insurance commission manages the company until the financial conditions can be properly corrected. If not, an order for the liquidation of insurance company starts. It begins with collecting as much of the company's remaining assets as possible. It is not uncommon for the liquidation process to range from 5 years to 9 years.

More on how the consumer is protected and how much will be recovered will be handled is in an upcoming report. A big hint, HMO - health maintenance organizations, and PPO's - preferred provider organizations ARE NOT covered by state guaranty payments.

Well published author, Don Yerke likes to concentrate on what you don't know or what no one else dares to print. Tell it like it is. The website address is http://www.agentsinsurancemarketing.com - Check out over 100 captivating and stimulating articles.