YourNews: Top tips on how to react if your insurance company experiences financial difficulties

Managing Director at Nottingham-based insurance broker Russell Scanlan, Bryan Banbury, discusses the likelihood of a significant insurance company going bust and what to do if you hear your insurance company is experiencing financial problems.

Clients being able to trust the financial stability of the insurers we place their business with is very important – in fact, it is the driving force behind everything we do. We constantly monitor the market, keep an eye on national and local trends and liaise with other professionals in our sector so that we have our ear to the ground about the potential financial troubles of any insurer.

A recent example of an insurer going in to liquidation is that of Lichtenstein-based operator Gable which late last year fell in to financial difficulties, with all policies effectively ending on December 16. We were well aware of the trouble Gable was experiencing and, due to our proactive approach to monitoring the market which is supported through our membership of UNA – a national alliance of 13 brokers with access to a system which constantly checks the ratings of insurers – we had no clients placed with them. Prudent brokers would take action well before an insurer’s rating goes down, because their approach is to pre-empt such scenarios rather than react to them.

Our advice to policy holders who think their insurer is experiencing financial difficulty is always to contact their broker immediately. The best brokers would be in touch with their clients, explaining that they are already searching for and will swiftly implement a new policy subject to agreement. If a new policy is not put in place straight away, many crises can arise – such as an uninsured claim.

Once a new policy is securely in place and you again have full cover, your broker can tackle recovering any outstanding claims or compensation owed to you by your previous insurer. A good broker will manage all of this on your behalf. It is likely that your broker will recover little more than unearned premium and claims in respect of compulsory insurances, but it is worth them pursuing, because any sum that you may receive could offset the cost of replacement insurance.

Insolvency of an insurance company is a rare event because the regulatory regime in the UK which applies to insurers, and particularly to life insurers, imposes pretty watertight safeguards which are aimed at preventing insolvency. However, as we enter a new year it is worthwhile ensuring that you are happy with all the policies you have in place for the next 12 months and more importantly to double-check that you have confidence in the financial stability of your insurers.

Using a chartered insurance broker, such as Russell Scanlan, will protect you against the risks of being placed with an unstable insurer due to the measures we have in place.