Insolvency Order Leaves High-Risk Drivers in 21 States Without Auto Insurance

Insolvency Order Leaves High-Risk Drivers in 21 States Without Auto Insurance

In 2018, a liquidation order against Access Insurance Co. left thousands of high-risk drivers without auto insurance. What happens when your insurer fails?
Cars in traffic

In early 2018, thousands of high-risk drivers were left without auto insurance following a liquidation order of Access Insurance Co. The company — a major provider of nonstandard auto insurance — was placed into receivership by a district court in Austin, Texas. The court ruled that the insurer's liabilities exceeded its assets, making it incapable of fulfilling future claims and putting its policyholders at risk.

Access Insurance was licensed to sell insurance in 22 states, writing nonstandard auto insurance policies for drivers deemed too risky to insure at standard insurance rates. However, the company failed to maintain sufficient loss reserves and pay certain taxes in some states, causing the insolvency order. Moving forward, the company will continue to do business only in Massachusetts.

If you were a policyholder with Access or your insurer recently closed, here's what you can do to file claims and find new coverage.

What happens to my car insurance policy if my insurer fails?

Regulators impose strict guidelines on insurance companies to maintain their solvency and protect policyholders. However, deficient loss reserves, mismanagement, unexpected catastrophes and fraud can all contribute to insurer impairment.

An average of 23.8 insurers across all insurance categories were put into liquidation each year from 2011 to 2016, according to annual reports from the National Association of Insurance Commissioners. If your insurance company has been ruled insolvent and subsequently placed into liquidation, your state's guarantor system will manage any remaining claims.

Insurance companies operate under a guaranty fund system, which requires insurers to make payments to the guaranty fund of each state in which they do business. When an insurance company becomes insolvent, the state guarantor will take over the financial obligations of the insolvent insurer.

How to file a claim

Prepaid premiums and any outstanding claims current policyholders file will be paid out by that fund. However, guaranty funds have limited capital, and claim limits vary by state. If you were an Access Insurance policyholder, consult your state guaranty association to file a claim.

In addition to obtaining a reimbursement for any prepaid premiums, you'll also need to find replacement coverage before your policy expires.

How to get replacement coverage

If your insurer goes out of business, it's important to buy a replacement policy as soon as possible. You could face stiff penalties if you allow your insurance to lapse. However, it might be hard finding coverage with multiple traffic violations on your record.

Access Insurance or your state's guaranty association may recommend a company with which you may find a replacement policy. However, you should compare quotes from at least three auto insurers in your area to find the best rates.

You can obtain a quote in minutes by providing basic information about yourself and your vehicle to the prospective insurance company. Once you've found a good deal, proceed with purchasing coverage.

Mark is a Senior Research Analyst for ValuePenguin focusing on the insurance industry, primarily auto insurance. He previously worked in financial risk management at State Street Corporation.

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