Reliance shut out of state market

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The Missouri Department of Insurance has prohibited a Pennsylvania-based company from selling new insurance policies or renewing existing policies in the state because of its bankruptcy. |ret||ret||tab|

According to a press release from the MDI, the agency took the action "to help protect business owners from the insurer's financial condition." |ret||ret||tab|

Randy McConnell, a spokesman for the Missouri Department of Insurance, said that the Reliance Insurance Co. had been in trouble "financially and managerially" for a year and a half. "Their financial problems are irreversible," he said. "The company has dug its own grave."|ret||ret||tab|

A publicly traded company with headquarters in Pennsylvania, Reliance was organized under Pennsylvania law. The Pennsylvania Department of Insurance took control of the company's finances in May. |ret||ret||tab|

According to Pennsylvania Insurance Commissioner M. Diane Koken, Re-liance completed financial statements on Sept. 28 that showed its assets as of March 31 to be $8.8 billion, with liabilities on that same date of $9.9 billion.|ret||ret||tab|

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Transferring customers|ret||ret||tab|

Local insurance agencies that sold Reliance insurance are transferring those customers to other insurance carriers. "The company is worldwide," McCon-nell said. "They had multi-billion-dollar coverage, mostly commercial lines. At one point, they owned 12 companies. But they merged last year to cut down on administrative costs." |ret||ret||tab|

Reliance was ranked as the No. 23 property and casualty insurer in Mis-souri, with $54 million in 1999 premium sales and most policies providing coverage such as workers compensation and business liability. More recent figures are not available because Pennsylvania state regulators allowed Reliance to forego reports to other states for the year 2000.|ret||ret||tab|

McConnell believes there has been enough publicity about Reliance's financial status that insurance agents should have been warning their customers to switch to other companies long before now.|ret||ret||tab|

"If you're in the middle of a Reliance policy now, start looking for someone else," he said.|ret||ret||tab|

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Liquidation|ret||ret||tab|

Scott Lakin, MDI director, said that the onset of liquidation in Pennsylvania means that cancellation of policies will begin shortly and that notices of cancellation will come from the state of Pennsylvania.|ret||ret||tab|

Richard Ollis, co-owner of Ollis & Company at 2274 E. Sunshine, said that his company sold very few Reliance accounts. "We replaced the Reliance customers with other carriers at the end of last year," he said. "We kept our customers informed and advised them. We took a proactive role in their coverage. At the beginning of 2000, Reliance had an A rating in A.M. Best. A year-and-a-half later, they're bankrupt. It can happen in a hurry. This reaffirms the need to monitor your insurance company's financial condition." A.M. Best is a service that rates the financial condition and stability of insurance companies. |ret||ret||tab|

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A.M. Best ratings|ret||ret||tab|

Dennis Breckenridge, owner of Breckenridge Insurors Inc. at 1334 S. Glenstone, agreed that it's important for insurance agents to stay abreast of what A.M. Best has to say about each insurance company.|ret||ret||tab|

"I only deal with companies who have a rating of an A- or better," Breckenridge said. "If they have less than that, I would quit doing business with them. I can see the handwriting on the wall. If a company gets progressively worse, like going from a B+ to a B and then a C, I start looking at what the company is doing month-to-month."|ret||ret||tab|

A.M. Best rated Reliance with an "E" this year, meaning that the company is under regulatory supervision.|ret||ret||tab|

In the Reliance liquidation, by law the Missouri Property and Casualty Guar-anty Association, a state-authorized entity funded by the industry, will cover the cost of workers compensation claims, other claims up to $300,000 and refunds of unearned premiums up to $10,000 in the Reliance liquidation.|ret||ret||tab|

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Workers' compensation|ret||ret||tab|

McConnell said that Missouri business owners needing workers compensation coverage should use two new services provided by the MDI. |ret||ret||tab|

The first is an Internet cost-comparison guide available through the MDI Web site at www.insurance.state.mo.us. The site provides information on the lowest available rates by employee class code. |ret||ret||tab|

The second service is the toll-free number 1-800-394-0964, which provides a counseling service on how to identify billing problems and obtain alternative coverage.|ret||ret||tab|

Lakin said current policyholders and workers whose injuries are already subject to benefits owed by Reliance and its subsidiaries, could face a lengthy recovery process in settling claims. "How-ever," he added, "the Missouri state fund that steps in when insurers fail also has an obligation to pay a substantial portion of any claims 100 percent of any workers comp claims and we will work to make sure that injured parties receive benefits as quickly as possible."|ret||ret||tab|

McConnell said that nationwide, insurance departments have been more vigilant about the financial solvency of insurers over the past decade. "The rate of insolvency has been cut in half since 1993," he said. "There were 30 insolvent companies in 1993. As of now, there are 14. Everyone is being stricter in the financial reserves that have to be held out to pay claims."[[In-content Ad]]