New York insurer exits market: How to protect yourself if your company fails

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Adirondack Insurance Exchange, a Buffalo-based insurer operating in New York, announced in July that it was “winding down its insurance business” due to a poor financial outlook and is encouraging policyholders to talk to their agents about replacement coverage.

A company agent confirmed that Adirondack was no longer offering policies and said that no media representatives were available to comment.

The insurer provides various coverages, from homeowners and auto coverage to identity theft and umbrella liability policies. 

The company’s customers will have some time to find new coverage. Adirondack Insurance Exchange will cease to provide coverage on Jan. 1, 2025. However, those with policy terms that end between October 1 and December 31 of this year will have to act more quickly, as their policies will not be renewed. 

Fortunately, if your insurer is unable to continue providing coverage, safeguards exist to ensure you’re not left without protection. From state guaranty associations to the support of other insurers, there are resources to help you navigate the situation and maintain your coverage.

Here’s what you need to know to stay protected and confident. 

What to do if your insurer discontinues coverage

If your insurer discontinues your coverage, you should have time to find another insurance company. 

States have notification requirements — which vary in their terms — that help ensure that an insurer’s customers won’t be caught off-guard, says Erin Collins, senior vice president of state and policy affairs at the National Association of Mutual Insurance Companies.

“Policyholders will have time to shop for coverage in the unlikely event an insurer fails,” she says. 

Of course, it’s important that you don’t procrastinate. You want to leave yourself enough time so that you can compare quotes from a number of insurers and get the best deal. 

You also want to avoid a situation where you are uncovered for even a day simply because you dragged your heels and avoided finding new coverage.

How your state protects you

States generally have regulations that require all insurers to hold a reserve of funds adequate to pay out claims. This helps make disruptions in an insurer’s ability to fulfill its obligations highly unlikely.

Collins says insurance companies must submit lengthy and detailed financial filings with state regulators that reveal the state of the company’s financial health. Insurers need to disclose details such as: 

• The amount of capital on hand
• How exposed a company would be if a climate catastrophe happened
• Financial reserves from investments such as bonds

“In addition to rigorous state oversight, insurance companies spread risk through their reinsurance agreements,” Collins says. 

The combination of the above “makes insolvencies [for insurance companies] unlikely,” she adds. 

However, insurance companies still can fail, which is why states keep an eye on them.

“State departments of insurance monitor the solvency of insurers,” says Janet Ruiz, director of strategic communication at the Insurance Information Institute.

Even if an insurance company fails, states stand ready to protect policyholders.

Each of the 50 states and the District of Columbia has an insurance guaranty association. These organizations protect policyholders by making sure claims from insolvent companies are paid. 

“Guaranty funds are created to protect policyholders from severe financial losses and delays in claim payment due to an insolvency,” Collins says. 

One type of guaranty association typically handles property and casualty insurance, while another type handles life and health insurance, as well as disability and long-term care. 

Typically, once a state court orders an insurance company to be liquidated, guaranty funds are used to pay policyholder claims. 

It’s important to note that while your state will guarantee a portion of your insurance benefits in the event of an insurer’s insolvency, it may not cover the full amount of your purchased coverage.

If you have any questions about what to do if your insurer is unable to fulfill its obligations, contact your state department of insurance.

Chris Kissell

Contributing Researcher

 

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Chris Kissell is a Denver-based writer and editor with work featured on U.S. News & World Report, MSN Money, Fox Business, Forbes, Yahoo Finance, Money Talks News and more.