Why choosing a good insurance company matters

The California Camp Fire

In 2018, California experienced some wildfires in the latter part of the year that had serious consequences for families and their homes. Dozens died in the Camp Fire in Butte County, and even more lost their home or property. This was the most destructive wildfire the State of California has ever seen.

Merced Property and Casualty, an insurance company founded in 1906, went from $23 million in assets to insolvency from the Camp Fire in 2018. According to an article from CNN, the town of Paradise, Ca. alone had $64 million of losses filed to Merced. A judge ruled that the California Division of Insurance would take over the company. Specifically, the Conservation and Liquidation Office of the state will liquidate what is left of Merced.

Fortunately for these policyholders, California has the California Insurance Guarantee Association, which helps cover serious incidents such as this one. Specifically, the language of the Association states that they “protect resident claimants in the event of an insurance company insolvency.” For the claimants, then, the California Insurance Guarantee Association will pay up to a certain amount. When claims exceed this amount, the remaining losses will be filed against the assets of Merced.

But what does all this have to do with a type of insurance company?

Every insurance company has an AM Best rating, a score put out by AM Best Company, who focuses on the creditworthiness and financial strength of insurance companies. At Eckburg, almost all of the companies we work with are “A” or “A+” rated by AM Best. In essence, the higher the score, the more financially stable the company is and the more likely the company will be able to pay out on its claims.

Merced was in a unique situation, insuring a lot of property in the city of Paradise and being responsible for a large portion of the town that was destroyed as a result of the wildfire. Merced was rated “A-” by AM Best, meaning they were still a sound financial company.

Situations like that which Merced found itself in is rare and unlikely to happen in a place like Illinois, but keeping the financial strength of your insurance company in mind is always a good idea. The stronger the AM Best rating of your insurance carrier, the less likely you are to be put in a situation like many of Merced’s clients were. If you are insured at Eckburg, we have likely placed your personal or commercial insurance with an “A” or “A+” -rated company.

Eckburg Insurance Group is the largest home and auto insurance provider in northern Illinois. We can cover all your home, auto, business, and life insurance needs. Our dedicated staff, made up almost entirely of men and women who were raised in our community, works tirelessly every day to keep you protected. Call us today at (815) 877-4100 or click here for a quote!