Inside insurance: Policyholders are protected by state

Recent financial news from the stock market, the world economy and government bailouts has just about everyone perplexed regarding which financial institutions are strong, which ones are in trouble and which ones will remain standing after the mergers and acquisitions are completed.


Banks are failing or merging, stocks are up or down depending on the hour and a line has formed at the Department of the Treasury with major institutions in several industries looking for a "bailout."

Like most of us, I'm concerned about where to keep my money, what's going to happen to my 401(k), or should I say, "What 401(k)?"

I also want to know whether the money I pay my auto and homeowner insurer will be there if I have a claim in the near future. Will I be protected?

This concern started with the problems of a major international conglomerate that the news media referred to only as an insurance company. In fact, that company owns hundreds of diverse organizations worldwide, and insurance is only one part of the mix.

The one line of business that the company will retain and that will remain strong is the insurance business, not the other diversified business lines.

The insurance industry remains fundamentally strong.

The industry's assets are in the range of $500 billion above its legal obligation to policyholders.

Insurers are financially able to continue selling policies, paying claims and developing new products to protect property, businesses and lives.

To protect assets, the industry collectively maintains less than 20 percent of its portfolios in stocks, with more than two-thirds of its funds placed in highly rated corporate and government bonds.

Unlike many banks and other financial organizations, insurers are not suffering from a credit or a liquidity crisis.

Furthermore, and closest to each of us, insurers are regulated at the state level. In Georgia, the Insurance and Safety Fire Commissioner's department closely regulates life, health, property and casualty and other insurers.

According to Commissioner John Oxendine: "For the past 14 years, my number one job has been to make sure that insurance companies are solvent and able to pay every valid claim. If it appears that any insurer will be unable to fulfill the promises made to Georgia policyholders, I will swiftly intervene with the goal of getting the insurer back into a strong solvency position."

Policyholders are protected from insurer failure by a limited safety net in place to pay claims. Initially funded by the insurance industry, the state guaranty fund is in place should a company not be able to pay its claims.

Consumers may call the Department of Insurance if they want helpful information about their insurer. The number is (404) 656-2070.

David Colmans is the executive director of the Georgia Insurance Information Service. Contact him at (770) 565-3806 or



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