Posted by: Jeff Rhodes | April 12, 2010

Disturbing Letter From My Insurance Company

HELP! I just received a letter from my insurance company containing the following paragraph:

Most state insurance regulations require that the insurance carriers notify their insured in advance of any potential increase in premium, deductibles, and changes in the coverage, decrease in limits or non-renewal.  This notification is required well in advance of the normal time that it takes to gather underwriting information and deciding upon our renewal position.  Therefore, to comply with these regulations, please accept this as your notice that the above captioned policy/policies may not be renewed as currently write, or may not be renewed.

Please furnish updated renewal information to your agent or broker as soon as possible.  This letter shall also serve notice that in the absence of receiving this information, all coverage provided will expire without further notice at 12:01 AM local time on the expiration date shown above.

Sincerely,

It says that they may not renew my coverage, or, if they do, there might be a significant increase in premium.  What do I need to do?

Answer: Unlike your auto, homeowners, and many building policies that automatically renew, you aviation policy is re-underwritten and manually re-quoted each year.  Most states have laws and/or insurance regulations that require policyholders be notified at least 30, 45, 90, or even 120 days prior to the expiration of a policy if there will be major changes.  These laws are (theoretically) intended to protect the insurance consumer against a surprise termination of, or change in, coverage.  With automatically renewing policies, it would be a very bad thing if the policy we had been expecting to renew suddenly just ended without warning.

The problem with your aviation policy is that the notification is required so early that it comes before the insurer has had time to gather the information needed to quote renewal.  They want to provide renewal terms based on the risk as it exists at renewal time – not necessarily as it existed 3 or 4 months earlier.  So – many insurers just notify EVERYONE that the policy might not be renewed, or changed at renewal.  With state-mandated notifications taken care of, they can proceed to collect their necessary underwriting information and take a position on the renewal offer in line with current market conditions.

As always, if you have questions or concerns, your broker should be your advocate and your consultant.  He or she should keep you informed of market conditions as you approach the end of a policy term and provide you with the best alternatives going forward.

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