Recently, one of our partner companies, Tower Hill Insurance Group, started a new insurance company called Tower Hill Insurance Exchange. The plan is to move its current customers from Tower Hill Signature and Tower Hill Preferred to this new company.
There are three main reasons why they do this:
- Merging customers into one company will make them a larger and more stable company.
- Less risk for Tower Hill. They will become a service provider and will only be paid a fee to run the company.
- The new company should have better results in Florida. We’ll explain later.
The Florida Property Insurance Market is in dire straits. There is currently an increase in fraudulent activities. Shady entrepreneurs, public adjusters and lawyers take advantage of loopholes in insurance and Florida law. Here is an infographic from FAIA to explain more (click here). Although we have not seen any major hurricanes in a few years, companies are paying more in property claims than ever before (although most payments go to legal fees)
Many property insurance companies in Florida have either stopped accepting new insurance policies, have not renewed a large portion of their customer base, or have placed severe restrictions on insurance guarantees to stop growth. Citizens (“last resort”; state insurance company) is growing faster than any other Florida real estate insurance company.
Insurance is not intended to be maintenance insurance. Nevertheless, some consumers use contractors, public adjusters and lawyers to get a free new roof when the roof has aged and needs to be replaced. I get it. Ceilings are expensive … especially with today’s inflation rate. However, this is like having your car mechanic file a claim with your car insurance company when they wear out. But I deviate.
What is a mutual insurance exchange?
A mutual insurance exchange has 3 parts:
- Subscribers – These are the policyholders. They are owners of the company and share in the risk.
- Agent in fact – This will be the management company (Tower Hill Risk Management) that manages the Exchange’s operations. The subscribers sign a limited power of attorney so that they can run all aspects of the company.
- Subscribing Advisory Committee – Annual elected officials who only review supervision.
The benefits of a mutual insurance exchange
Subscription savings accounts – When the company makes an insurance profit (spends less than it earns), the subscribers will start sharing the profit. Although they will not receive a check every year, they will receive some funds from the account when they cancel their insurance (sold property, went to another company, etc.).
More transparency – As a subscriber, you will receive information about the stock market’s finances. No, you will not know which neighbors have filed a claim, but you will know the financial health of the company.
Policyholder’s mindset – Since the policyholder is an owner, it is believed that it will reduce unethical decisions by policyholders. Better maintenance decisions on their home. Less likely to make frivolous claims. Less likely to be fooled by shady contractors knocking on their door. They know that bad decisions affect their premiums and chances of getting an insurance profit. At least that’s the hope.
The disadvantages of a mutual insurance exchange
Subscribers’ surplus contributions are not refunded. Initially, the company will charge 10% of the annual premium as a subscription fee. If you cancel your insurance in the meantime, you will receive a smaller refund that you would receive from most accepted insurance companies.
Although the Tower Hill Insurance Exchange is not one of these, some mutual companies may offer assessable insurance policies. This means that they can charge additional premiums if operating costs were higher than expected. Fortunately, Tower Hill Insurance Exchange insurance can not be assessed.
If you have further questions about the Tower Hill Insurance Exchange, please visit the THIE page.