HIH Auto Insurance Review

Many drivers reading this may remember HIH Auto Insurance. This automobile insurance company existed for some time in the late 20th Century, having been founded in 1968 and closed its doors in 2001, leaving their customers uninsured and pending claims unfiled. Rather than a traditional automobile insurance review, consider this more of a post-mortem, an examination into what HIH did right and what they did wrong that perhaps led to their downfall. Enter your ZIP into our FREE auto insurance quote comparison tool to find the ultimate savings!

Size

The recession has proven one thing time and again: It makes more sense to be small in this economy than it does to be big. The small businesses are the ones that can move more efficiently, that can adapt and change with the times, that can meet the customer’s demands without bending over backwards or compromising their way of doing things.

HIH was, then, perhaps too big for its own good. HIH was the second largest insurance company in Australia and was made up of more than two hundred forty different smaller companies, eight of which being licensed incorporated companies.

Just as a larger person requires more calories to stay in shape, a company that size requires more business to stay afloat. Contracts that could hold an entire smaller company over for a year were mere chump change to the giant that was HIH. Being the second
biggest insurer in Australia apparently doesn’t do your business any favors. Being the largest in any country can certainly help with publicity and income, but being the second largest only means you’re both too big and not big enough at the same time.

HIH Insurance Royal Commission

Upon failure, the Australian Federal Government formed the HIH Royal Commission with the intent purpose of investigating why the country’s second largest auto insurer had collapsed. Ultimately, it seems to have come down to bad debt.

Eight HIH auto insurance companies were in debt. These were HIH Casualty & General Insurance Ltd., CIC Insurance Ltd. FAI General Insurance Company Ltd., FAI Traders Insurance Company Pty Ltd., FAI Reinsurances Pty Ltd., Fai Insurances Ltd., World Marine & General Insurances Pty Ltd. and HIH Underwriting and Insurance Pty Ltd.

The bottom line is that HIH owed money and wasn’t making enough to cover their debts.

The Changing Times

HIH offered a lot of great insurance products to their customers. They offered full auto coverage and robust insurance packages at reasonable rates to a great variety of customers. They offered commercial insurance for fleets, they offered smaller packages for working parents, they offered great discounts and great service, they paid out to their claimants, but the one thing that they did not have was a plan for dealing with the changing times.

No matter how strong your business, if you don’t have a plan for dealing with hard times, then you don’t have a long term plan in the first place. Even after making it through the recessions that struck the western world in the early eighties and late seventies, HIH was simply not prepared for the recessions that hit the US, Australia and the UK around the start of the 21st Century.

Essentially, people weren’t spending as much as they used to. They weren’t spending as much on food, on their living expenses, and certainly not on insurance. People who had new cars with full coverage were trading them in for smaller vehicles and smaller insurance policies. People who had more robust coverage were trading that in for minimum coverage. HIH, unprepared to provide customers with the kind of bargain grade coverage they were demanding, had little choice at the end but to close their doors.

Some planning and foresight could possibly have prevented their downfall, but their story is just one of many that exemplifies how dangerous a recession is to even the biggest and most seemingly stable businesses around.

The Final Verdict

In the end, HIH was simply trying to make it in a market that they no longer had an understanding of. Still selling high end premium policies during a recession was a bad idea, but by the time they realized it, it was too late, they were already reporting layoffs and closures.

Any insurance company around right now who has been around since before the recession is likely to go the distance. It is no exaggeration to say that this is one of the most trying financial crises in the history of the western world, but thankfully, the survivors are the ones who can weather any storm.