Insolvency Funds and Why the Rich Should Know Better

Massachusetts, like most and I would assume all states, has a number of legislatively created entities that participate in or affect the insurance market in one way or another, including an insolvency fund intended to cover losses underwritten by,  yes, insolvent insurers.

The soon to be outgoing governor of the Commonwealth has now signed legislation exempting high net worth individuals - i.e., what normal people call rich people - from the fund's protection.  Under the change in the legislation:

A high net worth policyholder is defined as one with a net worth exceeding $25 million on Dec. 31 of the year before the year in which the insurer became insolvent. The Massachusetts Insurers Insolvency Fund (MIIF) will not be obligated to pay first party claims to a high net worth insured. Government entities are not included in the definition.

Now, personally, I don't have a problem with this, not the least of which is because it certainly doesn't affect me or anyone I know, and I doubt I'll ever manage to fall within the new exemption.  But it also  doesn't bother me, and is unlikely to ever affect me, because I investigate the insurers that I buy coverage from, and am pretty sure they are all financially sound.  I don't just chase the cheapest deal, which may make me a sucker, or it may make a sound consumer.  But what I do know it tells me is that anyone who is a shrewd enough businessperson or investor to have enough money to fall within the exemption is certainly shrewd enough to pick an insurer that is unlikely to end up under the umbrella of the insolvency fund, and ought to be expected to invest the time and money needed to pick such a carrier.  I don't know if this was the reasoning behind making this change, but this reason alone justifies it.