Insurance Ratings Explained with the Top Company Rankings – ValuePenguin
Insurance companies are subject to financial ratings that attempt to describe how financially stable they are. the most prominent financial rating agency for insurance companies is a.m. best, although all the major credit bureaus also look at insurers. You should consider an insurance company’s financial rating before purchasing coverage, as it indicates its ability to pay claims, especially in times of financial stress, such as a natural disaster.
what are insurance company ratings? why do they matter?
Insurance company ratings are holistic scores created by rating agencies to succinctly describe the financial strength of an insurance company. Financial rating companies take into account a wide variety of factors, but they mainly look at the financial performance of the company, the responsibility with which it is managed, and external factors such as vulnerability to natural disasters.
All types of insurance companies receive financial ratings, including auto, home, life and health. and the criteria used may differ depending on the exact type of insurance. For example, a Florida-based homeowners insurance company may be affected in its rating if the state is hit by a hurricane that causes extensive damage to homes there; meanwhile, a health insurer could be affected by a nationwide epidemic.
It is important to consider the financial stability of your insurance company before purchasing coverage because your insurer has an ongoing financial obligation to you. you depend on that company being available to pay a claim should you need them and that they can do so in a timely and efficient manner.
What are insurance company financial ratings based on?
The goal of insurance company financial ratings is to assess an insurer’s financial strength: how well the company is able to withstand a struggling economy, increased claims, or other financial difficulties. so the ratings are based on a wide range of different criteria related to financial health. A rating also includes things like how much cash the business has in reserve and whether the business has made a profit in the recent past.
common insurance rating criteria:
Each rating agency has its own methodology (and uses its own rating scale), so ratings will vary somewhat between insurers. however, all rating agencies base their decisions on roughly the same data. If an insurer has a drastically different rating from one rating agency to another, you should investigate further to determine the cause of the discrepancy.
companies that provide financial ratings to insurers
Many companies and groups control the strength of insurance providers, but the most common ones you will come across are a.m. best, standard & poor, moody and demotech. A.M. best is the most frequent specific insurance agency and is the one most used by the main insurers. standard & poor’s and moody’s do not specialize in a specific industry and are widely used in many types of businesses around the world, including insurance.
financial ratings are not infallible
While the ratings provided by rating agencies can give you a good idea of an insurer’s financial stability, they are not perfect. For example, Merced Insurance received an A- rating from A.M. Best, but the company went bankrupt in 2018 after the extensive wildfires that occurred in California that year. and standard & Poor’s, Moody’s, and Fitch gave Enron good ratings before its collapse. so take these ratings with a grain of salt.
Which insurance companies have “a” ratings?
For the most part, the largest insurance companies in the United States have very strong financial ratings. this indicates that the rating agencies have found that the major companies have strong business models. Top rated companies include Geico, State Farm, Mass Mutual and New York Life; all have the highest possible rating of a++.
We’ve compared the best morning ratings for several of the top insurance companies below.
comparison of financial ratings of major auto and home insurance companies
comparison of financial ratings of the main life insurance companies
comparison of financial ratings of the main health insurance companies
If your company is not listed, you can usually find its financial ratings on its website as well. however, keep in mind that an insurer may choose to highlight the best scores it has received: if it received an “a” from one rating agency and a “b” from another, you can choose to highlight only the best score. you may need to check directly with the rating company to find out how a particular insurer fared.
other ratings and reviews to consider when choosing an insurer
An insurance company’s financial stability is far from the only thing to consider when shopping for insurance. A good starting point for assessing your insurer’s overall quality of service is how many complaints your insurer has received: no company is perfect, but more complaints may be indicative of a company that is unable to provide an adequate level of service.
The National Association of Insurance Commissioners calculates each insurance company’s complaint rate based on how many complaints the company received compared to the amount of insurance it sells. An insurer’s complaint rate is one of the key metrics we consider when evaluating the best auto insurance companies in the country. Some states, including Michigan and Florida, also share this information at the state level, so check to see if you can get more local information.
For a broader view of customer satisfaction, you can also refer to the ratings made by j.d. power, a consumer research company. jd power rates customer satisfaction across many industries, including vehicles, insurance, and appliances. however, the ratings are only useful as a starting point.
You only have access, for the most part, to a company’s score in a given service area, without much information about what led to j.d. power to reach that conclusion. furthermore, j.d. power ratings depend entirely on consumer opinions. The company does not make its own analysis of the quality of service of insurers.
For individual customer reviews (and complaints), you can check out sites like the Better Business Bureau, review websites, and even local review sites like Yelp. however, keep in mind that customers are more likely to post online if they’ve had a polarizing experience, either positive or negative.
It’s also very difficult to get an accurate overall picture of an insurer’s quality based on individual experiences: one person with a very negative experience is likely to post a scathing review online, but hundreds of people with a normal but positive maybe not.