The most common way of rating insurance companies is their financial strength. AM Best (ambest.com) is perhaps the most well known institution that has been rating insurance companies for over 100 years. Also in the same way there are Standard & Poor’s [standardandpoors.com] and Fitch Ratings that do rate insurance carriers based on their financial strength.
Another aspect of rating is ‘claim paying practices’. A leader in evaluating auto insurance companies in regard with their claim paying practices is JDPower [jdpower.com]
Low or high financial strength is connected to the creditworthiness of the insurance company, its financial strength and its ability to pay the customers claims. The fact that an insurer has high credit rating is not an indication of ethical or unethical claim paying practices. Actually with certain insurers, strong financial position could be the result of stringent claim paying policy. There are many examples of insurers who had B rating with AM Best but had super customer services with very satisfactory claim paying policies, while other insurers with A rating(better than B), that maintained very poor claim paying practices to the point of expelling them from certain states and subjecting them to high fines for their claim payment policies/ practices.
For consumers which one is more important, claim payment records or financial strength?
It all depends on the following:
a) Client Needs. If client has a need that is best met with policies offered by Company A, then getting that policy from that company is the solution regardless.
2. Amount of risk involved. If the amount of insurance coverage is significant then financial strength is more important than claim paying practices. For example, a property owner who wants to purchase a policy to cover her $3,000,000 property needs to worry more about the financial strength of the insurer. A student who qualifies for basic auto insurance because his MVR needs to worry more about the claim paying practices of the insurer when insuring his 5 year old Honda full coverage.
3. Price/ premium. There might be little or no differences between insurers who have A+ rating o A++ (with similar satisfactory claim paying practices). Affordability of the insurance plan should be of great importance when dealing with similar insurers who are slightly different in their financial rating.
Whether you need a business insurance quote or car insurance quote, dealing with professional independent agent can be the answer to your questions.
Ed Sneineh, ChFC, CLU http://www.InsuranceNavy.com
Want to find out more about auto insurance and non owner insurance, then visit Ed Sneineh’s site on how to choose the best Insurance Quotes for Autos, SR22, and Nonowners for your needs.
