WHAT IS THE IMPORTANCE OF CARRIER RATINGS?

Business owners and consumers want to make sure that the insurance company they choose has the financial strength to handle their claims. To help individuals and businesses make good decisions, independent third party entities evaluate insurance companies to test their ability to serve their customers. These carrier ratings tell which companies can provide the best service to their insured customers and handle claims in a way that preserves the insureds’ financial health.

A.M. Best was founded in 1899 for the purpose of giving consumers an objective assessment of insurance companies. Their methods were created to detect which insurers were vulnerable and/ or problematic with regard to insurer insolvency. A.M. Best rates insurance companies on a scale, including A+ Superior, A Excellent, B+ Good, B Fair, C+ Marginal, C Weak, and D Poor.

A.M. Best is the most well-known insurer rating agency. In fact, many state insurance departments’ licensing exams refer exclusively to A.M. Best as the source of financial ratings. A number of Errors and Omissions policies that cover brokers and agents specifically require them to place their business with carriers rated above a specific threshold with A.M. Best.

There are other insurance rating organizations, which have their own set of criteria for ratings. Fitch, Moody, and Standard & Poor also offer financial ratings to insurance companies. Similar to A.M. Best, Fitch, Moody, and Standard & Poor work primarily with large insurers and those who do business in several states.

There is no question that a good carrier rating is one of the best advertisements to savvy customers. But, many smaller insurers find that they are not eligible for ratings from the big rating firms. For instance, if an A.M. Best rating doesn’t seem feasible, Demotech offers ratings to smaller companies who may not have the size to withstand large CAT losses. Demotech gives out more provisional ratings than any other rating firm. They work with a number of insurance companies who are mono-state insurers, who are smaller, or who have been in business for less than 10 years.

By offering quotes with insurance companies that are rated by AM Best, your agency can add value by contributing to the peace of mind of your customers.