Do you care about issues that don't directly affect
you? Then insurance company financial ratings are a waste of time!
You care about an insurance company's:
- Making as little as possible on you
- Being polite
- Paying a claim
- Return your phone calls
- Not overcharging you
- Being organized
The insurance company cares about:
- Making as much as possible on you
- Paying fewer claims
- Increasing premiums to market levels
- Reducing staff
- Lowering debt ratios
- Making good acquisitions
- Bolstering market share
- Getting a good return the money they pay ratings agencies!
What is good for the carrier isn't always good for the policy holder, and your goals
may even be opposite. If a company doing exceedingly well, find out why.
Almost every third party rating agency is paid by the insurance companies they are
grading. Weiss Ratings Inc., is the only service that does not accept money directly from
insurers. They admit:
"Unlike other rating agencies, we accept no compensation from the companies we
rate. Nor do we give the companies the opportunity to preview the ratings or suppress
their publication if theyre unfavorable, as most other rating agencies do."
Would you pay someone to give you a low rating, for both your current and
potential customers to see?
Even if the blatant conflict of interest weren't there, a financial rating is like a
picture of a business's bank account. If you were thinking about doing business with
someone, you would not ask for their bank records. Instead, you might:
- Check with the BBB, for complaints
- Ask friends if they had heard of them
- Inquire about their return policy
- Get a feel for whether the business is reputable
Let's say a company had great financial rating (a large bank account). Did they get
that way by fighting claims? Reducing staff? Increasing premiums?
Now lets say that you did care about how much money a carrier had. If the company didn't
like their ratings being lowered, they can request them withdrawn.
Also, ratings are usually confusing. All 6 have different criteria and grades. Chances are
you can't tell the difference between an B++ and an A. People usually avoid things they
can't understand, and the same things go for financial ratings.
They tell you ratings are important to make sure the company will be around so they can
pay their long term commitments. But, out of the many carriers out there, can you name a
- Has gone out of business?
- Has been bought out?
- Would go out of business, with all their assets and client policies disappearing?
The reality is that most of a sick companies' client base can be very attractive to
competitors. When a company is sick, the competitors see an opportunity to expand their
client base on a large scale at discount rates.
There is a place for these ratings agencies. They are very useful to the insurers
themselves, or creditors and investors. But most people want to buy only a coverage, not
part of the company--and few individuals have enough money to loan an insurer.
In summary, think of financial ratings as just a measure of "potential." having
the ability to pay your claims (and survive for 30 years while avoiding debt) is one
thing. Having competitive prices (and good customer service and actually paying claims
without a court order) is another. Here's a review of the different ratings services.
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