The Financial Strength And Claim Paying Practices Are Commonly Used Rating Criteria For Insurers

Ed Sneneh


There are couple of rating systems for insurance institutions. Insurance carriers, similar to other financial companies, can be rated based on specific financial and customer service criteria. The most critical standard to analyze insurance companies is 'financial strength'. The most known establishments which analyze insurance companies are  a. AM Best ambest.com, b. Fitch Rating, and c. Standard & Poors standardandpoors.com.

A number of rating institutions adopt different approaches. JDPower jdpower.com presents rating system for insurance carriers that includes factors based on claim paying policies, or what they call 'auto insurance claim rating.'

Low or high financial strength is connected to the creditworthiness of the insurance company, its financial strength and its ability to pay the insureds' claims. The fact that an insurance carrier has high credit rating is not a sign of better or worse claim paying routines. Indeed, with some insurers, strong financial position could be due to tough claim paying policy. There are many instances of insurers who had B rating with AM Best but had excellent customer services with very satisfactory claim paying policies, while other insurance carriers with an A rating (better than B), that maintained very poor claim paying strategies to the point where these insurance providers got debarred  from certain states and subjecting them to high penalty charges for their unfavorable claim payment practices.

Some clients think financial strength is the most essential criterion while others think that customer service rating is the one that is more important. So for consumers which one is more important, claim payment history or financial strength? The answer to this question is: It all depends on the following:

a) Customer's Needs Vs Company Offering.  Certain clients have specific needs that are met by a certain company. If a person has a need that is best met with services offered by Company A, then obtaining a policy from that insurer is the final solution regardless. Here the consumer does not have a choice.

b) Amounts of Coverage. If limits of insurance is high (ie millions or hundreds of thousands), then insurers financial strength is more relevant. A client who is insuring his $2,000,000 building has to be concerned more about the financial strength of the insuring company. A customer insuring a $5,000 car has to think more about claim payment history of the insurance provider.

c) Coverage Rates. Affordability of the coverage should be of higher value when dealing with similar insurance providers which are slightly unique in their financial rating. There may be minor differences among insurance firms who have A+ rating or A++ (with similar appropriate claim paying practices).

d) Trust. Buying insurance is a personal preference. When factors related to the financial strength and claim payment practices are relatively close to each others then the confidence of the insured in a specific firm or agent will be the primary factor in the selection.

Independent Vs Captive Agents. Whether you need a business insurance quote or car insurance quote, dealing with a professional independent broker can be the solution to your questions. Doing business with a captive agent means, in most cases, that you have the offerings of one company. Dealing with an independent agent permits clients to get more portfolio from more insurance providers.

Insurance Navy, 4717 N Pulaski Rd, Chicago, Illinois 60630 (773) 478-3700. We stay focused on Auto Insurance in Chicago Illinois and low rates for Illinois SR22

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