It is important to understand the financial strength of
insurance companies when you are comparing auto insurance quotes.
Several national rating institutions rate insurance companies. You pay less with
one company than another for the same coverages for many reasons. Some of it is
related to the size of the pool that the company has to spread the risk. The
main reason you want to check ratings is to see if the company cant pay future
claims or benefits. Financial strength ratings are an analysis of a wide
variety of risks that could affect an insurance company's long-term viability.
Insurance companies have failed or ceased to operate due to inadequate
financial strength, competitive forces, or changing dynamics in the
marketplace. There is a belief that ratings are not completely unbiased. In any
rating system, preferences can be seen. Here are the major rating companies:
A.M. Best
http://www.ambest.com
They have an independent opinion of a company's financial strength, operating
performance, and ability to meet its obligations to policyholders over the next
12 to 36 months. Their scoring of companies falls into these categories:
-
A++ and A+ (Superior) = superior ability to meet their ongoing obligations to
policyholders
-
A and A- (Excellent) = excellent ability to meet their ongoing obligations to
policyholders
-
B++ and B+ (Good) = good ability to meet their ongoing obligations to
policyholders
-
B and B- (Fair) = fair ability to meet their ongoing obligations to
policyholders
-
C++ and C+ (marginal) = marginal ability to meet their ongoing obligations to
policyholders
-
C and C- (weak) = weak ability to meet their ongoing obligations to
policyholders
-
D (poor) = weak ability to meet their ongoing obligations to policyholders
Most new companies start out at a mid level rating and then move up. If you're
considering a smaller, unfamiliar insurance carrier, you might want to research
their rating, but be aware that newer companies sometimes require time to get a
higher rating.
J.D. Power and Associates
http://www.jdpower.com
They are one of the largest, most comprehensive historical customer satisfaction
databases in existence, which includes feedback on virtually all aspects of the
shopping, buying, and product and service ownership experience. Each Year J.D.
Power and Associates surveys millions of consumers to understand their opinions
and expectations regarding the products and services they purchased. They
collect data from individual policyholders nationwide and rate them according
to coverage options, price, claims handling, satisfaction with company
representatives and the overall experience. Each company is then categorized by
performance.
Weiss Ratings, Inc.
http://www.weissratings.com
They offer free lists of the strongest and weakest financial services companies
in the nation. Those companies identified as the strongest are to be commended
for this accomplishment. However, if you are doing business with a weak
company, you may want to consider your other options along with the cost of
making a switch.
Standard & Poor's Ratings
http://www.standardandpoors.com
Standard & Poor's is one of the world's preeminent providers of credit
ratings. They provide a wide range of other products and services designed to
help individuals and institutions around the world make better-informed
financial decisions with greater confidence. Their product contains nearly 8
million ratings on approximately 40,000 issuers across the globe plus 240,000
research and commentary articles. And to help you analyze today’s market
actions in context, their archives more than 16 years of ratings history. Some
subscription and registration may be required.
Fitch Ratings, Inc.
http://www.fitchratings.comThe
Fitch Ratings Insurance Group provides ratings and research on insurance and
insurance-related companies worldwide. Because of the increasing globalization
of insurance markets, the group coordinates all research and analysis through a
Global Insurance Ratings & Policy Committee. Their goal is to achieve
consistency of rating methodology across countries. At the same time, Fitch
strives to ensure that its insurance ratings fully incorporate the unique
aspects of local markets by assigning lead analysts with local market knowledge
and presence. The Insurance Group balances local expertise with global
oversight to distinguish their ratings in the marketplace.
Read more on this subject,
Is Your Auto Insurance Company Rated?