So chances are that you’re shopping for some life insurance and got curious about who A.M. Best is and what exactly they bring to the table. You have come to the right page because today we will learn the ins and outs of the business! It is important for you as a consumer to gather as much information as possible when choosing the best company to receive coverage from because if you choose wrong then that puts your policy and money at risk and you work too hard to have your money at risk! The following are some key-points from the article;
- A.M. Best was founded in 1899 by Alfred M. Best with a goal in mind to report on the financial stability of insurers and the insurance industry.
- A.M. Best is a company that was created to report on the financial stability of insurers and the insurance industry.
- A.M. Best uses references, directories, and periodicals that provide insurance professionals and consumers with critical information that they can use to make informed business decisions.
- A.M. Best provides reliable information for companies to understand their weaknesses and strengths.
- All ratings are initially determined and subsequently updated by a Rating Committee.
- The best thing to do when shopping for life insurance is to take a couple minutes and check out the company’s A.M. Best rating because not only will it give you a little more direction but it will narrow down your choices on which company is the most qualified to receive coverage from.
What is A.M. Best?
A.M. Best is a company that was created to report on the financial stability of insurers and the insurance industry. They are known for providing very thorough ratings in order for their clients and consumers.
About A.M. Best
A.M. Best was founded in 1899 by Alfred M. Best with a goal in mind to report on the financial stability of insurers and the insurance industry. He started the company out of a single room in New York’s financial district until the company moved into their own office building on Fulton Street in 1920 for 45 years. In 1974, the company moved to their current headquarters in Oldwick, NJ because of their rapid growth.
Of all other providers of ratings, A.M. Best is the oldest and most widely recognized. They rate over 3,400 companies in over 80 countries around the world. With their Credit Ratings and related analysis they cover over 16,000 insurance companies around the world through a wide range of analytical resources. A.M. Best uses references, directories and periodicals that provide insurance professionals and consumers with critical information that they can use to make informed business decisions. They have offices all over the globe such as London, Hong Kong, Dubai, Singapore, and Mexico City, with of course offices in the U.S. A.M. Best has received recognition for their leadership in providing objective rating services to the global industry Intelligent Insurer’s Global Awards. Their awards include Best Rating Agency from Reactions Global Awards and an International Best Ratings Agency and many more.
What are their ratings for?
A.M. Best provides reliable information for companies to understand their weaknesses and strengths. This can help a company rebuild and structure their finances better. Their ratings are also a good indication of whether or not the insurance company will be stable enough to handle your money. A bad rating can really affect a company and the consumer trust for the company. If there weren’t any rating companies, consumers would have nothing to go off on when looking for insurance companies and have to wing it.
Why do ratings matter?
I mean what’s the big deal about these ratings anyway? Well, we know that the A.M. Best uses these ratings to show the consumers how financially stable insurance companies are. But what’s the big deal?? Well it’s important for a company to have a high rating like an ‘A’ because if the company has a bad rating that just shows that they are not stable enough to so if disaster happens, they would more then likely not know what to do or simply pull out or go bankrupt which can mean your policy will not be paid out.
For example, Brenda and Ben bought a policy from Company EFG (not a real company) because they saw that on their website “Fast and easy approval for life insurance, It takes five minutes top”. Brenda and Ben just had their first pair of twins a year ago, so their lives are completely upside down, you know the saying double trouble. Well, they have talked about getting some life insurance now that they have a bigger family but concluded that it’s too time-consuming right now and it really cannot be done. It wasn’t until Brenda was on her computer and found Company EFG when she told Ben this is the place and all they need to invest is five minutes of their lives. So long story short they got covered fairly quickly. They got approved for a million dollar policy with a 20-year term so that only meant $3,000 a year in premiums.
This was a great deal, until disaster struck (because disasters are inevitable). The market crashed and the top rated insurance companies stand strong, but Company EFG was forced to file bankruptcy. Brenda and Ben had coverage from Company EFG for nearly four years which resulted in about $12,000, and because the company filed bankruptcy their premiums are not being returned and all the money is gone with the wind. $12,000 is a lot of money for anybody, it can mean part of a down payment to a house, or college tuition for the twins, or even a used car paid out. Brenda and Ben decided they wanted to sue the company for all the money they invested in the company but it went nowhere because the lawyers found out that Company EFG had one of the worst A.M. Better ratings available from their scales and this is entirely Brenda and Ben’s fault for not investigating the company they bought coverage from. Which means that if they had searched the company online they would have found their rating and possibly realized that they should keep looking because they will not put money into something that may not be around for 20 years. Now they are forced to go into the world of insurance companies with no trust and more disappointment than ever since they lucked out of $12,000.
So just take the couple minutes out of your day and look into a company’s rating before getting coverage from them because in the long run it will save you money and disappointment.
A.M. Best rating scale
If you do not understand A.M. Best and their ratings don’t feel inferior because chances are that a lot of people are on the same boat as you. Insurance companies have to provide their ratings to consumers just like a nail specialist and realtor have to display their certifications and license to work with customers. Don’t confuse A.M. Best ratings with the school system of grades, because you will be receiving the wrong information. When your child comes home with an ‘A’ or ‘B’ that’s fantastic and worthy of some fridge action, or when your straight ‘D’ child comes home with a ‘C’ that just calls for attention from the fridge because you are so proud that they are trying! A.M. Better ratings are simple, a ‘C’ or below rating is bad and shows they are weak. Some would say even a ‘B’ rating is unacceptable, which we agree here at InsureChance, that’s why we only work with top ‘A’ rated companies. The following will go into detail of A.M. Best uses for this scale, a basic method of grading insurance companies.
- A+, A++ also known as superior, is only assigned to an insurance company who in A.M. Best’s opinion, show a superior ability to meet their ongoing insurance obligations. Only the best of the best receive this rating, if this is a rating on a company it’s worth looking into some more!
- A, A- also known as excellent, is only assigned to an insurance company who in A.M. Best’s opinion, show excellent ability to meet their ongoing insurance obligations. This means that they are financially stable and still reliable.
- B+, B++ also known as good, is only assigned to an insurance company who in A.M. Best’s opinion, show excellent ability to meet their ongoing insurance obligations. This is can still be a good sign.
- B, B- also known as fair, this is only assigned to an insurance company who in A.M. Best’s opinion, show a fair ability to meet their ongoing insurance obligations. However, the company’s financial strength is vulnerable to adverse changes in underwriting and economic conditions.
- C+, C++ also known as marginal, is only assigned to an insurance company who in A.M. Best’s opinion has marginal ability to meet their ongoing insurance obligations. Financial strength is vulnerable to adverse changes in underwriting and economic conditions. So pretty much weak in disasters.
- C, C- also known as weak, is only assigned to an insurance company who in A.M. Best’s opinion has a weak ability to meet their ongoing insurance obligations. Financial strength is VERY vulnerable to adverse changes in underwriting and economic conditions. So you can start questioning if they will fail when disaster strikes because chances are they might.
- D is also known as poor, is only assigned to an insurance company who in A.M. Best’s opinion has a weak ability to meet their ongoing insurance obligations. Financial strength is EXTREMELY vulnerable to adverse changes in underwriting and economic conditions. So you can definitely assume the company with this rating IS going to fail when disaster strikes. Stay clear from companies with this rating.
What is the process that A.M. Best partakes in to obtain company ratings?
All ratings are initially determined and subsequently updated by a Rating Committee. There will be a rating recommendation that is reviewed and deliberated based on the analytical process outlined for each rating action for the Rating Committee. A.M. Best has two types of Rating Committees, Rating Committee and Corporate Rating Committee. These members have to have at least six months of credit rating agency experience along with the knowledge and experience to formulate an opinion for the Rating Action being discussed. In order for them to discuss ratings there has to be at least six other members and have either the vice president or president in the office. When the Rating Committee is in their office with a VP or president present, they begin to investigate the corporate structure and their management team, development of products, internal systems and processes and the raising of capital. This is called the Preliminary Credit Assessment. After this process they proceed with their recommended rating and finalize the rating.
Final Thoughts
In conclusion, the best thing to do when shopping for life insurance is to take a couple minutes and check out the company’s A.M. Best rating because not only will it give you a little more direction but it will narrow down your choices on which company is the most qualified to receive coverage from. Let’s face it, the most important people in your life are the ones you care and love, don’t let their future financial stability be in jeopardy because you wanted to wing it, don’t be like Brenda and Ben! Do you and your family some good and shop around too because the first quote may be good but the next one could be better! Or simply if you don’t have enough time to compare ratings, reviews and quotes then consider working with an independent life insurance brokerage (like us!). Here at InsureChance like we said earlier only work with top ‘A’ rated companies so you can guarantee that we will find the safest and most reliable company for you and your family to invest in plus we have over 60 of them to choose from depending on your health and lifestyle! If you have any questions or concerns please feel free to contact us
