Are insurance ratings effective

Answer 1

Choosing the right insurance company is usually an important financial decision - whether for personal or business purposes. Before making a decision, an important consideration is the overall financial strength of an insurer. If an insurance company cannot pay for future claims or benefits, there is little point in paying for the insurance. That is precisely why insurance ratings came into effect. These ratings represent a thorough analysis of a wide variety of risks that could affect an insurer's long-term growth and survival. According to Insure.com, insurance companies can fail or cease to operate due to inadequate financial capabilities, competitive forces or changing fundamentals in their marketplaces. Standard & Poor is the world's foremost provider of these ratings. Make sure to do your research before selecting an insurance company. But keep in mind that higher ratings are not a warranty or a guarantee of an insurer's current or future ability to meet obligations to policyholders, nor are they a recommendation of a specific policy form, contract, rate or claim practice. So, are insurance ratings effective? Yes and no. Choose wisely!

Answer 2

The ratings are generally accurate and are intended to refelect the companies financial strength, unfortunately though the public tends to have a gross misunderstanding of what the rating means when it comes to an insurer.

A high rating on an insurance company simply means that they have plenty of money in the bank to pay claims with. This is great information to have as we all certainly want our insurer to have the funds available when a claim is filed.

The companies rating however, has no bearing on customer satisfaction, reputation, professionalism and does not indicate to the consumer "Why" they have that much money in the bank. Are they a very large insurer with a significant market share? Do they only accept the lowest risk insureds that rarely file claims? Do they deny many claims? Are the rates absorbently high? One simply does not know just from the company rating.

The best way to pick your insurer is based on premium rates and customer satisfaction along with financial strength.