You have bought a new car or a new house and you have even been very sensible in buying insurance for them. However, something doesnt seem right. There is a blip in the radar. You have probably ignored the most important factor to be considered while buying insurance the insurance rating of an insurer. The insurer might offer you the best insurance in town. Perhaps, his claims are true. Or to your dismay, as you would find later, the company is not financially strong to pay your claims. When you have information at your disposal, you would be foolish not to verify the insurance rating of the company that is offering you insurance.
Insurance Rating - Importance
While picking the right insurance company, there are few factors that matter more than the financial strength of the company. Your insurance is an important decision that you take to achieve your financial goals. When the company has a low insurance rating, all other offers presented by the company come to nothing. The basic purpose of insurance is to provide financial security in times of crisis and this would not be possible if the company is unable to pay your claims or other benefits.
Financial Strength Rating
The financial strength ratings or the insurance rating of a company represents a study of the potential risks that might influence the insurer s business in the long-run. A lot of factors are involved in the survival of a company in the insurance industry. These factors might include financial capability of the company, competition, transformations in the markets served by the company, etc. Although all factors play an equally important role in the insurance rating of a company, you would ideally want to choose a company that is financially secure. Insurance ratings are determined based on the financial data offered by insurance company to the Government or to the rating agencies directly. The ratings can be viewed by customers on the internet or in printed ratings books available in libraries. You might have often wondered why you pay different amounts for the same coverage in different companies. The key factor that determines the insurance rates set by a company is the size of the operating pool of the company. This pool is where the company distributes its risk.
Insurance ratings are not entirely unbiased. Institutions that rate insurance companies have their own specific preferences while rating them. Although the ratings might differ slightly, there is little doubt that financially secure companies would attain reasonably high ratings. Hence, there is no much cause for concern when you select an insurance company based on its rating. Deducing an insurance rating report can be an onerous task. And, the variations in the rating done by different agencies can be misleading in terms of not providing crucial information of an insurance company. For example, a company may be financially secure but other factors might affect its future performance, directly or indirectly. Hence, it is essential that you closely follow the rating system adopted by an agency and stick to it. When an insurance company is consistent with its top rating, it is quite obvious that this company is the ideal choice for an insurance policy.
For better judgments with the insurance ratings, you must understand how a few of the top insurance rating agencies rate a company. Some of the top rating agencies are A. M. Best, J. D. Power and Associates, Weiss Ratings Inc, Standard & ; Poors Ratings and Fitch Ratings Inc. A.M. Best offers the most comprehensive rating of insurance companies. It rates a company based on certain key factors like the insurer s financial strength, operational performance, and its ability to fulfill the obligations of the insured over the next 1-3 years. The scoring is done accordingly. However, there is one limitation to this system. New companies that may meet the basic criteria for decent rating may not figure in the top tier list because they would take time in attaining a higher rating.
J. D. Power and Associates are one of the biggest rating agencies with a history of consistent rating. They have an extensive rating system that even includes feedback from customers in terms of their buying and service experience. The agency conducts an annual survey among millions of customers and rates the insurer based on factors like coverage price, options, claims handling, customer service satisfaction and the customers overall experience. Based on their rating, they are categorized.
Weiss Ratings, Inc. is an agency that rates an insurer based on its financial strength. This may be a limitation for customers who seek additional information before selecting a company for insurance.
Standard & Poor\\\\\'s Ratings is one of the best credit rating agencies. Their rating experience includes over 8 million ratings of around 40,000 insurers all over the world. In addition to this, they also offer around 240,000 research and commentary articles that help customers take informed, sensible decisions while buying insurance. They also offer a rating history of companies that spans 16 years. Subsequently, customers can select an insurer with the assurance of good performance.
Fitch Ratings, Inc. organizes its rating activity with the help of a Global Insurance Ratings & Policy Committee. This is done to ensure that there is a consistency in the rating system all around the world. Additionally, customized reports and summaries are prepared by personnel who understand the local market well and offer an unbiased analysis. This makes it very distinctive in its rating system.
When you are looking to buy insurance, it is essential that you take an informed decision. You must review the insurance ratings of companies before you buy a policy. That way, you can avoid future insurance hassles.
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