Auto insurance company ratings

Do you care about issues that don’t directly affect you? Then insurance company financial ratings may not be that important! You care about a company:

  • Not overcharging you
  • Being polite
  • Paying a claim
  • Returning your phone calls
  • Being organized
  • Staying in business

The insurance company cares about:

  • Staying in business
  • Not overpaying on claims
  • Increasing premiums to market levels
  • Reducing staff
  • Lowering debt ratios
  • Making good acquisitions
  • Bolstering market share
  • Getting a good return on the money they pay ratings agencies!

With the exception of “staying in business” you can see, what is good for the carrier may not always good for the policy holder, and your goals may even be opposite. If a company doing exceedingly well, find out why.

Almost every third party rating agency is paid by the insurance companies they are grading. Weiss Ratings Inc., is the only service that does not accept money directly from insurers. They state:

“Unlike other rating agencies, we accept no compensation from the companies we rate. Nor do we give the companies the opportunity to preview the ratings or suppress their publication if they’re unfavorable, as most other rating agencies do.”

Would you pay someone to give you a low rating, for both your current and potential customers to see? Also many smaller insures are low cost, low overheard and have not budgeted large fees to pay these ratings agencies, and hence get a “NR” or not rated rating.

Say in many cases there is no conflict of 2 between ratings agencies and auto insurance carriers. A financial rating is like a picture of a business’s bank account. If you were thinking about doing business with someone, in addition to their bank or company records, you want to find out about claims paying ability, service and discounts.

Instead, you might:

  • Check with the BBB, for complaints
  • Ask friends if they had heard of them
  • Inquire about their return policy
  • Get a feel for if the business is reputable
  • Check with your State’s Department of Insurance for complaints and pay out ratios. Ratings guides are also useful.

Let’s say a company had great financial rating (a large bank account). Did they get that way by fighting claims? Reducing staff? Increasing premiums?

Now lets say that you did care about how much money a carrier had. If the company didn’t like their ratings being lowered, they can request them withdrawn.

Also, ratings are usually confusing. All 6 have different criteria and grades. Chances are you can’t tell the difference between an B++ and an A. People usually avoid things they can’t understand, and the same things go for financial ratings.

Ratings services and agents will tell you ratings are important to make sure the company will be around so they can pay their long term commitments, but out of the numerous carriers out there, can you name a carrier that:

  • Has gone out of business?
  • Has not paid policy holders before going under?
  • Has gone out of business, with all their assets and client policies disappearing?

The reality is that most of sick companies client base can be very attractive to competitors, and now that the company is buyable, they see an opportunity to expand their client base on a large scale at discount rates.

Now there is a place for these ratings agencies. They are very useful to the insurers themselves, or creditors and investors. But most people only want to get coverage, not be a part of the company.

In summary, think of financial ratings as just a measure of “potential.” Having the ability to pay your claims, survive for 30 years and avoiding debt is one thing, but having competitive prices, and good customer service and actually paying claims without a court ordered judgement, is another. Next, we will review the different auto insurer ratings services.