Many people choose an insurance provider in a similar fashion. They do an online search, see a price they like, visit the company website for a bit of background info, and then perhaps read a few online reviews before making their decision.
Following these steps and using this set of criteria to make a decision makes sense in some regards. Of course we need to find a rate that fits within our budget and we don’t have all day to dig deep into the minutiae of every insurance company we are considering. But an equally important criteria which is often overlooked is knowing how capable an insurance company is to pay off the claims of their clients. After all, if a company offers a good price for an insurance policy, but is unable to pay you in your time of need, then what’s really the point of being insured by them?
A simple way to know how dependable and financially secure an insurance company is by looking at their AM Best Rating. This letter-based grading system will tell you which companies have a high level of financial security and which do not. Choosing a company with a better rating will help you be confident that you and your family or your business are truly protected.
Why is AM Best rating considered the gold standard of ratings companies?
AM Best was originally founded in 1899 and today is the largest credit rating agency in the world. It stands out not only for its longevity, but because it is singularly focused on rating companies within the insurance industry. This specialization on insurance company ratings makes its assessments the benchmark of the industry. Their rating makes an accurate reflection of credibility so that consumers can be sure about which companies are secure financially and which are not.
How does the AM Best Rating system work?
AM Best has its own proprietary rating scale and standards. They consider both qualitative and quantitative factors in their evaluation, focusing on an insurer’s operational performance, management strategies, balance sheet, and risk management strategies.
The rating system is based on letters of the alphabet that rate a company’s profile from poor to superior. Their rating system operates on a scale, starting at A+ which indicates a superior financial rating to D which indicates a poor financial rating. You can see below all of the ratings AM Best gives and how each rating is defined.
Why should you go with a company that has an A-Excellent AM Best rating?
When it comes to choosing an insurance provider, the AM Best Rating should be put alongside or even above important factors such as insurance prices and coverage amount.
By going with a company that has an A-Excellent rating you can feel confident that you will receive quick financial compensation following a claim. The financial security and management that a company with an A-Excellent rating provides to clients is important, as it lets you know that during your time of need you will be taken care of, no matter what the situation.
CG for example, earned its A-Excellent rating in part due to our ability to handle the losses in our portfolio with our reinsurance program and/or our capital reserves. This means that even in times of crisis, we will be able to meet our financial responsibilities to our clients.
Having an A-Excellent rating isn’t only about meeting obligations, but about setting up an organization that prioritizes taking care of its people. As CG CEO Naz Farrow stated upon receiving our year 2022 certified AM Best A-Excellent rating, “this rating reflects a company’s sound strategy, prudent planning, best business practices, and teamwork that allows it to be there for people when they need help the most.”
Why is it essential for you to be wary of unrated or low-rated companies by AM Best?
There are unfortunate stories about insurance companies that go bankrupt after being unable to pay their clients claims. Trinidad based conglomerate Clico Limited, is one such company that was unable to pay $2.9 million in claims to its Caribbean-based clients due to poor financial management, and was forced into liquidation by Bahamian regulators. The company received a downgraded rating from AM best, going from a B+ to a B, before finally being given the lowest possible rating after news of the company’s financial instability emerged.
While it can be attractive to go with a lower rated or unrated company that offers discounted rates compared to a company with a higher rating, the risk involved needs to be considered. If you are insured by a company that is unable to meet their financial obligations, then you are certain to face a lot of distress during the claim process and potentially you may not receive any payment at all.
By going with a company that has an A-Excellent rating you can skip out on the stress of unpaid claims and have peace of mind knowing that you and your possessions are covered at all times.
