Financial Ratings of Insurance Companies

I have found that many insurance companies will tout their financial credibility through the rating companies scoring. You will see AM Best ratings, Moody's ratings, or Standard and Poor's ratings throughout company paraphernalia. The common ingredient seems to be that you cannot compare the two. One company may tout their AM Best rating, while another company you are looking at touts their Moody rating. I believe this is intentional because the rating companies will use different criteria in their scoring, and it is an obvious decision to use the 'best' insurance rating score to promote each insurance company to insurance shoppers.

Financial ratings are important for insurance shoppers. Generally they educate the shopper about the financial wherewithal of each company. This would imply a verification of the companies ability to pay claims to you in the event of a disaster. So what do you do to compare companies financial strengths?

I don't pretend to know the inner workings of the insurance industry, the ad industry or the ratings industry; however, I would suggest that companies that are intertwined with each other are not too critical of each other. If one company gets consistently high ratings from a given rating company but not so high from the others, I tend to believe there is some nepotism going on in the relationship and the scoring the insurance company promotes.

I have found a rating company called Weiss Ratings, that professes to be independent of the insurance companies because they accept no money from the companies they rate. I feel fortunate to have found them from The Street website.

I have found some interesting results in their scoring. If you have read my previous articles you have found that I am not a proponent of "big" insurance companies over "small" insurance companies, but rather a proponent of education. For the insurance shopper to make an informed decision it is important to understand that there are independent ratings of satisfaction, claims service, financial strength, and other factors that are important for insurance shoppers. I discussed previously that the winner of JD Power's recent "customer satisfaction with claims" award was a company most insurance consumers had probably never heard of, now if you run a Weiss Rating of financial strength the same company is financially strong too. (The top rated company was "Auto Owners Insurance Company" at the time of this entry with an A rating.) JD Power's top "overall customer satisfaction" insurer, had a B+ rating.

Compare those scores with Allstate (B to B+), Progressive (C+), GEICO (B+), Farmers (C), Automobile Club (C), and you realise that some small companies compete as well if not better than the 'brand' name insurance companies you hear about all the time.

What does all this mean? It means the informed insurance shopper should not be afraid to look at small companies in addition to the large companies they frequently hear about. You may end up with a comparable, if not better price, and get much better service and protection. After all, isn't that what you want from your insurance company?