AM Best rating services assess or report on the creditworthiness of over 16,000 insurance companies internationally. If you’re looking for a reliable way to validate an insurance company’s reputation and financial stability, AM Best is the place to start.
But exactly what are AM Best insurance ratings, and how are they used by consumers and insurance companies alike?
Keep reading to learn more in this AM Best insurance rating guide.
What Are AM Best Insurance Ratings?
Since 1899, AM Best has been providing policyholders a solution to verifying insurance companies’ financial stability. The name of the AM Best rating system comes from the company’s founder, Alfred M. Best.
AM Best is located in the US but has branches in the UK, Dubai, and Hong Kong. AM Best company ratings give consumers insight into financial analysis records, such as an insurance firm’s ability to pay claims.
So what exactly is an AM Best rating for insurance? What do insurance company ratings mean?
Think of it as an insurance company’s report cart. The AM Best insurance ratings scale will help you make an informed buying decision for your insurance needs.
AM Best’s Financial Strength Rating (FSR) is an independent opinion of an insurer’s financial strength rating and ability to meet its ongoing insurance policy and contract obligations.
Insurance companies take the ratings information issued by A.M. Best very seriously. Companies know a downgrade in an A.M. Best rating can mean a loss in customer confidence. It is also an indicator as to how attractive the company will be to investors. Customer confidence and new investors are essential when it comes to writing new business and remaining profitable. There are many factors that may make a company’s A.M. Best rating fall including:
- A change in the insurance marketplace
- A change in the company’s structure or management
- A large number of claims paid
- A reduction in the company’s financial reserves
AM Best Insurance Ratings Scale
Before using the AM Best rating system to assess an insurance company’s financial stability, you must know what the ratings mean. Below is a summary of each rating.
Superior (A+, A++) and Excellent
This rating is given to companies with a superior or excellent capability to meet their continuing insurance obligations. You’ll find all of the top insurance companies in this category.
Receiving an A rating shows that a company is financially strong and capable of guaranteeing your policy and keeping it secure.
Fair (B, B-)
A fair rating is assigned to companies that have a fair ability to meet their continuing insurance obligations. The companies’ financial strength is vulnerable to unfavorable changes in economic conditions and underwriting.
These companies are good for individuals who can’t afford policies with higher-rated insurance companies. With a B rating, you can expect the company to provide an affordable, secure policy.
You can rely on B-rated companies to give your family something to fall back on during difficult times.
Marginal (C+, C++) and Weak (C, C-)
A marginal or weak rating is given to insurance companies with a marginal or weak ability to meet insurance obligations. Their financial strength is also vulnerable to unfavorable changes in economic conditions and underwriting.
Companies with a C rating provide policies with no bells or whistles attached. They offer straightforward policies with straightforward premiums. They’re an okay choice for those who are purchasing insurance for the first time.
Poor (D, D-)
The weakest rating, poor, is assigned to companies with a poor ability to meet insurance obligations and have a “vulnerable” financial strength evaluation.
A D rating is reserved for the insurance companies that don’t meet AM Best’s minimum standards. You’ll also see “E” and “F” rankings. E is for companies who are under state supervision, while F is only for companies facing liquidation.
Any rating below C proves that a company is unreliable and not to be trusted within the industry.
What Factors Cause AM Best Ratings to Go Up or Down?
The www.ambest.com ratings methodology differs from other rating companies in that it focuses solely on rating products in the insurance marketplace.
The AM Best rating system considers several factors to determine rating types, including an insurance company’s business profile, financial performance, balance sheet, and management style. These insurance carrier ratings are a comprehensive comparison of how a company measures up to other industry insurance firms.
Several factors go into an insurer financial strength rating that can cause the rating to go up or down, including a:
- Change in the insurance company’s structure or management
- Change in the insurance marketplace
- Large number of claims paid
- Reduction in the company’s financial reserves
The financial outlook assigned by AM Best to companies is also vital. The outlook is how AM Best presumes the insurance company will perform in the imminent future. An assigned outlook can be positive, negative, or stable.
How Important Is the AM Best Rating of an Insurance Company?
Insurance companies take insurance career ratings seriously because they know that AM Best rating the financial strength of insurance companies is how consumers stay informed.
How essential is it for insurance companies to understand ratings and what they mean? A poor rating can lead to a loss in customer confidence. A poor on the insurance rating scale is also an indicator that a company is not safe to invest in.
New customers and solid investors are the lifeblood of insurance companies. The results of this insurance company rating system are not set in stone, however. An insurance company may accept, decline, or appeal the first rating.
Once the company accepts the initial rating, they’ll succumb to an annual review process. The only option after accepting the rating is to withdraw from the program.
How Do I Find an Insurance Company’s AM Best Rating?
Performing an AM best rating lookup is simple, but can take some time. An independent insurance agent at Doyle & Ogden Insurance Advisors can provide you with this information and further guidance as well. If you want to do your own research on a specific insurance provider, here’s how:
- Go to www.ambest.com
- Click “Sign Up” in the right-hand corner
- Fill in the requested information and read through the terms and conditions
- Follow through the provided login instructions
- Go back to the homepage
- Type in the name of the insurer you want to investigate and click “Go”
- Choose the name of the correct insurance company from the list provided
- You’ll find the life insurance company ratings chart in the center of the page
Complete these steps for every company you’re interested in finding within the AM Best insurance ratings list.
Have Confidence in Your Insurance Company
While comparing insurance coverage, you must also evaluate a company’s reputation and financial stability in the process.
Now you know why you can trust AM Best to help you find the best company for your insurance needs.
At Doyle & Ogden Insurance Advisors, we always recommend partnering with an A-rated or better insurance company. We seek to provide our customers with quality insurance policies that offer the right coverage for you and your family at an affordable price.
If you’re ready to get started, contact us for a quote today!
