When considering insurance carriers, selecting a company that’s fully capable of fulfilling its obligations is critical––especially if you experience a loss and need to file a claim. Like businesses in any industry, some insurance carriers are more reputable than others. So you help your clients shop for insurance, one thing to consider is the carrier’s A.M. Best rating, which is a good indicator of the business’s ability to meet its insurance obligations. There are many insurer rating agencies, but A.M. Best is one of the primary agencies, and their letter-grade ratings are well-recognized and accepted.
Most state insurance departments’ producer licensing exams still refer exclusively to A.M. Best as the source for financial strength ratings of carriers. Many Errors and Omissions policies that cover agents and brokers require them to place business with carriers rated above a certain threshold by A.M. Best, in particular. Here’s a breakdown of what criteria are used for these ratings and why it’s best to do business with an A-rated carrier.
How Do Insurance Carrier Ratings Work?
Insurance carrier ratings factor in a company’s liquidity, interest rates, investment risks, financial stability, competitive positioning, and more. The rating provides insight into a company’s financial standing and ensures they’re prepared to pay out a claim.
A crucial detail for determining a rating is how much money a carrier has in its financial reserve. Having a substantial amount of money on hand to pay out claims greatly impacts a company’s rating. As a result, A-rated companies are less likely to face financial difficulties that could affect their ability to meet the needs of their customers, while F-rated companies may face liquidity issues or go bankrupt in the event of a major payout.
A.M. Best rates companies in areas like property/casualty insurance, reinsurance, captive insurance, and more based on several sources, including regulatory filings, business operating plans, and annual and quarterly financial statements. The agency takes a quantitative and qualitative analysis of an insurance company’s business profile, operating performance, balance sheet, and how it compares to its competitors.
Why You Should Do Business with an A-Rated Insurance Carrier
An insurance company’s A.M. Best “A” rating is a key indicator of its financial stability and standing amongst its competitors. Additionally, an A-rating demonstrates its ability to meet its customers’ ongoing needs. As a result, they’re less likely to encounter financial difficulties that could prevent insureds from receiving payouts in the event of a loss.
Some characteristics of A-rated companies are:
- Having the size to withstand larger CAT losses.
- Having been in business for more than ten years.
- Financial stability.
- The ability to write business in multiple states.
- Being more capitalized.
- Being profitable.
- Having more reinsurance behind them.
- Writing more lines of business.
- Being more likely to have slow & steady growth.
Selecting an insurance provider should be a well-researched and well-informed decision. Opting to secure coverage with an insurance company with a poor rating could be a recipe for disaster. Before settling on a provider, it’s ideal to consider their A.M. Best rating.
Explore Top-Rated Insurance Providers for Your Clients
With various A-rated insurance companies to choose from, Quaker Special Risk’s consultants are fully prepared to assist you with finding the best coverage for your clients. Whether they need general liability, umbrella and excess, or cyber insurance, our team has access to the market’s best carriers. Your clients deserve a stable and trustworthy insurance provider that can fulfill their obligations in their time of need. Want to learn more about what companies and coverage options are available? Contact us today to get started.