How to evaluate an insurance company’s strength and why you should care.
You have been asking us how can you assess the stability of an insurance company. In our recent customer survey, you told us that ‘the reputation’ of the insurance company was one of your top three criteria for selecting an insurance policy.
At INSHUR, our purpose in the world of commercial auto insurance is to be useful, to help customers and make things simpler and well, just better. Insurance is an ancient industry, it is complicated and littered with acronyms, terms, and words which for most of us are either meaningless or plain confusing. But all those words actually matter, especially when it comes time to make a claim.
When you purchase an insurance policy you are essentially buying a piece of paper that promises to take care of a claim in the case of a loss. But how do you know the insurance company will actually be in business and pay the claim when the time comes. We appreciate that having a stable and secure insurer is essential, as is having the right cover, as it keeps you driving; we get that. Add to this the turbulent economic times, the last thing you want is an insurer going out of business at the time you really need them to make a claim.
Just take a look at the NY Liquidation Bureau’s website for a list of recent casualties in the New York Insurance market – all these companies were placed under the supervision of the bureau, essentially for going bankrupt. Some of those carriers actually wrote TLC policies. Pretty scary right? To help you, we thought we would outline what to look for when choosing an insurance carrier with your hard earned money. Any business can go bankrupt, including insurance carriers – luckily there is an organization that rates companies based on their financial stability.
A.M. Best is the largest and most recognized organization that provides these ratings – they have a system that determines a carrier’s financial strength from A to F, just like a report card. Carriers with an A rating are often thought of as the most financially strong and secure, whereas carriers with a C rating and below are thought of as risky. Some carriers are not rated at all (NR), that typically means that the insurance carrier’s management has decided against opening up their books to AM Best’s financial analysts.
The AM Best site provides a simple search that allows anyone to see the financial rating.
For further reading, we found this comprehensive article which explains the whole process: https://www.thesimpledollar.com/when-insurance-companies-go-bust/