Wednesday, October 31, 2007

Life insurance company ratings: What you should look for

They’re not infallible guides, but insurance ratings services are the customer’s best tool for gauging the quality of a life insurance company. Here’s a quick guide to the best-known services.

By Mary Pollman – SelectQuote

When you’re shopping for life insurance, cost is usually the first thing you focus on. But as soon as you’ve picked a group of policies in your price range, your next step should be some online research on the quality of the life insurance companies offering them.

The best place to do that is the websites of the insurance ratings services.

Start with A.M. Best (
Start your search by Googling “A.M. Best” or enter their url in your browser.

Finding a rating is relatively easy. There’s a “Ratings & Analysis” box at the upper left on the A.M. Best home page. Make sure the “Insurance” radio button is selected, then enter a company name in the box and click on “Find.”

If you’re researching a company that’s part of a large insurance group, odds are the next page will list several sister companies. We searched on “Genworth,” and a list 17 company names came up. The companies under one corporate umbrella can have very different ratings, so make sure you know which of the companies would be issuing your policy. SelectQuote makes that easy. When you click on “Companies We Represent” on SelectQuote’s home page, you see the companies’ full names.

A.M. Best rating is the benchmark
A.M. Best highlights and bolds the companies’ ratings under the “Financial Strength Ratings” headings. That rating is probably the most important tag any life insurance company wears. When a company is referred to as an “A+ company,” that doesn’t mean they’re A+ with S&P or Moody’s or Fitch. It means they’re A+ with A.M. Best.

Best’s all-important Financial Strength Ratings scale is as follows:

Secure Vulnerable
A++, A+ (Superior) B, B- (Fair)
A, A- (Excellent) C++, C+ (Marginal)
B++, B+ (Good) C, C- (Weak)
D (Poor)
E (Under Regulatory Supervision)
F (In Liquidation)
S (Rating Suspended)

Insurance company ratings can change rapidly
At the bottom of the Best page that lists the companies in a corporate group, e.g., all the Genworth companies, you’ll see the date and time of your search. Ratings can change rapidly.

In the past, Best batched their ratings releases once a year, but their antenna have been sharpened and their practices have changed due to some miscalls or late calls they made in the 1980s and ‘90s. A few life insurance companies were placed under “regulatory supervision” (they were no longer being run by their managers but by the insurance regulators of their domiciliary states) while their official A.M. Best rating was still A+. Oops.

A.M. Best now issues rating updates weekly, and if a company’s situation is volatile, the Best rating may change at any time.

Additional information from A.M. Best will cost you
If you click on an individual insurance company name in the list, you’ll go to a page with a little more information – such as the date Best assigned the company’s current rating. But if you really want to find out what Best thinks about the company, look under the “Reports and News” subhead and click on the “news and press releases” link.

Because Best publishes weekly and daily email newsletters and a monthly print publication, you are likely to find that they have gathered quite a bit of news on the insurance company in question. But to read an article, you have to subscribe to the Best publication that carried it. If you want to read the detailed A.M. Best analyst’s report on the company, you can, but the download will cost you $75.

Other insurance ratings services
A.M. Best isn’t the only rater of life insurance companies. Standard & Poor’s, Moody’s and Fitch also rate insurance companies’ financial strength.

Standard & Poor’s (
S&P doesn’t post ratings on their website, and they charge quite a bit for their information. One-page press releases announcing ratings changes run $100 apiece. A full analysis of an insurance company costs $400. However, in the search box on the home page, I entered a full company name, and on the search results screen, an article digest happened to mention the company’s rating. You may also get lucky.

Moody’s (
Moody’s seems to offer the opportunity to register for free access to their insurance company ratings information. But after I had filled out the lengthy registration form and clicked on the checkbox beside “I agree to Moody's Terms Of Use and Privacy Policy,” a popup box appeared telling me I had to scroll through the terms of use and privacy documents. I had already done so, but I did so again. And again. I switched to another computer and used another browser. Still no luck. I couldn’t get Moody’s system to accept my checkoff. So I was forced to give up.

Fitch (
Fitch analyzes how well capitalized insurance companies are. Fitch makes it easy to view its rating for a company. Just enter the company name in the search box on the home page. However, you have to be a paid subscriber to see the press release announcing the rating or to see the research behind the rating.

Bottom line: You get the most – and the most highly regarded – information on insurance company quality from A.M. Best. Don’t buy a life insurance policy until you at least know what the insurance company’s A.M. Best rating is. Checking the other insurance ratings services – S&P, Moody’s and Fitch – won’t hurt, but you may not learn much.

About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.

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