Insurer ratings

[Dilbert]

Do insurer ratings really matter? I just saw a study by AM Best that shows that less that 1% of all insurance companies go belly up in a given year. That means 99% of companies fulfill all policyholder obligations, regardless of their rating. An insured really only cares that the insurer will be around for the policy period, plus an indeterminate length of time until all long-tail claims are settled. Why should an insured care if one company is A+ rated versus another that is C rated? Or even A- to B+? The odds of any of them failing during the policy period is miniscule.

[Dilbert]

I was really hoping to get some feedback on this. How do the rest of you feel about insurer ratings? Are they of any value? Do your insureds pay any attention to them?

[yoyowordup]

I strongly disagree.

We had many contractors insured with Statewide Insurance Company of Illinois (in Arizona). They went from A- to C to gooonnnnneee within about 18 months.

Many claims don't show up during the policy period. Does the term products/completed operations ring a bell!

If a company goes from A to B to C, that's a good sign that they are on their way out. How many companies last with a C rating? Most mortgage companies won't accept them (for personal lines homes) and most general contractors won't take them. Anyone that has a requirement that your insured carry insurance usually states that the carrier must be B+ or better.

Also, it's impossible to get loss runs out of a carrier that has failed.

How does your e&o feel about carrier ratings? My E&O excludes coverage for insolvency if the carrier is below B+?

[Forum Reader]

Insurer ratings DO matter. Courts hold us responsible for placing insureds with companies that are financially stable. Rating agencies are one tool in our arsenal to help us evaluate stability.

Getting through a policy year without insolvency may be okay for fire insurance, but not much good for occurrence-form coverages. Ever heard of IBNR?? How about "reported but not adjusted/ajudicated"?

Having been exposed to numerous insolvencies (or rehabilitations), I can tell you that they cause a great deal of agony to both insureds and agents. No knowledgeable, professional agent would ignore ratings.

The point made by others relative to E&O insurance is quite valid. Also, ever try placing an umbrella over a B rated carrier?

[scott]

Ratings are the way we can judge the financial status of an insurer. I use several in the analysis of an insurance plan

AM Best
Weiss
S&P
Fitch

Use of rating services is another way to differentiate yourself from others - agents, advisers, and insurers.

Most agents talk about AM Best. I certainly tell my clients that Best has its place. Then I point out that almost 90% of insurers have a Best Rating of a- or better.

Intelligent buyers tend to look at that fact with scepticism. How can 90% of any group as diverse as insurers be "good."

I then point to Weiss and their track record of predicting insolvencies as well as their approach to ratings.

I don't use Weiss alone but in combination with other opinions. My approach, however, makes me different from most other advisers.

Isn't that what we are trying to show prospects and clients?

[captivenomore]

Company ratings are very important. Most of our local mortgage companies require A or better. One local independant wrote a lot of business with a non-rated company cuz the premiums were 50% less than most other companies. When we had a CAT event, those insureds were left with uncovered damage. Needless to say both the insureds & the mortgage companies were not happy! The local mortgage brokers are now much more aware of ins company ratings. Before they just assumed that if someone was writing it, it must be a good company. No more!!! They have seen you get what you pay for.