Insurance Companies' Ratings: Seven Mistakes to Avoid

Consumers often make mistakes regarding insurance companies ratings that could affect their decisions. An accurate assessment of these ratings is important to make so that you are not deceived. If you want to make sure that your legitimate claims will be paid you should review ratings, and avoid the following mistakes.

Common Insurance Companies Ratings Mistakes

  1. Assuming all ratings are unbiased. Some insurance ratings services will accept compensation in exchange for positive ratings. Not all services that provide insurance ratings will allow this, but there are some that have in the past.
  2. Assuming the grades from different ratings sources mean the same thing. All of the institutions that provide insurance companies ratings have their own unique grading scale. For example, a marginal rating could be listed as a "BB" under one system and a "C" under another system.
  3. Contacting the insurance company for ratings only. While insurance companies' ratings should be revealed by the company, but it is a safer move to check with the ratings services yourself.
  4. Contacting only one insurance ratings service. A majority of insurance ratings services offer free information to consumers regarding their evaluations of companies. Each rating system is different, and as mentioned earlier, some companies can be manipulated by insurers. For a more accurate understanding of the strength of an insurance provider, check multiple ratings.
  5. Confusing financial ratings with credit ratings. Financial ratings are related to the company's ability to pay policy related claims. These ratings excludes company payment histories and non-policy financial commitments. Credit ratings are related to the company's ability to pay debt and risk of default. These ratings focus on non-policy related financial obligations. While a company may have a high insurance financial rating, they could have a lower credit rating.
  6. Using insurance financial ratings to determine whether or not to invest in a company. Strong financial ratings are no guarantee than an insurance company will remain stable in the future or that it is a profitable investment. There are multiple factors that should be considered, besides financial ratings, when determining where to invest.
  7. Viewing outdated ratings. It is possible that the insurance company ratings that you are viewing have been changed. Be sure that the ratings that you have received are the most current.

If you would like to use insurance company ratings to help you in your decision making, be sure that you understand what you are looking at. Ask for help if you need it.

 

 

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