Playing the Rating Game

Playing the Rating Game

How you can tell which insurance companies have staying power

The financial strength of your insurance company is all the insurance you have that the firm will be around when it’s time for you to collect on a policy. But how can you tell if any one company is financially strong or weak?

Fortunately, you don’t need to spend hours poring over financial statements. Several independent organizations specialize in issuing “ratings” of life insurance companies. You should check a few best-known rating agencies.

Playing the Rating Game. Illustration : Elena

They will analyze a company’s financial strength and overall operations considering factors such as control of expenses, investment performance, claims experience, and management philosophy. They will also focus on the company’s claim-paying ability. They will publish a great deal of data, some of which can be difficult to interpret. They also will issue a simpler overall rating for each company.

It’s often difficult to compare the results of different company’s ratings. The A category alone may include several gradations.

What’s a smart consumer to do? One clue that trouble’s brewing is a drop of two or more ratings over a short period of time. And some experts recommend choosing an insurer that gets A or top B grades from four of the five raters. That’s pretty good insurance that your insurer will be around when needed.