Last Updated: April 12, 2010
Selecting an insurance carrier is not as simple as opening the yellow pages to "I." Since an insurance policy is a promise to pay in the future, choosing an insurance carrier is an important step in risk management.
Review Company Ratings: Research an insurance company before purchasing coverage. Insurance companies are ranked by up to six rating agencies on criteria such as financial strength and company performance. This data is available to consumers directly from the ratings agencies at no cost. The most commonly referenced agencies are:
- A.M. Best's financial strength rating provides an independent opinion of an insurer's financial strength and ability to meet its ongoing insurance policy and contract obligations. A.M. Best's has rated insurers since 1899.
- Standard & Poor's has been publishing insurer claims-paying ability ratings for those insurers who request a rating since 1971.
- Moody's insurance financial strength ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations. Moody's has rated insurers since the 1970s.
- TheStreet.com, formerly Weiss Research, Inc., has rated insurers since 1989.
- Fitch, Inc. publishes insurer financial strength ratings.
- The Comdex indicates on a scale of 1 to 100 where the company ranks among 1,100 companies that have been rated.
Contact the National Association of Insurance Commissioners (NAIC): The NAIC's Consumer Information Source (CIS) provides information about insurance companies you can use prior to purchasing insurance. Carrier reports are available online and provide information about common closed complaints by reason and type of insurance, as well as how the complaints were resolved.
Rely Upon Your Insurance Broker: An experienced insurance broker advocates on behalf of their client, not the insurance carrier. Brokers will know the marketplace as they deal with multiple carriers. Your broker can provide guidance about financial ratings, underwriting and ease of doing business. Your broker can also provide you with a "Car Fax" report about any insurance company under consideration.
Insurance Marketplace Standards Association (IMSA): The IMSA is the premier market conduct and compliance organization serving the life insurance marketplace. IMSA was created by the insurance industry to promote high standards of ethical conduct in the way insurance companies conduct business with consumers. Buying insurance from a carrier that belongs to the IMSA provides added comfort as these carriers have been measured against IMSA's rigorous principles and code of ethics. Companies that earn the IMSA seal have earned added credibility. It is the mark of integrity in the life insurance industry.
Talk with Your Friends and Neighbors: While every person's insurance needs are different, it is helpful to talk with friends and neighbors about their experience with insurance companies. Ask how they decided upon an insurance carrier and if they would use the same carrier in the future.
The promise to pay — the insurance policy — is only as good as the company standing behind it. Be diligent when selecting your insurance carrier.