Understanding Insurance Financial Ratings: A Consumer's Guide

Insurance financial ratings are an important factor to consider when you are searching for an insurance company that will meet your needs. Read the below information to find out what insurance ratings are and how to interpret them in order to find a reliable insurance company.

What are Insurance Ratings?

As a consumer, you have the right to know about any potential weaknesses that a company's structure may have. By contacting insurance companies, or using various insurance rating services, you can obtain detailed rating reports. Good insurance financial ratings are defined as "extremely strong, very strong, or strong" and commonly graded as "A+++" or "AAA" down to "A" or "B+", depending on which ratings service is giving the grade.

Normally, grades below "A", such as "B+" or "BBB" show some financial risk, however they are still safe companies. The lower grades go down to "CC" or "D", which means that there are a greater potential financial risks that the company faces. This weakness means that insurance claims are at risk of not being paid.

What to Make of the Ratings

Be aware that ratings may be paid for or removed at the request of an insurance company. This will appear as "NR" or "Not Rated". A lack of ratings may indicate that there was negative information revealed about the company. Also, contradictory information between sources could indicate that some ratings were influenced by compensation. If an "R" is shown, that means that the company is under regulatory supervision. This is a particular warning sign that there is some financial instability.