Using Auto Insurance Ratings to Select an Auto Insurance Company
Auto insurance ratings should be vitally important to you, when you are considering changing your current insurer. By virtue of the business itself, it stands to reason that any company that is in the business to reimburse others for losses may be destined for failure. For example, in the event of a cataclysmic natural disaster, insurance companies may have more claims than earnings, and be forced to go out of business. It doesn’t happen often, thanks to stringent state insurance regulators, but it does happen.
You can protect yourself by doing a little homework. There are several national institutions that do little else, except rate insurance companies. You may have even heard of a few of them, such as Standard & Poor’s, A.M. Best and Moody’s, but there are others, as well, and you can get all of the information you need online, courtesy of the World Wide Web.
Insurance companies are rated with letter grades, just as a student’s geography test might be: A+ is the best mark you can get, and it goes down from there. For the most part, insurance company ratings will vary very little from one insurance rater to the next. In general, you should never consider using an insurance company with a rating below a B+; they are much too risky.
Here’s what the rankings mean:
AAA: The Insurer is considered to have exceptionally strong security traits put in place to safeguard its finances; financial difficulties are unlikely, in most any economic climate.
AA: The Insurer is considered to have very strong security characteristics put in place to safeguard its finances; financial difficulties are unlikely, in most any economic climate. Close in ranking to AAA, with little variation.
A: The Insurer is considered to have strong security characteristics put in place to safeguard its finances; may be adversely affected under certain business and economic conditions.
B+ or BBB: The Insurer is considered to have good financial security traits, but may be adversely affected under certain business and economic conditions.
Bear in mind, these ratings are not based on customer service ratings, hours, staff or pricing, and they have no bearing on the outcome. The only thing that these ratings show, and it’s really the most important factor, is whether or not the insurance company has the financial resources and safeguards put into place to pay out claims or benefits. These auto insurance ratings are an analysis of an insurer’s financial strength, given a range of risk factors, which could adversely affect the company's ability to operate over the long term. Over the past few decades, many insurance companies failed as a result of inadequate financial strength, competition and lack of adaptability in the market.