Financial Ratings of Insurance Carriers in Houston, TX
Certain companies and credit agencies monitor the financial health of insurance providers and make their ratings public so organizations seeking insurance can choose a stable insurer. It's essential to consider a carrier's financial rating before you purchase coverage. Insurance ratings help indicate an insurer's ability to pay claims, even when faced with multiple high-dollar claims.
What Are Insurance Carrier Ratings?
An insurance carrier rating has much in common with a credit score. It provides a snapshot of the company's financial strength to show whether it is responsibly managed and financially stable.
Every insurer has a financial rating, and the criteria differ according to the type of insurance they provide. For example, a health insurance company's rating may decrease during a worldwide pandemic when the organization is under financial strain due to an abnormally high number of claims. An insurance company that primarily provides coverage for property and homes may experience a decreased rating after a significant natural disaster that triggers thousands of high-dollar claims, such as a hurricane or wildfire.
Insurance companies have a financial obligation to pay covered claims promptly according to your insurance contract. Their rating helps indicate the likelihood that they'll be able to help cover your claim efficiently.
What Companies Provide Insurance Carrier Ratings?
Multiple companies monitor insurance carriers' financial stability and strength. Familiar insurance rating companies include Standard & Poor's, Demotech, A.M Best and Moody's.
A.M. Best is an insurance-specific rating agency commonly used by major insurance companies. Moody's and Standard & Poor's rate nearly every type of business and do not specialize in rating insurance companies.
What May Affect an Insurance Company's Rating?
Insurance company financial ratings use numerous criteria to evaluate and grade insurers' financial strength. Their ratings help provide critical information about the following:
- The company's current financial situation, including how much cash they have in their reserves
- Whether the company has recently returned a profit
- The insurer's ability to potentially pay claims even as the economy struggles
- The insurer's ability to pay an increased number of claims after a widespread natural disaster or health crisis
Common insurance rating criteria for an individual insurer may include:
- Cash on hand
- Risk management protocols
- Diversity of revenue streams
- Debt ratio (debt divided by financial assets)
- Whether the company writes insurance for primarily high-risk organizations and individuals
Each rating agency uses a proprietary methodology and its own rating scale. Ratings may vary among insurers, so it's essential to ask your agent to help you determine whether a carrier has acceptable ratings from multiple agencies.
Contact Us Today
Our agents are ready to assist with tailoring an insurance package to meet your organization's needs. Contact E&O Insurance Agency today for help choosing an insurer with excellent ratings.