Posted on May 17, 2014
Business owners today can often feel overwhelmed by the many choices available for commercial insurance. While budget is always an important consideration, shopping only by price may not provide the appropriate level of coverage that matters to your business. When it comes to comparing the offerings of various insurance companies, one of the most important factors in determining what insurance policies are best is the carrier?s A.M. Best rating.
For over 100 years, A.M. Best has provided the general public with ratings for the financial service industry. This credit rating organization measures the strength and credit worthiness of insurance companies and then assigns a grade or rating to the company. Their evaluation process includes reviewing financial statements, reinsurance, business plans and actuarial reporting. Once the appropriate documents have been reviewed, they further analyze financial health factors such as credit, interest rates, regulations and underwriting criteria. They then use peer benchmarks to assess where on the scale each company fits within the industry as a whole.
Best ratings come in letter grades of A to F. The ideal insurance carrier will possess an A++ or A+, otherwise known as a superior rating. Those with an A or A- are considered excellent while companies with a B++ or B+ are rated good. Companies with ratings of ranging from A to B are considered by Best to be financially secure. Once companies reach the B range and below, they are considered financially vulnerable on an increasing scale. Scoring of F means the company is in liquidation.
So why is the Best rating important to your company? The necessity to place your business insurance with carriers maintaining A or better ratings is based on the fact that financially strong companies are more likely to honor the insurance contract and pay claims as promised. If they are unable to afford claims that come in, then it puts your company at risk of having to foot the bill should an accident result in significant damages from a lawsuit.
Essentially, a strong performing insurance company will be able to fulfill the promises made to your company when they offer coverage. You have a lot riding on protecting your business from potential financial devastation. It only stands to reason that choosing a superior company that will be able to handle your long term insurance agreement will give you the peace of mind and security necessary should the unexpected happen.