If you work in a call center or an MGA, you probably have that ominous posted note somewhere on your desk or computer screen with a letter written on it – ie: ‘A’. If anyone without an insurance background were to sit down at your desk, that would be the first thing they would throw away, right?
That information is there because of once every month or so, we get the call from the astute insured who wants to know what our AM Best rating is currently. They want you to know this off the top of your head. Since most of us are there to answer coverage questions or discuss claim resolutions, here are three reasons why AM Best is so important.
AM Best was founded in 1899 to report on the financial strength of insurance companies. They are reporting on companies worldwide – not just the US. No one wants to hand a ton of money in premium to a company who cannot function financially.
It should be important that the insurance company has the proper amount of funds and reserves on hand to pay a claim. Since many of them take any leftover margin and invest it into the stock market, back in 2008 -2009 when the stock market crashed, a good portion of those rating scales dropped from ‘A’ to ‘A-‘ or ‘B+’.
Getting the Benefits
Now that the ‘Fed’ has increased the rate, those letters should be picking up again; which in turn should mean a company with a high rating like ‘A’ or ‘A+’ would be benefiting from the best premiums.
Trust in the Company
Even though the majority of customers value premium amount and service when considering an insurance company; AM Best highlights what matters the most – claims service and payout.
The higher the rating the more likely the company will be in business when claim paid. If AM Best has been advising of a low grade it is a precursor to a company becoming. No one wants claims and coverage to be in jeopardy. If the AM Best rating is ‘A’ or ‘A+’ then the claims reserves and payout should be top notch.