Posted by Apply with usAmerican Life InsuranceWhen it comes to insurance policy products, what should be used to judge whether an insurance company is "good"?We also often see that after the name of an insurance company, there is one or more letters "A"or"B", what does this mean? On the American Life Insurance Guide websiteinsurGuru©️Life Insurance AcademyHere, we will introduce the authoritative "ruler" of insurance company credit ratings to help policyholders gauge the strength of insurance companies.
Authoritative organization for ranking and rating of insurance companies
Credit ratings have a history of one hundred years in the world, but the credit ratings of insurance companies based on bonds and stocks have just begun for more than 30 years.For American Life Insurance Company, there are mainly four major rating agencies that conduct comprehensive ratings. They are:
- Bayes (AM Best Company)
- S&P Global
- Fitch Ratings
- Moody's Investors Service
Standard & Poor's, Fitch and Moody's are the three most authoritative professional credit rating agencies in the world. They are mainly positioned in the commercial field. In addition to the insurance industry, they also involve a wide range of government or private corporate bond instrument credit ratings.
AM BestIt is the only institution that focuses on the credit rating of the insurance industry.It was established in 1899 and is a nationally recognized statistical rating agency (NRSRO) designated by the U.S. Securities and Exchange Commission (SEC) and the National Association of Insurance Commissioners (National Association of Insurance Commissioners).therefore,AM BestIs our evaluation of a "Is the American insurance company good?"The core ruler.
Why do insurance companies want to rate?
Ask professional rating agencies to rate insurance companies, which are usually expensive. So why do so many insurance companies take the initiative to rate?
Credit rating is the "business card" of insurance companies
Insurance company credit ratingIt is an independent third party that uses its own technical advantages and professional experience to evaluate insurance companies, reduces the information asymmetry between insurance companies and policyholders, and enables policyholders to pay for the insurance company’s capital, assets and liabilities, and solvency. , Profits, expenses, non-performing assets, etc. have a full understanding.
Insurance company credit ratingIt is the "identity card" of enterprises in market economic activities.A good third-party credit rating can enhance the image of an enterprise and increase its competitiveness. It is the "golden card" of an enterprise in market economic activities, which can enhance consumer confidence and increase purchases.
Insurance company credit ratingIt is the basis for guaranteeing the normal competition and financing of insurance companies. For a company without a credit rating to refer to, there must be relatively high information asymmetry outside, which makes it relatively difficult for the company to raise funds.On the contrary, companies with high credit ratings are easier to obtain the support of financial institutions, gain the trust of investors, and can expand the scale of financing and reduce financing costs.
So, for American life insurance policyholders, how to interpret the ratings given by rating agenciesComprehensive evaluation and ranking of insurance companiesWhat?
What are the benefits of understanding credit ratings for us?
When contacting the documentation of insurance companies or policy products, we often see that after an insurance company’s name, there is one or more letters "A"or"B", such as A, A+, AA-, etc., which represent the credit rating of an insurance company. Understanding the meaning of these letters can help us initially understand the strength of an insurance company.
The ratings of insurance companies use the letters ABCD to indicate the level of credit rating. The higher the rating, the stronger the solvency of the company and the lower the risk.The letters and symbols used by each institution are slightly different. The American Life Insurance Guide website recommends the Bayesian rating, which is a professional measure of the financial strength of financial insurance institutions.We also combined the evaluation systems of the other three companies, drew the following chart, and performed a simple benchmarking to help policyholders understand and interpret.
From the chart, we can see that the rating agency also uses the "+" and "-" symbols to modify a rating range up and down.
Conclusion
Once we have this "ruler", we can quickly identify the strength and financial strength of an "unheard of" financial insurance company.At the same time, we can visitAmerican Life Insurance GuideOfInsurance company reviewsPage, compare and understand the ratings of different insurance companies.
Reference appendix:
01. "Understanding Best's Credit Ratings – AM Best", 01.02.2019, AM Best, http://www.ambest.com/ratings/ubcr.pdf
