Last month, the blog Evolution of Wealth featured a fascinating post on the sometimes-difficult task of comparing life and health insurance company ratings from among four major ratings agencies – A.M. Best, Standard & Poor's, Moody's, and Fitch.
This is a concern I hear pop up from time to time. When deciding to pick up a carrier, you'll likely see their ratings proudly displayed on their site and in press material. But when the criteria differ so widely among agencies, what do these letters and numbers and symbols actually tell you? If a company is A+ with A.M. Best, it's the second-best according to A.M. Best – but if it's an A+ with S&P or Fitch … well, that's something completely different, now.
Past Agent Media studies show that producers are very concerned with the ratings and financial stability displayed by their insurance companies. (Agent Media is the publisher of the Agent's Sales Journal.) In our 2010 Annuity Market Study – the full results of which will be released in April 2010 – financial stability and reputation ranked second among the criteria producers use to determine which carrier is right for them, with 90 percent saying it was an absolute must-have.
In our 2009 Employee Benefits Market Study, "high company ratings" ranked third in importance, with 62 percent naming it as an absolute must-have. In the 2009 Life Market and Health Market studies, high ratings also ranked second – 61 percent in the life market and 55 percent in the health market.
In 1994, the U.S. Government Accountability Office released their report, "Insurance Ratings: Comparison of Private Agency Ratings for Life/Health Insurers." That report compared the ratings of five major agencies – A.M. Best, Duff & Phelps, Moody's, Standard and Poor's, and Weiss research – between August 1989 and June 1992 and found that ratings couldn't be easily compared, different agencies placed a different emphasis on the judgment of analysts, and some agencies are more stringent than others – yet ultimately, the agencies tended to agree on whether an insurer was secure or vulnerable.
