A.M. Best Ratings Explained

The A.M. Best Company is one of the leading insurance and financial company rating firms. The company uses a standard rating scale to provide consumers with information about the stability and long-term financial outlook of financial companies. A.M. Best’s rating scale is often one thing potential customers rely on when checking into a provider’s legitimacy.

At a glance, someone who is comparing the prices of different insurance companies can know whether they are dealing with a company that is in dire straits, is making a comeback from a financial blow, or is riding on top of the heap. Insurance companies have obligations to policyholders and the financial strength rating provides a look at the financial stability of a company so you can tell whether an insurer will be able to fulfill that financial obligation or not. A.M. Best’s rating scale

Here is the insurance rating scale used by A.M. Best Company, and what each insurance company’s ratings mean to you.

What do A.M. Best’s Letter Gradations mean?

What does it mean if an insurance carrier doesn’t have a rating?

Just because you cannot find a rating for any particular company from this rating agency, do not assume that the company is insolvent or even in poor financial health. There are many reasons why a rating may not be available, including the company is a subsidiary of a larger firm, lack of current information during the rating update, or company changes in name or ownership.

Other major rating agencies may have insight into the performance of a specific company; you can also turn to the BBB Business Profile of a particular insurance provider. This could be a good indicator of whether a provider will have the ability and financial strength to sustain its ongoing insurance operations, provide insurance coverage, and fulfilling its insurance obligations. You can look for signs of poor operating performance or financial performance.

Why do ratings change often?

Ratings for insurance have to be updated frequently in order to be kept up to date. Companies that have less than perfect ratings but which are known to be going through restructuring, selling portions of the company, or other financial transactions may be slated for a rating upgrade soon. It is not unusual for a rating to drop during a tumultuous economic season, and such temporary downgrades seldom last more than one or two rating periods.
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