What do the different auto insurance ratings mean?

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Asked July 26, 2011

1 Answer


Insurance companies are rated according to their financial strength and cash flow. Companies such as A.M. Best or Standard & Poor compile company statistics based on past and current operating strategies and establish the ratings to benefit people purchase insurance policies as well as those investing in insurance holdings.

The typical rating system is similar to a student report card except that the A, B, and C ratings have different scales. For instance an AAA rating is extremely high, while AA is moderately strong and the single A rating is strong but could use some improvement. A BBB rating is moderate verging on strong where a BB rating indicates a company that may be experiencing internal or external turmoil. CCC and CC ratings are both average, one leaning towards a moderate financial footing and the other bordering on a failing grade, represented by an R rating to stand for under Regulation.

Lastly, there is an NR rating that is sometimes seen. This rating indicates that a company has requested their removal from the ratings list, or a company that is close becoming regulated. NR ratings may turn into favorable ratings when they are included in the ratings again, but investors and policy purchasers should be wary of taking out new long term insurance policies while the NR rating is in effect. While a company can ask to have their rating removed without any apparent problems or concerns, the practice is generally only used when a company rating has become unfavorable, intended to minimize losses caused by the rating itself.

Answered July 26, 2011 by Anonymous

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