January 28, 2016 article updated September 29, 2021
Having a strong insurance partner has become even more apparent in the last couple of years in the wake of COVID-19 as many organizations, especially in the healthcare industry, faced unprecedented times. Being able to turn to your local insurance broker with questions as new situations arose – such as safety protocols to implement for employee and patient safety and various exposures that may potentially exist – was and is critical. Equally important is knowing that your insurance carrier is financially strong and resilient to weather difficult times and to continue to provide you with coverage for the long term.
Determining which carriers are financially stable
In going to market to place an account, insurance brokers look at how carriers are rated. A.M. Best Company, founded more than 120 years ago and highly regarded as providing a benchmark for assessing the financial stability and credit worthiness of insurers and the insurance industry, provides ratings for more than 3,500 companies in more than 80 countries. In assessing an insurance company’s financial strength, A.M Best completes a comprehensive quantitative and qualitative review of its financial statements, reinsurance, business plans and actuarial reporting. Once the appropriate documents have been reviewed, the rating agency analyzes financial health factors such as credit, interest rates, regulations, and underwriting criteria. It then uses peer benchmarks to assess where on the scale each company fits within the industry as a whole.
A carrier is graded alphabetically between “A++” and “S”. “A+” to “A++” indicates, for example, that a company has, in A.M. Best’s opinion, a superior ability to meet its ongoing insurance obligations, while a “D” rating indicates that the carrier has a poor ability to meet its ongoing insurance obligations. In fact, an insurer with an alphabetical rating of “B” or less is considered by A.M. Best to be vulnerable to economic conditions and underwriting changes.
The rating system also includes a numeric symbol which designates the carrier’s financial size category. This provides an indicator of the size of a company based on the carrier’s reported policyholder surplus, reserves, other investment and operating contingency funds and miscellaneous voluntary reserves reported as liabilities. A roman numeral is assigned to each company, anywhere from roman number I (less than $1 million) to XV (greater than $2 million).
Why an insurer’s financial rating is important to you?
An insurance company’s rating of “A”, “A+” or “A++” provides both you and your broker with the confidence and peace of mind that the program and carrier underwriting your insurance will meet its contractual obligations and pay claims as promised. It’s important to note that A.M. Best provides rating for both admitted (state-approved) and non-admitted (non-state-approved) companies. Often admitted companies are generalists and don’t particularly write a specific niche market, like home healthcare, or may not have developed an industry-specific insurance program tailored to the niche. Non-admitted or Excess & Surplus Lines carriers provide specialty programs, are committed to the niche, and may offer a more favorable solution than placing coverage with an admitted carrier.
Third-party contracts with other facilities and vendors may require a rating of “A” or better as part of conducting business with you. Your state licensing authority or franchise agreement (where applicable) may also mandate coverage with “A” rated or better insurance programs and carriers, so always be sure to ask your local agent or broker for this information when purchasing any type of insurance coverage.
Insurance company solvency is important to evaluate when deciding how to best protect your organization. Your local agent or broker is responsible for helping you to select a financially stable insurance program and carrier.
Manchester Specialty Programs is proud to partner with a select group of “A++” and “A” rated or better financially sound insurance carriers to cover the insurance needs for Home Care, Allied Health and Human/Social Services organizations. For more information about our portfolio of business insurance solutions for the broad spectrum of home health care, hospice, and medical staffing organizations, please contact us at 855.972.9399. We work exclusively with local brokers and would be happy to tell you more about our products and the company we keep.