Ever since two of the nation's largest insurers -- Mutual Benefit Life and Executive Life -- collapsed in the early 1990s (along with several
smaller companies), it's been clear that no one should take an insurance company's health
for granted.
The professional rating agencies, whose job it is to judge
the financial soundness of insurance companies and make the results public, have attempted
to toughen their standards and they remain, for better or worse, the best defense
consumers have against being stung. Before you buy any policy, but particularly whole
life, check the health of the issuing company by learning how it is graded by major rating
agencies.
Making sense of the ratings
You can get insurance-company ratings in libraries, from
agents or directly from the rating agencies. They're easy to get, but
not so easy to decipher.
To illustrate: An A+ is the second highest grade from A.M.
Best, but fifth from the top on Standard & Poor's and Duff & Phelps's scales.
Moody's Investor Service's fifth-best rating is A1.
No high rating will ensure safety for years down the road.
But to find companies in good health today, limit yourself to insurers that rate an A++ or
A+ from Best, a B or above from Weiss, or at least an AA from S&P, Moody's or Duff
& Phelps.
The table below lists the various ratings and what they mean.
A.M. Best
Duff & Phelps
Moody's
Standard & Poors
Weiss Research
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(800) 289–9222
A++, A+ Superior
A, A- Excellent
B++, B+ Very Good
B, B- Good
C++, C+ Fair
C, C- Marginal
D Below minimum standards
E Under state supervision
F Liquidating
AAA Highest
AA+, AA, AA- Very high
A+, A, A- High
BBB+, BBB, BBB- Below average
BB+, BB, BB- Uncertain
B+, B, B- Possessing risk
CCC Substantial risk
DD Company is under an order of liquidation
Aaa Exceptional
Aa1, Aa2, Aa3 Excellent
A1, A2, A3 Good
Baa1, Baa2, Baa3 Adequate
Ba1, Ba2, Ba3 Questionable
B1, B2, B3 Poor
Caa Very poor
Ca Extremely poor
C Lowest
AAA Superior
AA+, AA, AA- Excellent
A+, A, A- Good
BBB+, BBB, BBB- Adequate
BB+, BB, BB- May be adequate
B+, B, B- Vulnerable
CCC Extremely Vulerable
A+, A, A- Excellent
B+, B, B- Good
C+, C, C- Fair
D+, D, D- Weak
E+, E, E- Very weak
F Failed
A.M. Best's annual compilation of ratings and commentary, Best's Insurance
Reports, is available in many libraries. You can also check Best's Web site.
You can get individual ratings of claims-paying ability at no cost from Standard & Poors.
Or check Moody's for its credit ratings of insurance companies.
An individual rating from Weiss by phone costs $15, charged to your credit card.
A one-page report on a company costs $25, or three for $55. You may get more
information at the company's Web site.
IN THIS TUTORIAL
Rating the Company
