What Is an A-Rated Insurance Company and Why Does It Matter?
If you are like most insurance consumers, you may have heard the phrase, “A-rated insurance company” and wondered what all the fuss was about. Exactly what is an “A” rated insurance company and why does it even matter?
What Is an “A” Rated Insurance Company?
Generally, an “A” rated insurance company is considered one that performs at the top of its industry in creditworthiness (the ability repay creditors and pay any claims presented) as well as how it performs financially when compared to its peers. Of the major rating organizations, many give ratings ranging from “A” or above to a “C” or “D” rating (C or D ratings are considered very weak.)
Who Needs an “A” Rated Insurance Company?
The stronger the financial strength rating of an insurance company, the more likely it is that it will not experience financial failure and perhaps even close its doors. You need a company you can depend on to be around when it is most needed. For certain contractors, they are unable to complete a job unless they can show they have insurance coverage through an “A” rated carrier as a contractual requirement.
All “A” Ratings Are Not the Same
Insurance companies receive their financial strength ratings from insurance rating organizations which carefully analyze and evaluate a company’s financial performance both past, present and future. Some of the key factors used to determine an insurance company’s rating include financial reserves, claims payment history, business focus, and the company structure and management style. Each insurance rating organization uses its own formula for determining the varying degrees of financial strength ratings and their significance.
As you may have already suspected, all “A” ratings are not made equal when it comes to insurance companies. In fact, depending upon which rating company you look at, there could be several different degrees of “A” ratings, all with slightly different meanings. You can examine the ratings in more detail and each definition on the website of each Insurance Rating Organization:
This list is by no means meant to be complete and there are many more highly rated homeowners insurance carriers than those listed below. However, if you are on the hunt for the best value on an insurance policy, here are some of the top “A” rated or better insurance companies that may be worth checking out:
AIG: A.M. Best: “A” rating; Fitch: “A” rating; Moody’s: “A2 rating; “Standard & Poor’s: “A+” rating. AIG writes life insurance, accident and health insurance, mortgage insurance, travel insurance, and several other property and casualty insurance products.
GEICO: A.M. Best: “A++” rating; Standard & Poor’s: “AA+” rating. GEICO writes vehicle, property and business insurance as well as the additional insurance products of umbrella, life, travel, overseas, identity protection, pet, and jewelry insurance.
Progressive: A.M. Best: “A+” rating; Standard & Poor’s: “AA” rating; Fitch “AA” rating. Progressive writes personal and commercial lines of insurance including auto, motorcycle, homeowners, renters, life, health, commercial auto, and boat insurance.
Travelers: A.M. Best: “A” rating or above for all Travelers companies; Fitch “AA”; Moody’s: “Aa2”; Standard & Poor’s: “AA.” Travelers writes several lines including the following: personal insurance, auto, homeowner, condo, renters, flood, boat & yacht, umbrella, wedding & private events, identity fraud protection, and valuable items coverage. Business and special risk insurance: business owner’s policy, boiler & machinery, environmental liability insurance, excess casualty, global products, Indian Nations, inland marine, national property, ocean marine, commercial auto, umbrella, and workers compensation.
USAA: USAA provides insurance to service members of the U.S. military. A.M. Best rates USAA as an “A++” Superior. USAA writes motorcycle, auto, homeowners, life and health insurance and also provides banking and investment services.
The Hartford: A.M. Best: “A” ; Fitch: "A+"; Moody’s: "A2"; Standard & Poor’s: "A". The Hartford offers insurance and financial products to both businesses and individuals including: auto insurance (for individuals and special coverage for retirees through AARP), business owners policy, workers compensation, group life disability, commercial auto, commercial flood, commercial property, data breach protection, fleet insurance, general liability, global insurance, surety & fidelity bonds, marine insurance, homeowners insurance, college savings plans, employee benefits, employee retirement plans, life insurance mutual funds, and a safe haven program.
MetLife: A.M. Best: "A+" Superior; Moody’s Investor Service: "Aa3" (High Quality with Very Low Credit Risk); Standard & Poor’s (S&P): "AA-" (S&P’s Second Highest Rating). MetLife offers life insurance products, dental, disability, annuities, auto, and home insurance. In addition, it provides financial products including retirement planning, mortgage services, and wealth management services.
Farm Bureau: All Farm Bureau companies receive an A (Excellent) rating from A.M. Best. Farm Bureau offers auto, property, and life insurance in addition to investment and financial services. Property and casualty insurance products are available in AZ, IA, KS, MN, NE, NM, SD, and UT. Life insurance and annuity products are available in AZ, IA, ID, KS, MN, MT, ND, NE, NM, OK, SD, UT, WI, and WY.
State Farm: A.M. Best: A++ (Superior) rating; Standard & Poor’s: AA rating. State Farm offers homeowner's insurance, renters insurance, condo insurance, motorcycle insurance, life insurance, and banking and financial services through its agents across the United States.
The Hanover: A.M. Best: “A” Excellent; S&P: “A-“; Moody’s: A3. The Hanover offers commercial, specialty, and personal insurance products including: general liability, business owner’s policy, property, commercial auto, umbrella, workers compensation, marine, professional liability, management liability, surety, commercial umbrella and excess, industrial property risk, healthcare, auto, homeowners, watercraft, valuable personal items, identify theft insurance, and dwelling/fire insurance.
Erie Insurance: Eric Insurance is an “A+” Superior rated company by A.M. Best. It offers auto, homeowners, property & liability, life, and business insurance. It also provides retirement savings plan and annuities. Erie Insurance is available in DC, IL, IN, MD, NY, NC, OH, PA, TN, VA, WV, and WI.
American Family Insurance: American Family Insurance has an “A” Excellent rating with A.M. Best. It offers car, home, life, business, farm/ranch, and renters insurance in 19 states.
Amica Mutual Insurance: Amica Mutual Insurance is rated “A++” Superior through A.M. Best. It offers auto, homeowners, personal liability, and life insurance throughout the United States.
Nationwide: A.M. Best “A+” Superior; Moody’s: “A1”; Standard & Poor’s: “A+.” Nationwide writes auto, boat, motorcycle, homeowners, renters, life, group medical, business, pet, and farm insurance throughout the U.S.
Liberty Mutual: A.M. Best: “A” Excellent; Standard & Poor’s: “A” Strong; Moody’s: “A2” Good. Insurance products offered through Liberty Mutual include homeowners, auto, motorcycle, commercial, and group disability.
What It All Means to You
An “A” or better rating for an insurance company is important to you as the insurance consumer because it helps you judge which companies perform best in the area of creditworthiness and which ones will be around when you need them in uncertain and trying times. Of course, while an excellent financial strength rating is an important factor in determining which insurance company may be right for you, there are also other factors to take into consideration such as customer service, best value for the price, and overall customer satisfaction.
There are several organizations in addition to insurance rating organizations that can help you get an overall picture of an insurance company’s performance including Ward’s Top 50 property-casualty insurance companies, the Comdex Ranking, J.D. Power & Associates, and the Better Business Bureau. The more tools you have, the better equipped you are to find the right insurance coverage for you and your family.