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What is Life Insurance rating?

Life insurance rating or alternately called as Insurance Company rating is a method through which authorized and experienced financial agencies evaluate the financial strength of the insurance companies. There are several financial aspects of every company that can determine their overall “health” and standing in the industry.

What is Life Insurance rating?Some of the key aspects that life insurance rating companies use are – profit and loss statements, turnover, revenues, percentage increase in revenues, percentage increase in market share, historical performance records and comparisons, investments of the companies, asset base, etc.

All these parameters directly or indirectly influence the financial strength of the organizations and the life Insurance rating companies apply their own patented algorithmic calculations to determine the overall “rating” of the company. This method of calculation, type of rating and even the actual standings can vary for each rating agency and so, there is considerable debate in the market about their veracity or accuracy.

In spite of this ambiguity, the entire industry depends upon the life insurance rating provided by these agencies. Note that dental insurance would normally fall under this as well. There are numerous rating agencies in the world and the most credible amongst them are Weiss, S&P, AM Best, etc. These agencies have their own rating charts. All said and done, the life insurance rating companies are only able to provide the financial performance of the insurance companies and the performance of each plan/policy offered by the companies in the market. They only reflect the monetary strength of the company and not the actual feature wise comparison or strength of the individual life insurance plans. There is no denying the fact that life insurance rating is one of the most important aspects that can determine the popularity of the insurance company. But if people actually want to find out about the details and features of insurance plans before taking part in them, they will have to make additional comparisons.

Claims policy: Every insurance company will have a claims policy, terms for settlement and procedural guidelines for completion of claims. These aspects are actually not noted or analyzed by the rating agencies – they just scrutinize the amount that was paid out as claims. People will actually need to scrutinize the claims policy to determine if the insurance company is customer friendly or not. Many companies may have top class financial statuses and market shares but when it comes to claims and settlements, they pose too many road blocks on people who are seeking a claim. Those are the companies to avoid.

Current popularity: Life insurance rating will only offer an overall analysis of the performance of all insurance plans of the companies. They do not offer individual plan performance. So, there is always a possibility of a successful insurance plan to be inferior feature and benefit wise when compared to another plan from a different company. So, people will also need to find out details about the current performance of each plan that they intend to participate in. Life insurance rating is just an indicative factor and by no means is it a yard stick to determine the best insurance policies of the companies.

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