What is an AM Best rating and why should I care?

I promised I would fill you in on what an AM Best rating is and why you should care.

AM Best is an independent (i.e. not owned in any way by any insurance companies) organization that rates the financial strength of insurance companies and their ability to pay their policyholders what they promised them. It's been around since 1899 so it's had lots of practise at analysing insurance companies and most insurance companies care about their ratings very personally.

The top ratings indicate "secure" companies:

  • A++, A+ are considered superior,
  • A and A- are excellent, and
  • B++ and B+ are very good

Anything below that (B, B-, C, D, etc.) is considered "vulnerable", which is a polite way of saying that the insurance company's promises to their policyholders are at risk to some degree. The higher the letter in the alphabet, the higher the risk.

The holy grail is to get an A rating and while a B++ and B+ is still listed as being secure, some potential marketing companies we have talked with have told us that they would never partner with an insurance company with less than an A rating.

You should care because the security of your money is based on a promise and this rating indicates how likely that promise is to come true. Buyer beware!

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