Picking the Right Company

[Deborah Armstrong]

That's NOT what ratings track. Ratings track the financial stability and ability to pay claims of the given company, not a track record of paying claims.

True, I could have used a better set of words. You and I both know that it tracks financial and risk ratings and if their rating isn't good, that puts them at higher risk for the possibility of not being able to pay their claims. I never had a company not pay their claims, but we have seen companies be slow to pay claims and this comes from companies with low ratings. This is why it is important to go with companies that have high ratings. You want to know that they have strong financial stability and can pay their claims timely for your clients or you are going to lose clients.

 

[PrivClientSG]

True, I could have used a better set of words. You and I both know that it tracks financial and risk ratings and if their rating isn't good, that puts them at higher risk for the possibility of not being able to pay their claims. I never had a company not pay their claims, but we have seen companies be slow to pay claims and this comes from companies with low ratings. This is why it is important to go with companies that have high ratings. You want to know that they have strong financial stability and can pay their claims timely for your clients or you are going to lose clients.

A higher risk for the possibility of not being able to pay their claims? The companies you have experienced slow to pay claims -- and that comes from low ratings -- what do you attribute that to? Do you believe it had to do with them having "difficulty" paying their claims? Thanks.

 

[DHK]

but we have seen companies be slow to pay claims and this comes from companies with low ratings.

Please cite examples. Ratings has nothing to do with the timeliness of paying claims.

Contestability is the legal right of companies to investigate whether or not to pay a claim. Investigating the potential for fraud is another legal right of companies and they won't pay a claim until the investigation is complete.

None of that has to do with financial ratings.

 

[Deborah Armstrong]

A higher risk for the possibility of not being able to pay their claims? The companies you have experienced slow to pay claims -- and that comes from low ratings -- what do you attribute that to? Do you believe it had to do with them having "difficulty" paying their claims? Thanks.

Actually no, as insurance agents we have E & O in case we have an error or omission. Insurance companies have to pay into a "guaranty association" if they aren't financially stable enough to pay their claims.

Insurance companies are insured if they can't pay the claims. This is a worst-case scenario. It has been put in place to protect policy holders.

If the insurance company isn't financially stable enough to pay its claims, the state commissioner will put the insurance company into receivership. If the insurance company isn't considered solvent then the insurers policies could be transferred to another insurance company.

AIG had issues during the 2008 recession but got rescued by the federal government.
Merced had A- rating and still went out of business. Even with a good rating like that, there is no positive guarantee the insurance company won't go under. Nothing is failsafe but going with a higher rated company cuts the financial risks.

 

[Newby]

True, I could have used a better set of words. You and I both know that it tracks financial and risk ratings and if their rating isn't good, that puts them at higher risk for the possibility of not being able to pay their claims. I never had a company not pay their claims, but we have seen companies be slow to pay claims and this comes from companies with low ratings. This is why it is important to go with companies that have high ratings. You want to know that they have strong financial stability and can pay their claims timely for your clients or you are going to lose clients.

As a funeral Director that has been involved with thousands of claims over the last 25 years with every company you have ever heard of and many you haven’t, I have to say you have been fed some completely bogus information.

The #1 fastest paying company there is has to be Homesteaders Life. They have been B-Rated most of those years. I’m not sure if they’ve climbed up to A in more recent years. I don’t pay much attention to financial ratings.

Do you think New York Life, State Farm, Guardian, Lafayette, Mass Mutual are the fastest payers? You would be wrong on that unless you have some secret data that I’ve never seen.

 

[Deborah Armstrong]

As a funeral Director that has been involved with thousands of claims over the last 25 years with every company you have ever heard of and many you haven’t, I have to say you have been fed some completely bogus information.

The #1 fastest paying company there is has to be Homesteaders Life. They have been B-Rated most of those years. I’m not sure if they’ve climbed up to A in more recent years. I don’t pay much attention to financial ratings.

Do you think New York Life, State Farm, Guardian, Lafayette, Mass Mutual are the fastest payers? You would be wrong on that unless you have some secret data that I’ve never seen.

I am saying the better the rating the more likely they are in a better position to pay. On the other hand, to make your point, the 2008 recession exposed lots of highly rated insurance companies for not being as financially stable as the rating suggested. Unfortunately, that is the best measure that we have. We are at the mercy of the rating companies.

 

[Tahoe Ray]

As a funeral Director that has been involved with thousands of claims over the last 25 years with every company you have ever heard of and many you haven’t, I have to say you have been fed some completely bogus information.

The #1 fastest paying company there is has to be Homesteaders Life. They have been B-Rated most of those years. I’m not sure if they’ve climbed up to A in more recent years. I don’t pay much attention to financial ratings.

Do you think New York Life, State Farm, Guardian, Lafayette, Mass Mutual are the fastest payers? You would be wrong on that unless you have some secret data that I’ve never seen.

NYL pays claims almost instantly for what it's worth but I agree with everything here.

The best measure is the real-world experience of actually processing a lot of claims. And even that can change as company philosophies, employees, management etc. change.

 

[DHK]

AIG had issues during the 2008 recession but got rescued by the federal government.

AIG was the parent company of AIG SunAmerica. AIG SunAmerica and other insurance subsidiaries had no issues. (Not that it helps the AIG brand...)

 

[DHK]

I am saying the better the rating the more likely they are in a better position to pay. On the other hand, to make your point, the 2008 recession exposed lots of highly rated insurance companies for not being as financially stable as the rating suggested. Unfortunately, that is the best measure that we have. We are at the mercy of the rating companies.

No... the 2008 recession downgraded the United States credit rating and as a result, the insurance industry, whose policies are based on the same currency as the country they are domiciled in... also took a ratings hit. You can't have a greater credit rating than the government you are domiciled in.

So yes, the vast majority of companies took a ratings hit, but not because of their inability to pay. It was a ripple effect of the US Government's credit rating taking a hit.

Quoting Van Mueller, 2017:
"If the government of the United States fails... State Farm WON'T!"

 

[DHK]

I am saying the better the rating the more likely they are in a better position to pay.

Ever read the ratings definitions? You're unintentionally misrepresenting what ratings means to consumers.

A.M. Best:
https://www.ambest.com/ratings/guid...3.1521050614.1684878878-1873331206.1684878878

"A Best's Financial Strength Rating (FSR) is an independent opinion of an insurer's financial strength and ability to meet its ongoing insurance policy and contract obligations.

[...]

An FSR is not assigned to specific insurance policies or contracts and does not address any other risk, including, but not limited to, an insurer's claims-payment policies or procedures; the ability of the insurer to dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. An FSR is not a recommendation to purchase, hold or terminate any insurance policy, contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser. In addition, an FSR may be displayed with a rating identifier, modifier or affiliation code that denotes a unique aspect of the opinion."