In selecting a comprehensive insurance program for your health care organization, working with a local broker who partners with a firm that understands your industry, the exposures you face and how to address them, and can look ahead at emerging trends and the way in which they may impact your bottom line is critical. Equally important is that your insurance program is underwritten with financially sound, top-tier insurers also committed to the long-term success of your organization and industry.
How do you know if an insurance company is financially stable?
Insurance professionals utilize Best’s Financial Strength Ratings to support their carrier selection for the coverages and programs they are looking to secure. These ratings are provided by A.M. Best Company, a firm founded nearly 120 years ago and highly regarded as providing a benchmark for assessing the financial stability and credit worthiness of insurers and the insurance industry. Ratings are issued on more than 3,500 companies in more than 80 countries.
In providing its carrier ratings, A.M. Best completes a comprehensive quantitative and qualitative review of a carrier’s financial statements, reinsurance, business plans and actuarial reporting. Once the appropriate documents have been reviewed, it analyzes financial health factors such as credit, interest rates, regulations and underwriting criteria. It then uses peer benchmarks to assess where on the scale each company fits within the industry as a whole.
Best’s Financial Strength Ratings are represented in two ways. First, a carrier is graded alphabetically between “A++” and “S”. “A+” to “A++” indicates, for example, that a company has, in A.M. Best’s opinion, a superior ability to meet its ongoing insurance obligations, while a “D” rating indicates that the carrier has a poor ability to meet its ongoing insurance obligations. In fact, an insurer with an alphabetical rating of “B” or less is considered by A.M. Best to be vulnerable to economic conditions and underwriting changes.
The second symbol in the rating system is numeric and designates the carrier’s financial size category. This provides an indicator of the size of a company based on the carrier’s reported policyholder surplus, reserves, other investment and operating contingency funds and miscellaneous voluntary reserves reported as liabilities. A roman numeral is assigned to each company, anywhere from roman number I (less than $1 million) to XV (greater than $2 million).
What does this all mean to you and why is it important?
An insurance company’s rating of “A”, “A+” or “A++” will give you and your local insurance broker the confidence that the program and carrier underwriting your insurance will honor your insurance contract and pay claims as promised. Your local insurance broker, in going to the marketplace to secure coverage on your behalf, will determine the financially strong programs and carriers available to your organization, and whether they are the best fit for you.
Often a contract with another facility may require a rating of “A” or better as part of their requirements. Your state licensing authority or franchise agreement (where applicable) may also mandate coverage with “A” rated or better insurance programs and carriers, so always be sure to ask your local agent or broker for this information when purchasing any type of insurance coverage.
Insurance company solvency is important to evaluate when selecting a carrier, and is part of the overall ratings evaluation process. Your local agent or broker is responsible for helping you to select a financially stable insurance program and carrier. State guaranty funds (a sort of “backup” for insurance companies in the event of insolvencies) are often not adequate, or do not pay claims in a timely manner.
Manchester Specialty Programs is proud to partner with a select group of “A++” and “A” rated or better financially sound insurance carriers to cover our clients’ insurance needs. For more information about our portfolio of business insurance solutions for the broad spectrum of home health care, hospice and medical staffing organizations, please contact us at 855.972.9399. We work exclusively with local brokers and would be happy to tell you more about our products and the company we keep.