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Life Insurance Carrier Financial Ratings: What You Need to Know

What are life insurance carrier financial ratings?

Life insurance carrier financial ratings are scores given to life insurance providers that report how fiscally strong the carrier is.

An experienced life insurance producer is a guide.

The goal is to provide prospects and clients with the critical information they need to make informed choices that have long-lasting benefits.

Matching your client up with the right life insurance carrier requires you to not only know what they offer, but also grasp how financially sound the carrier appears to be.

The last thing you want to do is unintentionally put your clients at risk.

Before you close your next life insurance case, get in the know about life insurance carrier financial ratings.

Keep reading to find out what they are, why they’re important and which rating companies you can trust to provide solid data.

1. What are life insurance carrier financial ratings?

Life insurance carrier financial ratings are scores given to life insurance providers that report how fiscally strong the carrier is.

The rating is the result of examining a wide range of factors.

The rating company will look at the overall financials of the life insurance carrier, how the organization is being run, as well as outside elements such as susceptibility to unforeseen events like a pandemic, for example.

You and your client need to consider a carrier’s economic standing before they purchase coverage because the carrier has a financial obligation to your client.

Your client is depending on the viability of a carrier to pay on a claim when it’s needed. Don’t take an unnecessary risk to sell a life insurance policy without being sure the carrier is financially sound.

2. What information do carrier financial ratings provide?

Life insurance carrier financial ratings reveal how likely the carrier is to be able to endure a downturn in the economy, a rise in claims or any other economic burden that could come along.

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3. What are the financial criteria for rating life insurance carriers?

There are several factors that a rating company will take into account when determining the financial viability of a life insurance carrier.

This includes:

  • The amount of cash that’s readily available.
  • Debt is divided by assets to determine a debt ratio.
  • How diverse the revenue streams are.
  • Strategies for risk management.
  • Life insurance policy quality. For example, a rating company will want to see policies being written for low- and normal-risk individuals as opposed to a large number of high-risk cases.

It’s important to note that various rating agencies have their own specific criteria and scale for rating life insurance carriers.

The good news is that, because the companies doing the rating all have access to the same information, the results should be consistent with little variation. 

4. Who provides financial ratings for life insurance carriers?

Who rates the financials of life insurance carriers?

Life insurance carrier financial ratings are most commonly provided by companies like:

  1. A.M. Best
  2. Standard and Poor’s
  3. Moody’s
  4. Fitch

Let’s take a look at the organizations that are providing the actual life insurance carrier financial ratings.

There are quite a few but some are more popular than others. 

Here’s a list of the most common companies that monitor life insurance carrier financials:

  • A.M. Best. The highest rating that can be earned is A++. The ratings go down from there, all the way to an F.
  • Standard and Poor’s. The range goes from AAA as the highest rating and goes down to a D as the lowest.
  • Moody’s. The highest rating a carrier can receive is Aaa. The lowest is C, with a variety of levels in-between.
  • Fitch. AAA is the highest rating and the lowest possible score is a D.

Use life insurance carrier financial ratings to delight your clients

As a life insurance producer, your job is to make sure that your prospects and clients have the best information to make the choices that will benefit them the most. Now and in the future.

Understanding life insurance carrier financial ratings and being able to relay that information to your clients increases their trust in you.

That trust can turn into valuable repeat business and referrals that will help you reach your goals and help your business grow.

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