Recently, a couple that I’ve known for some time invited my fiancé and I to join them for a double date. We planned to have dinner, play board games, and have some wine. My fiancé and I had been looking forward to the date and had high expectations for the evening.

What we didn’t know was that our friends’ relationship had been spiraling downhill during the weeks leading up to our double date. The gal had been laid off from her high paying job and money issues had caused a rift between the couple. Despite their best intentions for the evening, their personal issues affected the way they interacted with each other and with my fiancé and I throughout the evening and we became collateral damage of their struggling relationship.

The lesson? Often times, the quality of our interactions with others hinges on how stable our own life is at that moment.

Stability is not only important in relationships, but it is also crucial to business. A company at war with itself will struggle to provide excellent service to its customers.

In a way, insurance companies are similar to a romantic relationship. Their struggles can also take a toll on their interactions with others – in the case of insurance companies the people who are affected are their customers.

In many relationships, stability is undermined by an inability to adapt to change.

For insurance providers, the ability to evolve and adapt is an important component of achieving lasting success. Their odds of success are significantly limited by their inability to keep pace with change. And like relationships, good times in the past are no guarantee that the future will be just as bright.

Insurance providers operate in what is an extremely volatile business. That’s why I highly recommend researching and confirming that your future insurance provider is stable before committing to a long-term relationship.

How to Evaluate an Insurance Provider’s Stability

Stability is a broad term that can mean many different things, especially when talking about the insurance industry, so I’m going to try to boil the term down to brass tacks.

There are two things I look for when evaluating an insurance company’s stability:

1.  Their financial strength

2.  The stability of their insurance premiums

Note: This is the second article in a three-part series where we discuss the steps consumers should take when shopping for insurance.
Click the links to read Part 1 and Part 3.

How to Evaluate an Insurance Company’s Financial Strength

The number one indicator of an insurance company’s stability is their financial strength rating.

How do you figure that out? Well, rating agencies have already done the research for you. There are several well-known rating agencies that analyze insurance companies and provide forward-looking grades that reflect their ability to meet their financial obligations. Here are a few of those rating agencies:

I’m confident that each of those rating agencies provide reliable data, but my personal favorite is A.M. Best.

Below is an AM Best key that shows you what each rating signifies about the company it corresponds to.

how to research insurance company stability

These ratings probably don’t mean a whole lot the average consumer. That’s probably because most consumers don’t know how they are affected when their insurance carrier is in a financial weak position. Let me tell you why you should care.

During phases when an insurance provider is struggling to make a profit, they may implement drastic changes to right the ship. For example, they might cut back their claims department staff, which means they have fewer representatives to take your call and assist you. They might skimp out on their commitment to maintaining the latest technology, which could mean that you have a tougher time submitting claims, receiving timely estimates, or face slower processing times.

Any time a company scales back their expenses, you know that the money is being taken from somewhere. You might not know which department or aspect of your experience will be affected, but it’s bound to happen. So why not search for an insurance provider that is already providing excellent customer service while consistently exhibiting best-in-class financial strength.

Here’s a snapshot of Auto-Owners Insurance Company’s historical financial strength ratings over the years. As you can see, this company has years of consecutive A++ ratings backing their reputation. Definitely a sign of a strong company.

how to research insurance company stability

Is Anything Less Than an A++ Rating Unacceptable?

Obviously, it doesn’t get any better than an A++ rating, but that doesn’t mean a lesser rating is automatic cause for concern.

If you come across a company with fluctuating financial strength ratings, you’ll want to look at how the company reacts to changes in financial strength.

How can you do that?

Pay attention to news published about the company. Are they laying off employees? Is there massive turnover in your region? Is there a merger that isn’t going smoothly? A company’s reaction to change can have catastrophic effects on the quality of your claims service.

To be fair, there are many reasons why an insurance company’s financial strength rating could change and often there should be no cause for concern. For instance, if an insurance provider operates in 15 states across the count and three of those states were victims of the hurricane of the century, you can probably cut that company a break. In fact, it’s pretty impressive if that company still managed to earn an A-rating. On the other hand, if a company’s market share has been in decline for years and they are falling behind technologically, you might want to take note.

How Insurance Rates Are an Indicator of Stability

A few years ago, I decided to get in on the Black Friday craze. I arrived early at a Best Buy to purchase a flat-screen TV for 70% off. After bursting through the doors, I found a salesperson and asked about where I could find the TV I had circled in their Christmas ad. The salesperson’s response? “We already sold the only one we have in stock, but let me show you what else we have.”

No one likes a bait-and-switch, whether you are shopping for a TV or insurance.

Some insurance companies offer certain discount rates during your initial term, but after that your rates will go through the roof. Maybe your insurance provider changed the algorithms they use to determine your rates. Or maybe something about your life changed and placed you in a different category that is subject to new rates. But there is also a chance that the company just pulled the old switcheroo just like the folks at Best Buy did. They do whatever they can to get you in the door and then they try to sell you something else.

How can you protect yourself against these types of tactics? Talk to a local independent agent. Agents don’t want to run a dozen new insurance quotes for each of their clients every year, so you better believe they’re aware of which insurance companies offer stable insurance rates.

Getting the information you need is easy. Just ask, “Which insurance companies do your clients tend to stay with the longest?” It’s probably safe to assume that the companies not forcing agents to shop rates at every renewal period probably aren’t changing their rates often.

This is the final article in a three-part series where we discuss the steps consumers should take when shopping for insurance.

Click the links to read the other articles: Part 1 | Part 3.


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