Gallagher Re’s analysis found that between January 2022 and August 2023, there were 282 rating actions, with 109 carriers experiencing 60 rating downgrades and 64 negative outlook changes; 15 experienced both. None of the issues behind these downgrades—and insolvencies, for that matter—seem to be going away anytime soon, which means that carrier ratings and downgrades must remain at the top of mind.
In the face of this chaotic time for the industry, insurance carrier ratings provide valuable insights into insurers’ financial strength, stability, and reputation and help you recommend coverage options to your clients.
Your customers rely on you to recommend financially sound carriers. High ratings from reputable rating agencies reassure clients of the carrier’s ability to pay claims. Therefore, maintaining an up-to-date understanding of carrier ratings is crucial. Failing to stay informed about carrier rating changes and failing to act on changes in ratings can be the basis of an errors & omissions claim.
Here are some strategies to stay up to date with insurance carrier ratings and avoid becoming collateral damage in the face of a carrier downgrade:
1) Regularly monitor rating agencies. Familiarize yourself with reputable rating agencies such as AM Best, Standard & Poor’s, Moody’s, and Fitch Ratings. Regularly check their websites or subscribe to their newsletters for updates on insurance carrier ratings. Set up alerts for rating changes and reports on the rating agencies’ websites.
2) Utilize industry resources. Access industry publications and websites that provide analysis and summaries of carrier ratings. Engage with professional associations, such as the National Association of Insurance Commissioners (NAIC), for updates.
3) Leverage technology. Use specialized software and platforms designed for insurance professionals that aggregate and provide real-time updates on carrier ratings. Implement customer relationship management (CRM) systems that integrate carrier rating data to streamline your workflow.
4) Maintain direct communication with carriers. Establish relationships with carrier representatives to receive firsthand information about their financial health and rating changes. Attend carrier-sponsored webinars, seminars, and conferences to stay up to date on their performance and strategic changes.
5) Use your professional network. Stay engaged with the insurance industry by attending conferences, seminars, and workshops. These events often feature sessions on industry trends, regulatory changes, and updates on insurance carrier ratings. Professional associations offer access to resources, training, and information about insurance carrier ratings. These associations often publish newsletters, reports, and educational materials to help agents stay informed and compliant with industry standards.
6) Communicate with your clients. Educate your clients about the importance of insurance carrier ratings and how they can use them to make informed decisions about their coverage. Provide them with resources and guidance on how to interpret ratings and choose reputable insurers with strong financial standing.
7) Policy reviews. Regularly review existing policies in light of the most recent carrier ratings to ensure ongoing suitability for your clients’ needs. Be proactive in suggesting alternatives if a carrier’s rating declines significantly.
8) Document, document, document. Document all client interactions concerning carrier ratings to maintain transparency and protect yourself and your agency in the event of an E&O claim.
Even in this chaotic environment, by seizing the opportunity to employ the strategies, you will be prepared to effectively advise your clients and not only safeguard your clients’ interests but do what is needed to protect yourself.
