What to Know About Insurance Company Ratings — and Which Companies Are the Best Rated

Insurance companies are subject to ratings that attempt to determine how financially stable they are. The most prominent ratings agency for insurance companies is AM Best, but the big credit agencies all look at insurance companies, too. You should consider the rating before buying coverage, as it indicates the company's ability to pay claims, especially in times of financial strain — like after a natural disaster.

What are insurance company ratings? Why do they matter?

Financial ratings companies consider a variety of factors, but they primarily look at the business's financial health, how responsibly it is run and external factors like vulnerability to natural disasters.

All types of insurance companies — auto, home, life and health — receive financial ratings. But the criteria used may differ by type of insurance. For example, a homeowners insurance company based in Florida may see its ranking drop if the state is hit by a hurricane that causes a lot of damage to houses there. Meanwhile, a health insurance company could be affected by a nationwide epidemic.

Considering the financial stability of an insurance company before you buy coverage is important, because they have an ongoing financial obligation to you. You're depending on that company to be around to pay a claim — promptly and efficiently.

What are insurance company financial ratings based on?

The goal of insurance company financial ratings is to evaluate financial strength: how able they are to withstand a struggling economy, increased claims or other financial hardships. So the ratings are based on a wide array of criteria relating to financial health. A rating also includes things like the amount of cash the company has in reserve and whether they've turned a profit in the recent past.

Common insurance rating criteria:

Every agency has its own methodology and scale, so ratings will vary somewhat. But all ratings companies base their decisions on approximately the same data. If an insurance company has a drastically different rating from one agency to another, you should do more research to determine why.

Companies that provide financial ratings to insurance companies

Many companies and groups monitor the strength of insurance providers, but the most common ones are AM Best, Standard & Poor's, Moody's and Demotech. AM Best is the most prevalent insurance-specific agency and the one most commonly used by major insurance companies. Standard & Poor's and Moody's do not specialize in a specific industry and are used across many types of businesses worldwide, including insurance.

Financial ratings aren't infallible

While agency ratings can give you a good idea of an insurance company's financial stability, they aren't perfect. For example, Merced Insurance had an A− rating from AM Best but went bankrupt in 2018 after the extensive wildfires in California that year. And Standard & Poor's, Moody's and Fitch all gave strong ratings to Enron, which collapsed. So take these ratings with a grain of salt.

Which insurance companies have A ratings?

The biggest insurance companies in the United States generally have very strong financial ratings, which indicates sound business models. Companies with the best ratings — the highest possible — include Geico, MassMutual and New York Life.

AM Best ratings for several top insurance companies are compared below.

Financial ratings comparison of top auto and home insurance companies

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Financial ratings comparison of top life insurance companies

Financial ratings comparison of top health insurance companies

If your company isn't listed, you can usually find their financial ratings on their website. However, remember that a company may choose to highlight their best scores If they received an A from one ratings agency and a B from another, they may opt to show only the better score. You may need to check with the ratings company directly to learn how an insurance company did.

Other ratings and reviews to consider when choosing insurance

An insurance company's financial stability is far from the only thing to consider. A good starting point for evaluating overall quality of service is how many complaints the insurance company has received. No company is perfect, but more complaints may mean they can't provide an adequate level of service.

The National Association of Insurance Commissioners calculates every insurance company's complaint index based on the number of complaints the company receives compared to the amount of insurance they sell. The complaint index is one of the key criteria considered when evaluating the best car insurance companies in the country. Some states, including Michigan and Florida, also share this information on a statewide level, so see if you can get more local insights.

For a broader look at customer satisfaction, you can also look at ratings from J.D. Power, a consumer research company. J.D. Power rates customer satisfaction across many industries, including vehicles, insurance and appliances. The ratings are only useful as a starting point, though.

For the most part, you only have access to how well a company scored in a given area of service, not why. Also, J.D. Power's rankings are completely dependent on consumer reviews. The company doesn't analyze the quality of the insurance company's service.

For reviews (and complaints) from individual customers, you can look to sites like the Better Business Bureau and other review websites, such as Yelp. Keep in mind, though, that it's difficult to get an accurate picture of a company's general quality based on individual interactions. Customers are more likely to post if they've had a very positive or very negative experience. One person with a very negative experience is likely to post a scathing review, but hundreds of people with unremarkable but positive ones may not.

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