Insurance companies are graded on financial strength, solvency, and the ability to pay policyholder claims. A high-rated insurance company is more likely to honor the terms of the policies it issues, offer better service to its customers, and be a good place to work.

The Insurance Rating System 

In the United States, the insurance rating system is based on the opinions of the four major insurance company rating agencies. Standard & Poor’s, Moody’s, A.M. Best, and Fitch are independent agencies that each have their own rating scale. Key rating factors include financial reserves, company structure, business focus, and management style, in addition to the history of claims payment. Because the ratings don’t necessarily equate between organizations, one insurance company can receive different ratings among the various agencies.

A company’s ranking on the insurance rating system determines how attractive it is to potential customers and the workforce. Even though ratings are not based on facts, they weigh heavily on the reputation of your business. Getting a higher insurance rating is not just dependent on a company’s credit score, but it also considers those factors that underpin the potential for profitability and growth. Things like work/life balance for employees and customer satisfaction are taken into account to help guide the public on whether to do business with you.    

Attention to these factors and streamlining processes through automation can help your business stand out from the competition and earn a higher ranking.   

Classifications

Classifications used by rating firms are fairly broad. The ratings represent Excellent, Superior, Poor, and Distressed financial conditions. All the agencies use letters of the alphabet in some configuration, with Moody’s including numbers, to denote ratings. 

For example, an AAA rating from Fitch represents a company with an exceptionally strong capacity to pay financial commitments. The same category from A.M. Best, A++, means the insurance company exhibits a Superior ability to meet ongoing commitments. Standard & Poor’s BBB designation translates to Good financial security characteristics, and Moody’s would rate a company Ba if its financial security is questionable and in need of improvement.

  • A.M. Best’s rating system includes 13 ratings ranging from A++ to D.
  • Moody’s system consists of 21 categories in a combination of capital letters, lower-case letters, and numbers from Aaa to C.
  • Standard & Poor’s 21 categories range from AAA to C.
  • Fitch Ratings has 11 categories beginning with AAA and ending at D.

Rating organizations consider both quantitative and qualitative as well as internal and external factors when evaluating an insurer.

Growth Potential

When customers are satisfied and employees are happy to work for an insurance company, the potential for growth is there. This is an example of a quantitative external factor having a qualitative effect on internal operations. Product offerings, price, and customer service greatly affect the future of any business. Expanding the number of satisfied customers reflects well on the insurance rating system.

The liquidity of an insurance company and the health of your investments also show whether your business is likely to grow. If a company can show the potential for desirable outcomes down the road, the rating agency is more likely to assign a better grade. 

Profitability

To be profitable, an insurance company must have a certain amount of money in its financial reserve to pay out claims and still have flexibility should disaster strike. Using automated accelerators, not only helps the workforce keep track of cash flow, but also follow the daily operations of the business, recognize potential weaknesses, and predict growth.

Automated systems simplify spreadsheets and reporting. When an insurance rating organization examines your profit margin, a positive outlook translates to a higher ranking.  

Efficiency

One of the essential characteristics of a top-rated insurance company involves being highly organized. Organization comes through streamlining processes and systems using process accelerators like Robotic Process Automation (RPA), Artificial Intelligence (AI), and Machine Learning (ML).

Companies enjoy higher rankings through increased compliance, lowered expenses, and the enhanced customer experience in the process. These capabilities take the drudgery of completing these tasks off human workers while accurately completing them in less time. These systems can intelligently automate processes to ensure the company efficiently reaches benchmarks and remains in compliance.

The use of these products alleviates repetitive work to make an operation more efficient, more competitive in the marketplace, and more likely to earn a higher insurance rating.

Achieve Higher Ratings and Increased Business

Applying automation strategies to your insurance company can be a game-changer. Insurers who turn to digital solutions are finding ways to stay profitable and increase the customer experience while managing complex portfolios. Streamlining operations transforms claims processing and enhances risk management. This, of course, helps with achieving a higher insurance rating. 

There are companies committed to helping insurers leverage their full potential and grow their companies through increased efficiency. Intelligent Automation services provide clients with comprehensive ML and RPA functions to overcome the challenges that get in the way of a high rating. 

Digital consulting companies can provide solutions that allow you to:

  • Standardize data collection
  • Minimize time spent on uploading information
  • Streamline processes
  • Maximize accurate reporting
  • Drive efficiencies
  • Prove your ROI
  • Generate insights for business growth
  • Remain in compliance with the National Association of Insurance Commissioners (NAIC)

If you’re looking for ways to save money, elevate the customer experience, and make your insurance company more digitally competitive, start your transformation and contact a digital consulting company today.

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