Q

What are A.M. Best auto insurance ratings?

A

A.M. Best is a credit-rating agency that uses multiple criteria to rate auto insurance companies’ ability to fulfill claims and other financial obligations to their customers.

Haley Sprankle

By 

Haley Sprankle

Haley Sprankle

Reviews Editor

Haley Sprankle is a former reviews editor at Policygenius who specializes in homeowners and auto insurance. Previously, she was a writer at Wirecutter and The New York Times.

Published January 21, 2022 | 2 min read

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Policygenius always factors in  financial confidence—how stable the company’s business is—when assessing an auto insurance company. One of the credit-rating agencies we use to do so is A.M. Best. This century-old credit rating company uses multiple factors to determine how likely an auto insurance company is able to pay out customer claims, or take responsibility for other potential financial obligations. These ratings help signal to customers which auto insurance company is successful and trustworthy.

While we know this rating is a great tool to gauge each auto insurance company’s financial success, it can also be helpful for customers to understand. Here’s how it all breaks down.

How does A.M. Best rank auto insurance companies?

A.M. Best uses a typical grade school scoring system, with ratings from an A to F, differentiating each score with varying plus or minus signs. In this scale, a double plus sign would be the highest version of that letter rating, while a single minus sign would be the lowest. A.M. Best evaluates each auto insurance company using four key financial factors:

  • Balance sheet strength:  How much money a company has at any given time, how differentiated the company’s income methods are, how well the company generates income, the quality of reinsurance programs, and other financial elements.

  • Business profile: How well the company is doing in the market, how well the company is being managed, and how well the company is distributing its products

  • Enterprise risk management (ERM): How risky the company’s business model is

  • Operating performance: How stable the company earnings are, how diverse the company’s earnings are, and the comparison between the company’s earnings and its liability

A committee oversees the assessment of these four factors, and then they determine the final score for each auto insurance company. If the company has good cash flow, predictable expenses, diversified income, and a strong brand, it is likely to score higher.

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How do we use A.M. Best rankings in our homeowners insurance reviews?

At Policygenius, we evaluate auto insurance companies on five different criteria— price, financial confidence, third-party ratings, policy options, and the company’s customer experience. A.M. Best is one of three major credit-rating agencies that helps us rate an auto insurance company’s financial confidence. Each letter score is assigned a numerical value from 1 to 10, and we average those scores together to get the financial confidence score for each company we review.

Why do we trust A.M. Best?

For over a century, A.M. Best has been evaluating insurance companies. These ratings are rooted in high-level analysis, scrutiny, and accuracy. Ultimately, A.M Best evaluations can help auto insurance customers be confident that they’re doing business with successful, trustworthy companies.

Best's Credit Ratings™ are under continuous review and subject to change and/or affirmation. For the latest Best’s Credit Ratings™ and Best’s Credit Reports (which include Best’s Credit Ratings™), visit the A.M. Best website at http://www.ambest.com. See Guide to Best’s Credit Ratings™ for explanation of use and charges.

Best's Credit Ratings™ reproduced herein appear under license from A.M. Best and do not constitute, either expressly or impliedly, an endorsement of Policygenius or its recommendations, formulas, criteria or comparisons to any other ratings, rating scales or rating organizations which are published or referenced herein. A.M. Best is not responsible for transcription errors made in presenting Best's Credit Ratings™. Best’s Credit Ratings™ are proprietary and may not be reproduced or distributed without the express written permission of A.M. Best Company.

A Best’s Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. It is not a warranty of a company’s financial strength and ability to meet its obligations to policyholders. View our Important Notice: Best's Credit Ratings for a disclaimer notice and complete details at http://www.ambest.com/ratings/index.html.