HAS THE RATING OF ANY OF YOUR CARRIERS CHANGED?
by Curtis Pearsall
If you don’t know, you need to read this document by Curtis Pearsall. Rating firms are evaluating company results every day to determine ratings.
Although many agencies won’t know the rating of their companies, I hope that they care. Put yourself in the position of one of your clients. You place the business with an agent, expecting that if you have a loss the carrier will pay the claim. Suppose a loss occurs —and you learn that the company is insolvent. Trust me. You wouldn’t be happy! Your customers rely on you and your staff to place them with companies that will be around to pay their claims.
To show your professionalism and do the right thing, I’d offer these recommendations:
- Have a point person in your office check the rating of your markets at least once a quarter. This can be done by contacting the company (through the marketing rep) or by accessing the rating online.
- Set a minimum rating criterion for doing business with a company. If you’re using Best’s, I’d suggest at least an A-.
- Make sure you know the rating of the carriers on every Surplus Lines proposal you get. If the wholesaler’s proposal involves an unfamiliar company, ask for the rating. If they don’t know it, don’t deal with them.
- Don’t rely on state guaranty funds. I get periodic calls from customers asking why I’m concerned about a particular company because if it fails, the fund will be there to pick up the pieces. Although guaranty funds can help ease the pain of insolvencies, they have their limitations (caps on payouts, as well as some flexibility on the date of the loss and of the insolvency).
If one of your carriers suffers a rating drop, it’s essential to let your customers know. Send them a letter that states the facts and issues and explains the meaning of the rating change. To tell a customer that their insurance company is now rated C- without providing an explanation doesn’t benefit anyone. The letter should also offer to give your customer a proposal from a carrier with a higher rating. This type of communication will play a major role in your defense if your customer has a loss that involves an insolvent insurer.
Curtis M. Pearsall, CPCU, AIAF is Vice President, E&O of the Utica National Insurance Group. He can be reached at Utica National Insurance Group, P.O. Box 530, Utica, NY 13503; (800) 274-1914; fax (315) 734-2807; or e-mail [email protected]. This article originally appeared in the Utica National Insurance Co. E&O Bulletin and is reproduced by permission.