The List of Top-Rated Insurers Is Misleading

James Flanigan's column, "Buying Insurance Without Getting Stung"(April 10), includes a serious misrepresentation.

Flanigan accurately stated that only 11 companies have top ratings from A. M. Best, Standard & Poor's and Moody's Investors Service. But very few companies even have ratings done by S&P; and Moody's.

S&P; rates 120 carriers and Moody's rates 54. Fewer than 50 would have the possibility of a top rating from the three firms. This puts the 11 in a far less exclusive group than the article indicated. S&P; and Moody's primarily rate carriers heavily involved in the annuities market so investors can evaluate the safety of an annuity product compared to other investments.

Most of the 2,000 insurance carriers are not primarily in the annuity market and have chosen not to pay the significant cost of a rating by S&P; or Moody's.

Best rates almost all life insurance carriers and 257 have received an A+ rating.

Flanigan lists the 11 carriers holding top ratings from all three companies as if they are superior to the others.

But it would be a mistake for readers to assume that those 11 carriers are the safest and best. Several of those on the list have higher-than-average junk bond holdings and mortgages in default. Some of the safest and most stable life insurance carriers do not sell significant amounts of annuities, and so, are not rated by either S&P; or Moody's.

Unfortunately, choosing a carrier is not as simple as Flanigan's list would imply. The buyer must know if the carrier has too many ratios outside of acceptable limits. (Numbers are available through the National Assn. of Insurance Commissioners.)

They must also find out the percentage of assets in junk bonds, commercial mortgages, mortgages in default and if the carrier has met projected interest rates over the past five or 10 years. All of this seems daunting, but buyers can demand this information from their agents, or find another agent if theirs are not forthcoming.


The writer is managing editor of California Broker, a trade publication based in Burbank .

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