Why Is My Carrier Not Rated by A.M. Best?
Commercial Insurance Carriers and A.M. Best Ratings
Many businesses throughout the U.S., staffing included, are currently with an insurance carrier that’s not rated (NR) by A.M. Best. Working with a NR carrier can pose a challenge as many companies state in their insurance requirements the staffing agency must have coverage with an ‘A’ rated carrier in order to conduct work or even effectively bid with such company.
While we also encourage and advise our clients to include an ‘A’ rated carrier stipulation in their own insurance requirements, it’s important to note that just because an insurance carrier is NR, doesn’t necessarily mean it’s not financially solvent or a reputable carrier. There are always exceptions to take into consideration.
A.M. Best is a voluntary rating center and is an independent opinion, not a standard. Because of the various state regulators and guidelines that each insurance company must comply with, most companies rely on the A.M. Best recommendation. There are, however, some insurance companies that choose to forgo this voluntary rating system as they’re in full compliance with the state regulations, guidelines and audits. Therefore, this voluntary rating process is deemed unnecessary.
There are a number of reasons a carrier could elect to forgo this voluntary rating system. Below are a few examples:
- The carrier has met and continues to meet all requirements of the state Office of Insurance Regulation to qualify as an “admitted carrier” where licensed. An “admitted carrier” means that the insurance company must comply with all state regulations regarding insurance, which are established and overseen by the National Association of Insurance Commissioners. In the event that the insurance company fails financially, the state will step in to make payments on claims as necessary.
- The carrier’s reinsurance program has been reviewed and approved by the state Office of Insurance Regulation.
- A.M. Best does not rate federally licensed self-insurance funds.
- There’s a cost associated with obtaining an A.M. Best rating that could range from $5,000-$500,000 per company.
It’s important to remember that A.M. Best is not a warranty of an insurers financial strength and ability to meet its ongoing insurance policy and contract obligations. The staffing industry is already limited with market options; therefore, this should not exclude your staffing company from competitively bidding on work. If you’re currently insured with a NR carrier and you find yourself in a position where a client is requiring a rated insurance carrier, here are a few suggestions to consider:
- Have your carrier supply a list of the reinsurers. Most you will find are ‘A’ rated or better by A.M. Best.
- Work with your broker and carrier to supply supporting documentation to confirm your carrier’s financial strength and ability to meet its ongoing insurance policies and contract obligations.
- Work with your broker to coordinate a call between the various parties. Sometimes simply talking it out is the best resolution.
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