My “A” Rated Insurance Carrier Has Been Downgraded What Does That Mean?
By: Keith Goodwin (Capstone Brokerage) August 2013
A.M. Best Company is a global full-service credit rating agency dedicated to serving the insurance industry. They use a lettered grading scale much like an individual credit score. They also use a numerical grade for the size of the company. Basically they determine the financial stability of an insurance carrier. Occasionally insurance Companies are downgraded through the A.M. Best Credit rating. When this occurs it can cause issues for business owners for several reasons.
Policyholders are often contractually bound to carry Workers Compensation and General Liability with “A” rated insurers. It is the businesses responsibility to maintain compliance with all contractual obligations. This can be especially important in the construction and subcontracting industry. Here in Las Vegas, as well as across the country contractors will require all subcontractors to have Workers Compensation and General Liability policies in place with an “A” rated company to insure that they are financially stable.
For subcontractors that are placed with Insurance companies that are downgraded finding new coverage is a must. They can be in violation of their agreements, which in turn can cause a hold on payments for services rendered until they place their Workers Compensation and or General Liability insurance back with an “A” rated insurer.
The good news is that Workers Compensation and General Liability policies can usually be moved at anytime. Understanding both types of coverage is very important and can be complicated. There are many options out there for coverage. Making a good broker extremely helpful.
A benefit to having an Insurance broker managing your businesses insurance coverage is that they will know about these types of changes as soon as they happen. Brokerages understand insurance coverage’s and how it affects your business. Brokers help companies manage the risks that come along with doing business. If your current provider is downgraded our brokers will evaluate if your company needs to place their business elsewhere.
A good rule of thumb is to be aware of contracts that require specific insurance carrier ratings and to stay in contact with your broker to maintain proper coverage’s.
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