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Company Quality Made Easy

Written by Aaron Pinkston, Fri, Oct 16 2009

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Because Clarifinancial focuses so much on quality results, a lot of the insurance shoppers want to make sure they choose a quality company. So how does Clarifinancial share information about company quality in a way that makes sense? And how do we come up with our information?

Let the Ratings Confusion Begin

There are many different rating agencies, and it’s important to know that Clarifinancial does not assign financial ratings nor did we design the method of comparing them on a level playing field.

When the United States Government Accountability Office (US GAO) did a study of the insurance ratings systems, they found a few problems. The primary problem is that because rating scales differ from one company to the next, they are difficult to compare. An “A+” from one company may be the rough equivalent of a “C+” from another, and an “A+” may be about the same thing as an “Aaa”. If you followed that, you may be wondering if a “C+” from one company and an “Aaa” from another could be roughly equivalent. The confusing answer is no.

I’m convinced insurance rating companies make their money by confusing folks. I mean, why else would they use hair-brained scales that you can’t compare with each other?

A Level Playing Field

Fortunately, the US GAO concludes that there are five company quality bands in each of the rating systems that do roughly mean the same thing. To read more specifics about the study, go here. If you just want to read the abstract of the study about insurance financial ratings, you can check it out here.

All we have done is use the same scale 1-5 scale and multiply it by two and flip it upside down. In our system, a 10 is better than a 4. Also, we don’t think a company should get a rating of 10 unless at least two rating companies agree it should have a 10. That’s pretty simple, huh?

Clarifinancial to the Rescue

How this works is that when the agent creates a quote, we ask about the actual ratings insurance companies have at that time. We ask for up to three ratings if they are available to get different perspectives. Then our computers look at the chart the US GAO created, multiply it by two and find the average to the nearest whole number.

In general, steer clear of companies that have a 2, and companies that have a 10 seem pretty solid.

It’s that simple. Now you have a meaningful way to compare insurance company quality using a 1-10 scale. Even if they use different measuring sticks. Leave the deciphering to us. We make choosing easy because choices are clear. See how easy choosing can be when company quality is clear.