HOW TO MAKE SURE YOUR INSURANCE COMPANY WILL STILL BE AROUND WHEN IT COMES TIME TO PAY A CLAIM. FIVE SOURCES OF FINANCIAL RATINGS OF INSURANCE COMPANIES.

Herb Denenberg Column. August 18, 2002.

How do you go about checking out the financial strength and stability of an insurance company? Since the World Trade Center catastrophe, the answer is more important than ever. That's because the potential of unexpected, catastrophic losses looms larger than ever before. As a result, there has been what is called a flight to quality, meaning that insurance buyers, especially the most informed ones, are much more particular about the financial quality of the insurance companies they insure with.

The financial strength of an insurance company has always been an important issue to informed buyers. Consider a life insurance policy. You may buy it today, and it may be in force during your life for over a half a century. Under the policy, the payout to beneficiaries may extend over many decades. It may be hard to predict a century in advance, but you certainly want to be sure that the company is rock solid today. And the same principles hold true for other kinds of insurance such as auto and homeowners.

With the Internet, it is easier than ever to check out the financial strength of an insurance company. Each of the five rating services has a Web site, and they make available the ratings of the companies they evaluate.

You want to be sure that any company you select has a high rating from at least one and possibly more than one of these five services. A highly regarded publication called the Insurance Forum suggests this rule of thumb when buying a life insurance policy, a health insurance policy or an annuity: "We suggest that you select a company with high ratings from at least three of the five rating firms." The same rule of thumb would make sense for other kinds of coverage.

Then it suggests exactly what it means by high ratings for those who want to be the most cautious (or in the words of the Insurance Forum "extremely conservative"). Here are the five services with the recommended highest ratings. As you will observe, each of them uses a different system for rating companies.

* A.M. Best Company, Inc.: A++

* Fitch Ibca Inc.: AAA, AA+

* Moody's Investor Services: Aaa, Aa1, Aa2

* Standard & Poor's Insurance Ratings Services: AAA, AA+

* Weiss Research: A+, A, A-, B+

If you are willing to be less cautious, it suggests accepting slightly but not substantially lower ratings. For example, for Best's, the Insurance Forum suggests A++ or A+ if you want to be "very conservative" and A++, A+ or A for the "conservative."

You can ask your insurance agent or company for its rating if you don't want to bother to go to the Web sites of these financial rating services. Any good public library can help you get the ratings, either through the volumes, which the services publish, or by going on their Web sites.

Here are the addresses of the five services:

* www.ambest.com

* www.fitchibca.com

* http://www.moodys.com

* www.standardandpoor.com

* www.weissratings.com

Financial strength is only one way to judge a company and its product. Any buyer will also want to inquire into the quality of service rendered by the company and the prices it charges for its product. But the essence of insurance is certainty of performance after a loss, so you don't want to go with a financially shaky company simply to get a lower price.

(Herb Denenberg is a former Pennsylvania Insurance Commissioner and consumer advocate.)

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