Article #2 in the series: How to evaluate and compare an insurance company for financial strength.
Ask your advisor for a "Vital Signs Report" for any insurance company you are considering.
A "Vital Signs" report is an objective spreadsheet that summarizes and compares up to 8 insurance companies on 1 page; for several important financial safety criteria. This can help protect you from a biased or commission driven advisor from offering a company to you that is considered less than acceptable by honest and client focused advisors. You can even specify which companies you would like to compare.
What kind of information is on a Vital Signs Report?
First of all, 5 different and qualified rating agencies analyze key criteria such as the relative risk inherent in any insurance companies investment portfolios, asset growth, bonds in default and what types of investments the carriers are holding.
How can a layman interpret the results? This is made easy for you.
Each of the 5 rating services assigns a percentile rating to each carrier on the report.
The 5 ratings are then averaged and assigned a composite rating known as a
"Comdex percentile" The higher the number, the safer the company is considered to be.
My opinion is that an insurance company should have at least an 80% Comdex rating.
Aren't all insurance carriers about equal?
Not really. The example attached shows for example, that Transamerica Life has a strong Comdex rating of 93%; an elite number;while the well known AAA has only a 60% rating.
Are there safeguards for doing business with companies licensed in California?
Yes, there is a California Guarantee Association that protects the consumer up to certain limits for life insurance and annuity claims; but an agent is not allowed to discuss that with you prior to a sale since it is considered unfair marketing.
In summary, you should not only expect your advisors to make product recommendations from companies that are competitive; you should also ask for a financial safety comparison of the specific company recommended versus other companies that your advisor has researched. The vital signs report is an industry standard that is recognized and used by the more diligent advisors.
This article is not offered as investment advice; but is offered as a tool to help the layman compare insurance companies for financial strength.
A sample report is available by calling the phone number below and leaving your email address.
Randy Taylor
1(916) 601-5270
