Insurance companies are rated by independent agencies that evaluate their financial strength, their ability to pay claims, and the quality of their customer experience. Five major agencies assign financial strength ratings: A.M. Best, Fitch, Kroll Bond Rating Agency (KBRA), Moody’s, and Standard & Poor’s. Beyond those, organizations like J.D. Power measure customer satisfaction, and the National Association of Insurance Commissioners (NAIC) tracks consumer complaints. Together, these systems give you a well-rounded picture of any insurer’s reliability.
Financial Strength Ratings
Financial strength ratings are the most widely referenced measure of an insurance company’s health. They answer a single critical question: if you file a claim, can this company actually pay it? The five agencies that rate insurers each use their own scale, standards, and pool of rated companies, so a rating from one agency isn’t directly comparable to a rating from another. Still, the general logic is the same across all of them.
A.M. Best is the agency most focused on the insurance industry specifically and has been rating insurers for over a century. Its scale runs from A++ (Superior) at the top down to F (In Liquidation) at the bottom. Standard & Poor’s and Fitch use letter scales that start at AAA and descend through AA, A, BBB, and below. Moody’s uses a slightly different naming convention, with Aaa at the top followed by Aa, A, Baa, and so on. KBRA follows a similar AAA-to-D structure. In every system, ratings in the top few tiers signal strong financial health, while anything below the midpoint of the scale is a warning sign.
To arrive at these ratings, analysts dig into several layers of an insurer’s finances. The core areas they examine include:
- Capital adequacy: Whether the company holds enough surplus capital beyond what it needs to cover expected claims. Think of it as a financial cushion for worst-case scenarios like a major hurricane season or a surge in auto claims.
- Loss reserves: Money the insurer has set aside to pay claims that have already been filed but not yet settled. If reserves look too thin relative to the company’s obligations, that’s a red flag.
- Investment portfolio: Insurers invest the premiums they collect, and the quality and diversification of those investments affect their ability to pay future claims.
- Operating performance: Whether the company consistently brings in more in premiums and investment income than it pays out in claims and expenses.
- Business profile: The types of insurance the company writes, how concentrated it is in certain regions or product lines, and how its competitive position looks over time.
Ratings are not static. Agencies review them periodically and can upgrade or downgrade a company based on new financial filings, major catastrophe losses, or shifts in the broader economy. A downgrade doesn’t necessarily mean the company is about to fail, but it does signal deteriorating financial conditions worth paying attention to.
How to Look Up Financial Ratings
You can check an insurer’s rating directly on each agency’s website. A.M. Best offers a free lookup tool where you can search by company name. S&P, Fitch, Moody’s, and KBRA also publish ratings, though some require a free account to access full details. The Insurance Information Institute recommends checking ratings from more than one agency, since each uses its own methodology and not every insurer is rated by all five.
When you pull up a rating, you’ll typically see the letter grade along with an “outlook” label such as stable, positive, or negative. The outlook tells you whether the agency expects the rating to change in the near future. A company rated A with a negative outlook may be headed for a downgrade, while one rated A- with a positive outlook could be on its way up.
Customer Satisfaction Rankings
Financial strength tells you whether a company can pay your claim. Customer satisfaction rankings tell you what the experience will actually feel like. J.D. Power is the best-known organization in this space, surveying tens of thousands of policyholders each year across auto, home, and life insurance.
These surveys rank insurers on a 1,000-point scale, scoring them on factors like pricing, trust, coverage options, ease of doing business, digital tools, employee interactions, and problem resolution. Separate studies focus specifically on the claims process, measuring how easy it was to file a claim, how long it took to reach a resolution, and whether the settlement felt fair.
The results can reveal meaningful gaps between companies that look similar on paper. Two insurers might both carry an A+ financial strength rating, but one might score 100 points higher on claims satisfaction because it processes claims faster or communicates more clearly during the process. If your priority is a smooth experience when something goes wrong, these rankings add a dimension that financial ratings alone can’t capture.
NAIC Complaint Data
The NAIC maintains a complaint index that lets you compare how many complaints a company receives relative to its size. The index is calibrated so that 1.0 represents the national average for a given type of insurance. A score of 2.0 means the company receives twice as many complaints as you’d expect for its market share, while a score of 0.5 means it receives half as many.
This data is useful because it adjusts for company size. A giant insurer will naturally receive more total complaints than a small regional carrier simply because it has more customers. The complaint index accounts for that by weighting complaints against the volume of premiums the company writes. Keep in mind that the index can fluctuate from year to year based on changes in both the company’s complaint volume and shifts in the broader market, so looking at a few years of data gives you a more reliable picture than a single snapshot.
You can search complaint data for free on the NAIC’s Consumer Information Source website. Your state’s department of insurance may also publish its own complaint reports with additional detail about the types of issues consumers raised.
What Ratings Mean for You
Each type of rating serves a different purpose, and the one that matters most depends on what you’re evaluating. If you’re buying a life insurance policy or an annuity that won’t pay out for decades, financial strength ratings are the priority. You need confidence that the company will still be solvent 20 or 30 years from now. For auto or homeowners insurance, where you might file a claim next month, customer satisfaction scores and complaint data carry more weight alongside financial stability.
A practical approach is to use financial strength ratings as a filter first. Narrow your options to companies rated A- or higher by at least one major agency, then compare those finalists on price, customer satisfaction, and complaint history. This way you’re not choosing between a great experience and a financially shaky company. You’re choosing among strong companies and picking the one that treats its customers best.