Insurance Curator Insurance markets are built on trust — and that trust rests on measurable regulatory signals. For consumers deciding which insurer to buy from or whether to renew a policy, three signals stand out: financial solvency, rate filings, and independent credit/financial ratings (notably AM Best). This article explains what each signal means, how regulators use them to protect policyholders, and practical steps you can take to use these indicators to protect yourself.
Why these signals matter for consumers
- Financial solvency ensures a company can pay claims now and in the future. Insolvent insurers can leave policyholders unpaid and trigger state guaranty fund interventions with limits and delays.
- Rate filings disclose how insurers calculate premiums and whether regulators approve or require changes — directly affecting affordability and fairness.
- AM Best ratings provide an independent view of an insurer’s balance sheet strength, operating results, and risk management, helping consumers compare carrier stability beyond price and marketing.
These signals intersect with consumer protections and legal frameworks described in resources like Best Insurance and Your Rights: Consumer Protections, State Variations, and How Laws Affect Coverage and help guide behavior covered in the Consumer Protection Checklist: What to Check Before Buying Any 'Best Insurance' Policy to Avoid Legal Traps.
1) Financial solvency: the regulator’s baseline
State insurance departments monitor insurer solvency using several metrics:
- Statutory surplus / policyholder surplus: the cushion available to absorb unexpected losses.
- Risk-Based Capital (RBC): a formulaic measure comparing capital to regulatory thresholds; RBC triggers regulatory intervention when low.
- Reserve adequacy: are loss reserves properly estimated for future claim payments?
- Annual audited statutory financial statements submitted to regulators.
What this means for you:
- Low or decreasing surplus, negative operating cash flow, or RBC levels near regulatory action flags can signal risk of insolvency.
- State guaranty associations provide a safety net but have limits, exclusions, and processing delays.
See guidance on state-specific protections and complaint routes at Filing a Complaint: How to Use State Insurance Regulators to Resolve Disputes with the Best Insurance Companies.
2) Rate filings: transparency, fairness, and affordability
Insurers typically must file rate proposals and supporting actuarial data with state regulators before implementing changes (varies by state). Regulators review for:
- Actuarial soundness (are rates sufficient to pay claims?)
- Non-discrimination (do rates comply with anti-rating statutes?)
- Consumer impact (sometimes regulators assess affordability or public interest)
How consumers can use rate filing information:
- Monitor pending filings if you have a large exposure or face steep increases.
- Use filings to challenge unjustified hikes through your regulator or consumer advocates.
- Compare filings across carriers to understand pricing trends in your state.
For practical comparisons of state requirements and legal compliance, consult Auto Insurance Minimums by State: How to Compare Requirements to Find the Best Insurance for Legal Compliance.
3) AM Best ratings: independent assessment of insurer strength
AM Best is a widely used insurance industry rating agency that evaluates insurers on four primary factors:
- Balance sheet strength
- Operating performance
- Business profile
- Enterprise risk management
These translate into letter grades (e.g., A++, A+, A, B++, etc.) and Credit Ratings (financial strength) that help consumers and brokers assess an insurer’s ability to meet policy obligations.
Table — AM Best rating tiers and consumer takeaways
| AM Best Rating | Meaning (Financial Strength) | Suggested Consumer Action |
|---|---|---|
| A++ / A+ | Superior | Strong choice for stability; good for large exposures. |
| A / A- | Excellent | Solid option; good balance of price and reliability. |
| B++ / B+ | Good | Monitor trends; consider limits and claim experiences. |
| B / B- and lower | Marginal / Weak | Exercise caution; verify guaranty coverage and claims handling. |
| C / D / Under Regulatory Supervision | Vulnerable / Troubled | Avoid new business; contact regulator if insured. |
Why AM Best matters:
- It aggregates financial data and expert judgment to highlight credit risk that may not be visible from price alone.
- Rating downgrades can precede market exits or impairments — an early warning for policyholders.
If you need help interpreting policy language or exclusions that could amplify risk, see Understanding Policy Language: Key Legal Terms, Exclusions, and Endorsements That Define the Best Insurance.
Regulatory signals compared — quick reference
| Signal | What regulators look for | How consumers are protected |
|---|---|---|
| Solvency metrics (RBC, surplus) | Adequate capital, reserve adequacy | Guaranty funds, supervisory actions, rehabilitation/liquidation process |
| Rate filings | Actuarial support, legal compliance | Public hearings, adjustments, consumer advocacy input |
| Independent ratings (AM Best) | Financial analysis by third party | Market transparency and informed buying decisions |
How consumers should act — a practical checklist
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Check AM Best before you buy or renew
- Look for A or better for high-value exposures. If your insurer is B or lower, ask questions about claims-paying history and reinsurance.
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Monitor rate filings for your state and insurer
- If you see a proposed increase, read the rationale and file comments with your state insurance department if concerned.
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Review insurer financials if available
- Track policyholder surplus trends and any public regulatory actions.
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Understand your contract
- Confirm coverages, caps, and exclusions. For health or unique exposures, see Best Insurance for Health Coverage: ACA Mandates, State-Level Protections, and How to Appeal Denials.
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Use state tools and complaint channels
- If you experience bad faith or unfair pricing, file with your state regulator (see Filing a Complaint…).
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Plan for catastrophic risks separately
- Flood and earthquake often require separate policies; evaluate insurer solvency particularly for large disaster-exposed carriers: Best Insurance for Flood & Earthquake Risks: Mandates, Exclusions, and When to Buy Separate Policies.
When signals conflict: downgrade but approved rates, or strong rating but high premiums
- A rating downgrade with approved rate increases may mean the insurer is trying to shore up capital — this can be a red flag for future stability.
- An insurer may have a strong rating but charge high premiums due to market concentration or underwriting selection; compare options and question the insurer’s explanations.
Small businesses should also weigh regulatory and contract considerations beyond ratings — see Policy Law for Small Businesses: Contracts, Indemnity, and Regulatory Requirements for the Best Insurance Programs.
Final recommendations
- Treat AM Best ratings as a critical screening tool, not the sole determinant. Combine them with regulator solvency metrics and rate filing history.
- Use your state regulator as a consumer protection partner — from rate reviews to complaint resolution.
- Keep an eye on legislative changes that reshape protections and what “best insurance” means: How Insurance Law Is Changing: Recent Legislative Trends That Redefine What ‘Best Insurance’ Means.
By watching these regulatory signals and using the available state and independent resources, you can make more informed decisions and reduce the risk that your insurer won’t be there when you need it most.