What is the insurance rating system and why does it matter?
Learn about the major ratings agencies, and what their ratings mean
Movie ratings — you know what they are and what they mean. (Rated G? Expect wholesomeness. Rated R? Leave the kids at home.)
Going out to eat? You know what a Yelp rating means. (Five stars? Expect deliciousness. One star? Something’s fishy, and it might not be the fish.)
But what about life insurers? Turns out, they have ratings, too. And those ratings can be … a little confusing. (Where else could an A+ rating actually be … kind of mediocre?)
Fear not: We’ll help you decode what those ratings are and what they mean.
After all, those ratings are an important factor to consider when you’ve made the critical decision to buy life insurance. When you’ve made a decision to provide financial protection for your loved ones in case the worst should happen to you, you want to make sure that protection is, well, protected.
Here’s what you need to know.
In this article:
What is the insurance rating system?
It’s probably not quite accurate to call it a system. That implies there is one overarching way of evaluating insurers, and that’s just not the case.
There are, in fact, four key third-party ratings providers, and each one has its own unique system. Much the same way outside analysts examine a publicly traded company’s fiscal data to forecast its future, these ratings agencies investigate an insurer’s financial strength and claims-paying ability.
To put it another way, the purpose of these ratings is to evaluate how likely an insurer is to pay what it owes your loved ones in case they make a claim on your policy. Important stuff, right?
Especially when you consider an insurance policy can last up to 30 years, or even for the rest of your life. That’s a big commitment, so you want to make sure you can trust the other party over the long haul.
What are the major rating agencies?
Here are the four key third-party rating agencies:
What are their criteria?
The criteria used to rate an insurance company varies by rating agency.
Some of the factors A.M. Best considers when rating a company are:
- Evaluating its equity in action
- Balance sheet strength
- Strong historical cash flow
- Financial performance consistency
- Country risk
- Operating performance
- Market position
- How competitive the market is
- How it manages risk
Here are the factors that Fitch considers:
- Financial strength
- Capitalization and leverage
- Debt service capabilities and financial flexibility
- Financial performance and earnings
- Investment and asset risk
- Reserve adequacy
- Asset/liability and liquidity management
Here are the factors that Moody’s considers:
- Credit risk
- Fixed-income obligations
Here are the factors considered by S&P:
- Competitive position
- Industry and country risk
- Financial risk
- Capital and earnings
- Financial structure
No matter the agency, the goal is to evaluate the financial stability of an insurance company, and its ability to meet its financial obligations. And just like it’s helpful to read a couple movie reviews before deciding what to see, it can be useful to consult the ratings for some or all of these agencies as you look for an insurer.
What are their rating scales?
Just to keep you on your toes, each rating agency also has a completely different ratings scale. For example, an A+ from A.M. Best means “superior.” An A+ from S&P is in its bottom ratings tier.
Here are the top ratings available from each agency:
|A++, A+||Superior ability to meet insurance obligations|
|A, A-||Excellent ability to meet insurance obligations|
|B++; B+||Good ability to meet insurance obligations|
|AAA||Highest credit quality, lowest default risk|
|AA+, AA, AA-||Very high quality|
|A+, A, A-||High credit quality, low default risk|
|Aaa||Highest quality, subject to the lowest level of credit risk|
|Aa1, Aa2, Aa3||High quality, subject to very low credit risk|
|A1, A2, A3||Upper-medium grade, subject to low credit risk|
|AAA||The highest rating, given to companies with strong financial performance, which have the ability to pay all claims and obligations.|
|AA+, AA, AA-||This rating is slightly below AAA, given to companies that can meet all of their obligations and policy commitments.|
|A+, A, A-||Given to companies with good financial strength but could be affected by adverse market and economic conditions.|
Why do insurance ratings matter?
Again, these are assessments of an insurance company’s financial standing. Life insurance is a unique business — many American life insurers have their roots in the 19th Century or earlier, and the idea of life insurance in general dates back even further.
And yet, as with most business categories, life insurance has been disrupted (or at least changed) by the Internet. That includes startups like Haven Life. But unlike some startups, Haven Life is wholly owned and backed by MassMutual – every Haven Term policy is issued by MassMutual or its subsidiary, C.M. Life.
That means you get the best of both worlds: An easy, online-first application process, which leads to a policy you can then manage online. But you get the backing of a policy issued by MassMutual or its subsidiary C.M. Life. MassMutual has more than 170 years of history behind it.
On that note, you might be wondering about MassMutual’s and C.M. Life’s financial ratings. Here you go:
- A.M. Best: A++ (superior)
- Fitch: AA+ (very strong)
- Moody’s: Aa3 (high quality)
- S&P: AA+ (very strong)
What about Haven Life?
Because Haven Life is a life insurance agency, it does not receive a rating from the leading rating agencies. You can instead refer to the ratings for MassMutual and C.M. Life, listed above.
So why choose Haven Life? Haven Life offers term life insurance coverage backed by a top-rated insurance company, from an online-first agency devoted to making life (and life insurance) less hard. That includes offering highly competitive rates using an innovative approach to actuarial science.
Start by getting a free online life insurance quote today.
About Scott NevilRead more by Scott Nevil
Our editorial policy
Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus
What our customers are saying
Jun 1, 2023
Easy to apply
Easy to apply I just got approved last week so haven't had to make any claims or anything like that (as this is a life insurance policy, guess that's a good thing lol). But what put Haven Life at the top of my list was their intuitive website and easy application process. All done online and then the physical exam was done in my home! Very easy process.
–S Speightread more at
May 25, 2023
There was truly no medical exam for…
There was truly no medical exam for their term life insurance. The customer service was responsive and helpful. The price was comparable to another company with the same terms.
–Bukkyread more at
May 11, 2023
Wonderful company!! I definitely recommend Haven life!! Awesome at finding the best coverage for me! Great coverage that is affordable!! Glad I listened to the recommendation that was given to me about this company
–Blaiseread more at
May 10, 2023
Great Customer Service
I looked into two other companies. The coverage was comparable but I was most impressed with Haven Life’s customer service. I was also impressed with the pricing tools.
–Danielread more at
Apr 19, 2023
Simple & easy.
Pros: -Easy online application -Can get coverage immediately after applying online -Pretty seamless process throughout the experience Cons: -Although told I was covered initially after applying online, I was informed that I needed to get physical check up in order to continue the plan. -Although I’m very healthy, my plan price increased 2x after the physical checkup.
–Malcolmread more at