By Head of Broker Relations, Richard Westgate
There have been a large amount of businesses recently that are focusing on rated insurers only for the peace of mind of their client and their clients purchasers. This is absolutely the right thing to do for the perception of the market. Is it the case though, that as brokers we are jumping on a band-wagon or does it really yield better cover and offer a better solution to our clients.
Rating is not as complex as some would have you believe. It has very little to do with the amount and type of business written. However much it has an effect on what exposure the insurer has. It does not factor highly on the reason to give an insurer a particular rating.
Ratings come from Audits. Audits conducted by firms that look at whether an insurer can afford to pay out a claim, and if a payout is required (how much they have in the coffers). There have been past instances where the sum of claims have exceeded that of the capacity with some insurers so an audit of finances is conducted to reassure the purchaser that they are financially stable by way of a rating. NOTE: This does not mean that the insurer will not go out of business if the unfortunate happens, it just means the rating agency thinks is less likely because they have seen the accounts.
This is the important point an A rated Insurer is not protected from going bust, nor does it protect the client from getting the full premium back if something does go awry, in fact they will never get the full premium back. It merely states that the money they said they had is there and they can pay out on a certain percentage of the policies it has written.
Does this mean that some UNRATED insurers are in a better financial position than rated ones? Well… Yes it does. It is less likely of course. As if you have the funds why not just pay for the audit and get rated, Right? Right. But this may not be on the cards for them or indeed getting rated in the country of issue- however much covered by the regulatory bodies- may not be on their radar.
What does that mean for brokers looking only to sell Rated cover and what does it mean for the clients who are not looking for that peace of mind. For the brokers it means having the status and the confidence to offer “rated” cover no matter what the condition of the insurer is. This can possibly be a sticky situation as that insurer is not absolved from insolvency (as previously mentioned). For the client, well they could be missing out on quotes from cover that could be more applicable to them either through cost or cover levels. Yes, there are differences. Some people prefer higher Excesses, some prefer FSCS protection because not all Rated Insurers have that.
Any company can apply to a Rating Agency to carry out an audit and grant them a rating, many firms simply choose not to do this, and in electing not to do so this does not necessarily mean that they are in any better or worse of a financial position than a company that does get rated, it can simply mean that they decided not to pay a Rating Agency to give them a grading.
At Compariqo we work with a range of rated and unrated markets, and our broker partners are offered full training for our products. They have our policy wording and our eBooks for reference. We are always on hand to take a call to answer any questions they may have and- Most Importantly- We have rated and unrated cover to cater for all their clients needs.
If you are interested in hearing what our Broker partners benefit from and how our routes to market can expand your offering and income. Get in touch with me by direct message or firstname.lastname@example.org as well as 07581039392 and let’s grab a coffee.
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As an independent broking business, Compariqo is focused on arranging structural warranty and insurance cover for residential developments for our customers. As well as a suite of complementary insurance products to meet the demands of developers and SME builders, we can also source a wide range of finance solutions through our relationship with one of the UK’s top business finance specialists and their extensive panel of lenders, meaning we can cover all of your construction insurance and property finance needs.