 We've all heard of insurance underwriting. However, not many people outside of the insurance industry really understand what it means. By definition, underwriting is the process of selecting, classifying, and rating risks. More simply put, it's how insurance companies decide what risks (or, in laymen's jargon, customers) to accept and insure. But did you know that when shopping for a suitable travel insurance policy (or any other type of insurance, for that matter) you should evaluate the prospective travel insurance underwriter in much the same manner? Well, you most certainly should.
Many shoppers consider their work done when they find the lowest-priced travel insurance policy. And while cost-effectiveness is undeniably important, as is finding the policy that best fits your travel and financial needs, it doesn't end there. There is another vital factor that many travel insurance shoppers fail to identify: the financial strength of the insurance underwriter. And since the underwriting company will be the one paying the claims, you want to be sure that the organization is in a strong financial position to do so if and when called upon. After all, you wouldn't want to send in a claim form and receive a response back from the company stating that due to financial difficulties they won't be able to pay your claim, would you?
It's therefore very important that, when shopping for travel insurance, you find a company that has a strong financial rating in addition to a great insurance product. How is this done? Well, there are a number of entities whose business it is to rate the credit and financial stability of financial services companies. Two of the most well-known of these organizations are Standard and Poor's (S&P) and A.M. Best. The rating systems that these companies use may differ slightly, but they typically employ a report-card type of grading scale ranging from A to F, and often including pluses and minuses (A+ or A-, for example) and double or triple letters (AAA, AA) to arrive at a more specific rating for comparison purposes. These ratings provide an overall picture of the financial strength and security of the insurance company, and are based on both financial data provided to the government as well as information given directly to the rating company.
Of course, price will always be a major consideration in choosing a suitable travel insurance policy, and rightly so. We all want to save as much money as we can whenever possible, and with such fierce competition in the marketplace there's certainly no need to overpay. And, needless to say, finding a policy that fits your needs is a fundamental reason for buying insurance. But these are only two of the critical factors necessary for arriving at a sound travel insurance decision. Remember, a two-legged table cannot stand. Don't neglect to rate the insurance company while they're rating you.
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