Insurance carrier ratings and why they matter

We all know that our insurance carrier must have a good rating - “A” or better is usually the standard that everyone wants to adhere to - but what does that actually mean? What if my insurance company has a rating lower than that, and how will that impact me and my participants? These are questions you should be asking yourself and your broker or company that you are working with as they are important threshold questions on a number of different levels.

Let's first start with what the ratings actually mean, and what agencies are the most common.

Insurance Ratings Explained

Insurance carriers are the backbone of any insurance plan, and they are the entity that is actually going to be paying your insurance claims. All insurance carriers receive a rating from one of the insurance rating agencies to show how financially stable they are and therefore, how likely it is that the carrier will be able to actually pay your insurance claims.

For a rating to be valid, it has to be held by the same entity that appears on your insurance certificate, it cannot be a holding company or parent/partner company. Many insurance carriers have complicated corporate structures, with many parent and subsidiary companies, often as a result of compliance requirements around the world or as liability protection. The rating of a parent company is no good if the subsidiary writes the business - that corporate structure protects the parent from the debts of the subsidiary.

Rating Agencies

There are a number of rating agencies that insurance carriers can use, and in many cases they may hold more than one rating from the list. The main agencies that most insurance companies use are:

• A.M. Best
• Standard & Poor’s
• Fitch Ratings
• Moody’s Investor Services

When it comes to rating insurance carriers, A.M. Best is the most prominent in the insurance world, however, the other agencies also provide insurance strength ratings too. There are also other agencies that will provide insurance ratings, but the ones listed above are the largest and most well known.

J1 Insurance Rating Requirements

We all know that to be in compliance with the J1 visa regulations, participants must hold a valid insurance policy that meets a number of criteria. That criteria is as follows:

• Medical Benefits of at least $100,000 per accident or illness
• Repatriation of Remains in the amount of $25,000
• Expenses associated with the medical evacuation of the exchange visitor to his or her home country in the amount of $50,000
• A deductible not to exceed $500 per accident or illness
• A policy underwritten by an insurance carrier with:
  • an A.M. Best rating of ‘‘A-’’ or above;
  • a McGraw Hill Financial/Standard & Poor’s Claims paying Ability rating of ‘‘A-’’ or above;
  • a Weiss Research, Inc. rating of ‘‘B+’’ or above;
  • a Fitch Ratings, Inc. rating of ‘‘A-’’ or above;
  • a Moody’s Investor Services rating of ‘‘A3’’ or above;

This is a summarized list of the J1 visa insurance requirements - you can view the full list on the Electronic Code of Federal Regulations , however, it captures the main benefit and limit requirements.

For the rating agencies, there are actually 5 credit rating agencies that can be used to show compliance with the J1 requirements.

Non-Compliance — What Does this Mean?

In short, if your insurance company does not meet the requirements above for one of the rating agencies, then your insurance coverage is not compliant and you are in violation of the J1 requirements. In practice, we have not seen a huge amount of scrutiny of the J1 insurance credit ratings by the State Department. As a sponsor or participant, you should be very mindful about this, as the ratings are an indication of a carrier's financial strength and ability to pay claims, and the requirements are there as a minimum level. Anything below that and you could run the risk of your participants' claims not being paid.

• Overview
• Tips when evaluating new insurance options
• Moving existing participants to your new insurance carrier
• Insurance carrier ratings and why they matter
• Appropriate benefits and limits in your insurance plan
• Handling dependents on your insurance plan
• What information should I share when looking for new quotes?
• ACA and Cultural Exchange Participants