New York -- Memo to owners of life insurance policies or annuities: You can now find out virtually everything you want to know about whether your policy is safe.
A newsletter called The Insurance Forum has just published a special ratings issue, covering 1,002 life and health insurance companies. It tells you: (1) How every established insurance-rating service (A.M. Best, Standard & Poor's, Moody's and Duff & Phelps) evaluates the soundness of your company, or a company whose policy you're thinking of buying. (2) Whether the company's ratings are better or worse than they were last year. (3) Whether enough questions are raised by its financial statements to make it a possible target of attention by a state insurance commissioner (503 companies make this list).
The four ratings services don't view every company alike. In general, A.M. Best is the easiest marker, followed by Duff & Phelps, then Standard & Poor's and finally Moody's, the toughest of the bunch. If a company has a good A.M. Best rating but a zinger from Moody's, your insurance agent may mention the first but not the second.
With this ratings issue in hand, however, you'll get the full story at a glance. The ratings cost $10 from The Insurance Forum, P.O. Box 245-J, Ellettsville, Ind. 47429.
Many shoppers today are confining their search only to the very safest companies. Here's the definition of "safest" used by The Insurance Forum's editor, Joseph Belth, professor of insurance at Indiana University:
* The insurer has been evaluated by at least two of the four major rating services mentioned above. An A.M. Best rating alone won't do.
* The insurer has very high ratings from at least two of the services. Here's his definition of "very high:" From A.M. Best, an A-plus-plus (the traditional A-plus won't do); from Duff & Phelps, an AAA or an AA-plus; from Standard & Poor's, an AAA, AA-plus or AA; and from Moody's, Aaa, Aa1, Aa2 or Aa3. All of these ratings are strong ones.
* In addition to the above, the insurer has no mediocre ratings. From A.M. Best, that means nothing below A-plus; also, nothing below AA from Duff & Phelps, below AA-minus from Standard & Poor's or below A1 from Moody's.
Mr. Belth lists 89 insurance companies that currently meet these super standards.
In general, the raters take a similar view of the insurance companies they look at. But sometimes, there's a substantial difference of opinion. Central Life Assurance Co. of Iowa, for example, has an A-plus from Best but only an A from Standard & Poor's, which is S&P;'s sixth rating from the top. Crown Life Insurance Co. of Canada is A-plus by Best but A3 by Moody's.
When you run into these anomalies, ask your insurance agent to get each rater's written report on the company. The reports disclose the reasons for the rater's concern.
Belth's newsletter also shows ratings changes -- both for the worse and for the better. Take Equitable Life Assurance Society. It has been struggling with horrible losses on its investments. But recently, it completed its first public offering of stock. As a result, both Standard & Poor's and Duff & Phelps moved it up a peg, to A-plus.
One rater Belth leaves out is the three-year-old Weiss Research of West Palm Beach, Fla., by far the hardest marker of all. As part of its evaluation, Weiss examines whether the insurer could survive a severe recession. Weiss ratings cost $15 by phone, plus $25 for a short written report. Call the company at (800) 289-9222.
A good rating isn't a guarantee. For example, none of the major raters foresaw the rapid collapse last year of New Jersey-based Mutual Benefit Life. Still, not much gets by them -- and their expert opinion is the only guide consumers have.