New York -- If you're buying an insurance policy or an annuity, it's important to check the company's safety ratings. But you can't always rely on your insurance agent to tell the whole story -- or even to know what the story is.
As an example, consider Jackson National Life based in Lansing, Mich. In 1991, Moody's, one of the nation's four major rating services, gave Jackson National a financial-strength rating of A2. On Moody's scale, that's sixth from the top.
But Jackson National never disseminated that information to the 82,000 agents who sell its policies. "We did not participate in the rating, there's no written report, and we have no comment about it," said Jackson National spokesman Bill Gray. This month, Moody's raised that rating to A1. But some Jackson National agents may be talking only about the higher marks given by another service, A.M. Best. Best dubs Jackson National A-plus; on Best's scale, that's second from the top.
In other cases, insurers may shade the truth. In his newsletter, The Insurance Forum, Joseph Belth, an insurance professor at Indiana University, has reported three cases in which an insurance company picked favorable phrases out of its ratings report to tell consumers, while ignoring unfavorable phrases.
In short, checking out an insurer is ultimately up to you. To do it, you need to talk to the following four major ratings services. Here's how:
* To get an A.M. Best rating, if you have a push-button, call Best's customer service department at (908) 439-2200, give the exact name of the insurance company and ask for its A.M. Best identification number. Then call (900) 420-0400 and enter the ID number when so instructed by the electronic phone gnome.
You get the rating, a brief explanation of what it means and the date it was issued. You can also get a faxed copy and a summary of Best's rating system, which puts the rating into context. The 900 number costs $2.50 a minute. A call usually lasts two to three minutes.
If you have no fax machine, or if you have a rotary phone, a copy of the rating costs $10 by mail. You can also pay customer service $20 for an advance company report, which details the insurer's financial position. (You can read a similar report, free, if your library carries Best's Insurance Reports, published annually.) Best rates around 3,800 insurers.
* To get a free rating from Standard & Poor's, call (212) 208-1527 and give the insurance company's full name. Operators give you the rating and tell you generally what it means. They'll also tell you if the insurer is on S&P's Watch List for possible downgrading or upgrading. A four-page written report, explaining the company's strengths and weaknesses, costs $25. Mr. Belth thinks S&P's reports are franker than those published by A.M. Best.
S&P bestows its major claims-paying ratings on some 525 companies that have cooperated with S&P analysts. It also gives "solvency ratings" to 2,000 other companies. Solvency ratings are based solely on public data.
* To get a free rating from Moody's, which covers 264 companies, call (212) 553-0377. It will also tell you whether a company is on its Watch List. For the 115 companies rated by Duff & Phelps, call (312) 368-3157. Neither of these free services volunteers an explanation of its
ratings, so you have to ask.
* Don't bother asking your state insurance departments for safety ratings. Weiss Research, a new and controversial rating service, recently called all the states to ask about Presidential Life Insurance, rated B-plus by A.M. Best. Only 16 states volunteered a rating and two (South Carolina and Tennessee) got it wrong. Weiss, an exceptionally (many insurers say unduly) tough marker, charges $15 for an oral rating, $25 for a one-page report and $45 for a longer report. Call (800) 289-9222.
Although there are many systems for judging insurers, Mr. Belth suggests this three-part standard for conservative buyers of new policies: The company should be (1) rated A-double-plus or A-plus by A.M. Best; (2) hold one of the top two or three listings from at least one of the other major raters; and (3) not be rated below the fourth category by any of the major raters.
That means a Moody's rating of Aaa, Aa1 or Aa2, and a Standard & Poor's or Duff & Phelps rating of AAA, AA-plus or AA. Mr. Belth won't accept an A.M. Best rating only. "A good insurer," he says, "should go to the trouble of getting a second opinion."