If you’re researching the top life insurance companies so you can make a decision for yourself on who deserves your business, you may have already found there are quite a few rating agencies who all have their own way of scoring insurers.
While it is simpler than compiling all the data yourself, it still provides you with four separate reviews, on four separate scales.
Understanding The COMDEX Ratings
In order to take those reviews from A.M. Best, Moody’s, Fitch and Standard & Poor’s and put them all on a level playing field, the Comdex was born. It’s a composite score of all the evaluations a life insurance company has available, and puts each company into one single, 100-point scale. This, in essence, creates a percentile in which to place each company.
The higher the percentile, the higher its overall rankings from the other private rating companies.
Each of the big four independent raters use their own scales with similar, yet inconsistent ratings and explanations. An “A” rating from one is not necessarily the same as an “A” from another, so it becomes a little more difficult for the common consumer to start wondering which rating agency is really the most accurate, or which insurance carrier is really the most reputable.
The Comdex takes this into account by creating percentiles, because while the letter is important, it’s also important how many other carriers were able to get the same, or better, rankings. If a company got an “A” rating but so did another 100 companies, how valuable is that information?
However, if it was one of only 10 companies, now how much more reputable does the company appear to be?
In order to get a number, the Comdex first takes a complete count of all companies who have at least two of the four rankings necessary to earn a Comdex score.
This helps to keep it a little more consistent because not all carriers seek out more than one rating, and also gives the Comdex something to average out as just one rating being taken into consideration would give excess weight to one rating agency’s platform.
Next, each individual rating agency’s full list of carriers is counted and divided by how many carriers were in each category. For example, if A.M. Best rated 100 carriers and only five were able to obtain the top rate, those five would be in the 100th percentile. If another 20 got the second highest score, they’d be in the next percentile, and so on.
Calculating The Final Score
After all four agencies had their lists compiled, sorted and calculated for carriers’ scores, the scores are then tallied up and averaged for the carriers. Another example, let’s say XYZ insurance company was in the 90th percentile for A.M. Best, the 85th percentile for Fitch and the 80th percentile for Moody’s, the average of the three would be a Comdex score of 85 (90+85+80=255, 255/3=85).
While, once again, this can’t be the only number you can rely on, it does help to find what percentile a company is in with a somewhat fair amount of data. Again, it isn’t perfect because not all companies are rated by the same number of rating agencies, so the number may be omitting up to 50% of the possible input it could have available.
When choosing the best life insurance company for you and your family, consider the Comdex score, all the individual ratings of the company, the company’s history, and even current client reviews, if available. Be sure to check back every so often to make certain the company you’re paying your premiums too is living up to its promises, too.