What makes a good insurance company?
An Insurance company sells the promise to pay for certain expenses in exchange for a regular fee, called a premium. For example, if one purchases health insurance, the insurance company will pay for (some of) the client’s medical bills, if any. They calculate the risk of occurrence then determines the cost to replace (pay for) the loss to determine the premium amount.
It is important that the insurance company you choose are concerned with your personal insurance needs and capable of explaining your options in a way you can understand.
When looking for insurance, you want to buy protection from an insurer you trust. Therefore, things to check should you wish to ensure you are dealing with a reputable insurer:-
- Reviews/recommendations – it’s always best to find out about other customer’s experiences so you can check these out on Trust-pilot
- Avoid dealing with unauthorised insurers – search the FCA register – Insurance Companies are regulated by the FCA (Financial Conduct Authority) who provide confidence to consumers. If the insurer is not on the FCA register, you should avoid them.
- Insurer’s financial strength – To find out if your insurer is financially strong enough to pay the claims of its customers even when a big disaster hits, there are several independent rating agencies (M. Best, Fitch, Kroll Bond Rating Agency (KBRA), Moody’s and Standard & Poor’s), each with its own rating scale however, all will give you the chance to make an informed decision.
- Price is very important however, it often is the case that you pay for what you get so just because the insurance maybe more expensive than others, it could be that the policy provides better cover.
- Coverage – as per above, it’s so important to check the cover available to ensure it suits your personal needs.
It is so important that you check what you are actually covered for. CHEAP INSURANCE is cheap for a reason. When it comes to making a claim, you may just find you’re not covered.
Check out our comparison and see how we compare.
Why are some insurance companies underwritten by other firms?
The term for this is called Reinsurance which is a form of insurance bought by insurance company to spread the risk of a potential large loss. A little like a betting shop will spread the risk if they have too much exposure on a favourite horse in a race. They will lay bets on the race with other bookmakers so if the horse does win they have more money to pay out to the winners. Essentially, reinsurance can protect the insurer from financial ruin and therefore ensure the customer gets paid should they make a claim.
A portion of the premium received from a paying customer for insurance by the insurance company will be spent to purchase a reinsurance contract that will pay out in the event of an exceptionally large loss.
Reinsurance is a large and complex industry and Insurers are legally required to have sufficient capital in reserves to pay all potential claims related to the policies which customers have bought.
The two main types of reinsurance are Treaty which covers all or a portion of an insurer’s risk and is effective for a certain time period and Facultative insures against a specific risk factor.
To find out more read our blog: https://www.bestpricefs.co.uk/blog/why-are-some-insurance-companies-underwritten-by-other-firms/