Picking The Right Insurance Carrier: What is a Comdex Score and Why Does It Matter?

When consumers choose an insurance carrier, there are several factors to be considered.  Some important points are clear and obvious, while others are not.  There’s a saying in the insurance industry that, “It doesn’t matter, until it matters, and then it’s all that matters.” 

When it’s all that matters, every point of an insurance plan is of the utmost importance, whether it was clear and obvious or minor and overlooked.

Most people don’t like talking about contingency plans, especially when their utility involves nightmare scenarios like your business getting sued, becoming sick or injured, or dying.  Even less people like paying for these plans that we all hope and pray are never used.

In my book, What Should I Do with My Money?, I reference “Protection First” as the top priority in financial planning.  Yes, the boring, depressing, costly insurances are to be addressed first.  As a CFP®, it’s my job to educate the public on how all these negative adjectives can be misleading. 

I’m not so naïve as to think insurance salesmen deserve a star on Hollywood’s Walk of Fame, but it should be an exciting and valuable planning process that offers unparalleled peace of mind.  The way to appropriately purchase insurance is to buy it as if you were reading your policy during that nightmare scenario, when each line of the contract is all that matters.

The normal starting point in the buying process is product.  What type of coverage is the proposed insured looking for?  Is it safeguarding income from disability, auto and home from disaster, liability from lawsuit, a lifetime’s earnings from death, etc. 

Then there are countless products underneath these categories, whether it is own-occupation or any-occupation disability insurance, term life insurance or whole life, and so on.  Within the desired product are the terms of the contract, essentially what is covered or not covered.  This might be considered the “fine print”. 

Lastly, there is what consumers often consider to be the most important factor– price.  It’s easy for someone who has come to grips with creating a contingency plan to feel good that they are responsibly protecting against the unexpected.  If the right thing to do is to buy product “X”, simply buy it at the lowest cost. 

The array of online marketplaces and search engines have empowered consumers to do just that, check the box in the quickest and cheapest way possible.  When we are on the front-end of the planning process, when “it doesn’t matter”, checking the box seems adequate.

But then, how valuable is the appropriate product, with the perfect language, at a bargain price, if the carrier does not fulfil their promises at the time when it is needed most?  The factor that has yet to be touched on, is how to pick the right insurance carrier.  All the considerations mentioned in the prior paragraph are words on paper. 

One might say they are in the laboratory and not in the real world.  The real world is where unexpected, unwelcome events occur, and insureds ask their carrier for a potentially life-saving check.  It is when “it matters, and it’s all that matters.”  The ability for an insurance carrier to fulfill its promises is led primarily by its long-term financial standing.  One of the best ways for consumers to judge insurance carriers claims-paying ability is by reviewing their Comdex score.

The Comdex is a composite of all the credit ratings an insurance company has received, ranking companies on scale from 1-100 (the higher the score, the stronger the company).  The score is generated by VitalSigns, a tool owned by Ebix, a leading international supplier of on-demand infrastructure exchanges to the insurance, financial, and healthcare industries. 

VitalSigns rates over 500 insurance companies based on yearly financial reports provided to the National Association of Insurance Commissioners (NAIC) along with ratings from the 5 leading rating services—A.M. Best, Standard & Poor’s, Moody’s, Fitch, and Weiss.

Here’s a list of the latest Comdex scores among notable companies:

• Berkshire Life (Guardian’s provider of individual disability income insurance)*- 100
• Northwestern Mutual Life Insurance Company- 100
• New York Life Insurance Company- 100
• Guardian Life Insurance Company of America- 99
• Mass Mutual- 98
• Prudential- 94
• John Hancock- 93
• Principal- 91
• Lincoln Financial Group- 91
• AIG- 82
• Equitable- 82
• Ameritas- 82
• Standard- 81
• Brighthouse (established by MetLife)- 78
• Ohio National- 74

*Berkshire Life operates as a wholly owned stock subsidiary of The Guardian Life Insurance Company of America.

An insurance company’s credit rating should not be the only consideration in developing an insurance plan, but it is a critical one.  Regarding price, cost should only be an objection in the absence of value.  For instance, most car fans would agree that a $40,000 used Civic is more expensive than a $100,000 new Ferrari. 

In respect to contract language, always remember that the benefits are only as strong as the company who stands behind them.  A quick check on a company’s Comdex ranking can help vet good companies from ones that may not be as reliable.

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(Featured image by Towfiqu barbhuiya via Unsplash)

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