The dangers of using an unrated insurer

Taking out insurance gives you peace of mind that you are protected; however, what happens if you use an unrated insurer and what risks does this pose?

Insurance rating explained

With so many different insurance companies from which to choose, how do you know which to pick? Analysing the insurer rating is one reliable option. Insurers allow companies to assess them with a rating, which looks at factors such as the insurer’s financial risk, liquidity, capital and earnings, management, and competitive position. This can reveal how financially credible and stable the company is.

The perils of an unrated insurer
If you use an unrated insurer, it is much harder to have a clear and reliable understanding of how financially stable or credible the company is. You also run the risk that it could collapse further down the line, leaving you without any cover. Is it worth taking such a big gamble? If you are looking for insurance, such as motor trade insurance, you will inevitably be searching

for the best deal possible. One thing to bear in mind if you choose an unrated insurer is that it has the ability to offer cheap premiums to brokers.

According to Insurance Times, using unrated firms could be in breach of a broker’s duty of care.By placing business with insurers that do not have financial ratings, a broker could be unwittingly exposing itself to potentially hefty legal claims.

With this in mind, choosing an insurer that offers the best price might not always be the most sensible option. You might save money at the offset; however, if the firm goes bust, you could end up significantly out of pocket. This is why you should always use a reputable broker such as Quote Me Today.

If you own a fleet of vehicles for business purposes, using an unrated insurer could even put your operation at risk if anything goes wrong with the insurance company. At the very least, you will have to obtain a new policy; what’s more, not having cover in place would mean your fleet of vehicles is out of action until the insurance situation is rectified.

It is always worth doing your homework before choosing an insurer to find out whether it has a rating in place, especially if it offers what appears to be a really good deal.