Further, unlike bank accounts, insurance policies are not protected by federal deposit insurance. So, while there are many protective funds set up within the industry, the bottom line is that if your insurer fails, so may your policy. Traditionally, insurance financial strength ratings were not widely used by consumers. The ratings seemed complicated, and the prospects for financial problems seemed unlikely or irrelevant. Well, that's no longer true.
Insurance companies do fail.
Others employ questionable business tactics and must make large restitution payments. And consumers are purchasing increasingly sophisticated annuities and other insurance products that make the financial strength of insurers anything but an academic topic. While agents are still a fundamental part of the insurance process, consumers increasingly interact with companies and products without the involvement of an agent or, in some cases, any insurance representative until they are close to purchasing a policy. With the Internet further shortening the distance between the consumer and an insurance transaction, it's all the more important that consumers have access to credible information about insurer finances and financial condition. This work included a series of market-research studies among buyers, both retail and corporate, as well as insurance company executives, agents, brokers, financial planners, and consultants to the industry.