The long-established partner often drafts the incumbent’s policies, that is, he issues the policies himself and backs them up with his financial assets. This allows buyers to use the senior partner’s ratings as an arbiter of the financial stability of the incumbent’s policies.
Is it safe to buy life insurance from a startup? | Smart change: personal finance
For example, Bestow’s policies, one of our life insurance choices, are issued by leading insurer North American Company for Life and Health Insurance. This means Bestow sets the terms and pricing for policies, but if its business falters, NACL is there to support the death benefit.
For consumers, the alliance can also give credibility to new entrants in the market. “When ‘challenger brands’ compete in a market with companies like New York Life, which has just celebrated its 175th anniversary, they need to make it known. [to consumers] they have expertise in space, ”says Lajdziak.
Some start-up insurers are rated by smaller agencies
Not all insurers write policies through a partner. Some write their own policies and thus qualify for their own evaluations.
A challenge for buyers, however, is that newbies are unlikely to be rated by agencies that rate life insurers the most, like AM Best, Moody’s, and Fitch. Rather, they might be noted by lesser-known names in the notation. For example, the leading Lemonade is rated (and well) by Demotech, an agency founded in 1985 – over a hundred years after the AM Best store opened in 1899.