Comdex Ratings: What it is and Can you Trust it?
Comdex Rankings and their use with Financial Strength Ratings.
The Comdex Score and why its important.
- What is the Comdex Score?
- Is the Comdex Score more important than an AM Best Rating
What is a Comdex Score:
A comdex score is "a composite score averaging the ratings of the major insurance rating organizations." The word Comdex also refers to an old Computer Expo that ended about 2005.
Comdex ratings/rankings include rankings from AM Best, Fitch, Moodys, & S&P. It is a score up to 100, with 100 being the best.
The Comdex is basically a compilation score of financial strength ratings from multiple rating agencies. It goes by various terms: Comdex Score, Comdex Rating, and Comdex Ranking.
Why the Comdex Ranking is helpful:
The comdex score is an extremely useful as a one stop answer to your question "Is this insurer sound?"
It is extremely useful for people buying Annuities and Complex Cash Value Life Insurance policies as it may allow you to compare carriers with just one ranking. Having just one ranking may make is slightly simpler for consumers to check financial strength ratings.
The Comdex also assists by blending four different opinions (FSRs) together in a sense creating a poll of polls. This 'poll of polls' has a lot of industry value. It openly displays variances from one credit rating agency vs another rating agency. In some ways its possible that the Comdex is more an industry tool rather than a consumer tool.
The comdex score is not, however is not itself a financial strength rating and there are other concerns we have about it.
The Issue with Comdex Scores / Comdex Ranking/ Comdex Ratings:
Comdex is a computed score of rating agencies used for life insurance companies. It is important to note that it is itself not a rating but a combination of the ratings. This can not be overstated, so it is worth repeating: A Comdex score is a compilation of ratings.
An article on investopedia recommends that clients "Ask about the life insurance company’s Comdex ratings." Unfortunately for consumers getting a Comdex score requires you to as the carrier or the agent for the information directly.
Why Do you Have to Go to a Carrier or Agent to get a Comdex Score?
Because comdex scores are not generally available from to the public. You can not just log in, such as with AM Best, etc, create an account and see for yourself. This creates somewhat of an issue in our opinion. Whole vs Term has stated over and over that clients should follow the following rules when researching Financial Strength Ratings:
- Check the Financial Strength Rating every time you purchase any form of insurance.
- Do not trust ratings on carrier or agents websites.
- Check the Financial Strength Ratings yourself, direct from the Credit Rating Agencies
- Check two different insurers with the same rating agency, check for the Financial Strength Rating and do not focus as much on the Issuer Credit Ratings.
- Do the exact same thing with Another Rating Agency.
- Do not cross compare one insurer with one rating agency with another insurer with another rating agency.
Therefore using a Comdex score breaks many of the rules that we have set forth. Specifically, it requires you to get the rating information from the insurance agent or insurance company and "trust them." It does not allow you to check the rating direct yourself. Lastly because Comdex is a compilation score it may make you consider checking just this one score.
Therefore due to its non public interface - I struggle to suggest it as a platform for consumers. Besides its not clear how consumers would even get the comdex information, at least legally.
Also at times I have a hard time finding much of a place for it. If consumers do not have their own access to the scoring methodology and access to the results from the four Credit Rating Agencies - what exactly is the point of the Comdex Rating?
How would you feel about crash test results on new autos that was not available to the general public? Would you buy a car because the crash score told to you by the carrier was a perfect 100? Wouldn't you rather read about the car tests results yourself direct from the reporting agency?
The Real Potential Value of the Comdex for Consumers:
Its my belief that the Comdex does indeed have a place for consumers who are considering Cash Value Life Insurance policies or Annuities. However it should probably be used in CONJUNCTION with the Financial Strength Ratings, not in place of them.
It should be explained though to consumers accessing their ratings that it is reliant on not just one credit rating agency but instead on all four. If just one rating agency makes a mistake then the Comdex rankings will therefore be thrown off. In some ways this makes the rating tool either more accurate or less accurate depending on how one were to look at it.
Is the Comdex Score more important than the AM Best Financial Strength Rating:
The Financial Strength Rating from AM Best is an independent opinion about a given insurers ability to meet claims. The comdex score is a compilated scoring technique that uses AM Best and three other rating agencies.
Therefore the Comdex score is NOT more important.
How do I check a Comdex Ranking?
There is no way for consumer to check a comdex score, at least legally as far as we know. Therefore its hard to see the value for consumers.
What is an AM Best Rating?
AM Best ranks insurers generally by two methods. The method most useful for insurance consumers is the Financial Strength Rating - which rates companies based on their claims paying ability.
How do I check a Financial Strength Rating with AM Best?
Go to AM Best and either create an account or just log in. AM Best is available for free for consumers. For a short video on how to do accomplish this, just go to youtube. Make sure you look for the Financial Strength Rating which can often be abbreviated as FSR.
What is the best life insurance company?
The best life insurance company is usually the life insurance company that produces the best priced offer with the appropriate amount of coverage and term length with the best set of Financial Strength Ratings. Sometimes the "best life insurance company" is an insurer that is rated lower that has a product that meets a clients specific needs. However it is often the higher rated insurer that meets the clients needs.
Do other companies issue Financial Strength Ratings?
Yes, three other companies issue their own version of the Financial Strength Ratings: S&P, Moodys, and Fitch. All three are commendable businesses.
What is the best use of the Comdex Rating?
In our opinion, the best use of the Comdex score or ranking is for individuals procuring annuities or cash value life insurance. For consumers focused on affordable term life insurance it may not have much value.
The other real value of the Comdex score is for insurance industry usage.
About Whole Vs Term Life Insurance
Whole Vs Term Insurance was created with the idea that all insurance products are not the same. We believe that clients should not be pushed to purchase over priced life insurance products that they neither need nor want.