On some of my monthly notes, I try to answer questions that I get frequently from members. Here is one topic that comes up a couple times a month from different members. Question: What is the financial stability of MTMIC? Does MTMIC have a “Best” rating? If not, why not?

First, a common measurement of financial strength in the insurance industry is how much surplus a company has. Surplus is the amount of financial cushion a company has in the event that losses exceed the premium. As of March 31, 2015, MTMIC had a surplus account of $17,950,415. Industry experts often say that the ratio of surplus to premium should be one to one. MTMIC has $0.94 that is surplus for every $1 of premium.

Regarding question number two, MTMIC does not have a “Best” rating. The rating company called “Best” is most often focused on large companies. Their rating model gives “credit” for being large, writing multiple lines of coverage in multiple states. And they charge a fee in excess of $50,000 annually for their designation. MTMIC is a small single line coverage company in Michigan only and would get penalized under this model. Also, $50,000 is a lot of money for a designation. We believe our member owners would prefer that money be spent on Loss Control programs or dividends. Over the nearly 40 years of MTMIC’s operation, our Board of Directors and staff have built a frugal tendency, i.e. spend members/ owners money wisely. While we do not have a Best rating, there is another a large insurance rating organization called Demotech. Demotech has been rating insurance companies for 30 years and their annual fee is $10,000. This seems like a reasonable amount and a fair value. Our rating from Demotech is A-Exceptional. Interestingly, Demotech’s track record of determining insurance company solvency is better than the big company agency of Best.

Besides our financial stability rating as shown by Demotech, MTMIC is also covered by the Michigan Property & Casualty Guaranty Association. This is an association that protects Michigan policy holders in case their insurance company has financial difficulty. In my 44 years of insurance company management, here is another interesting twist. The large national carriers rated A – superior by Best add and drop products as they evaluate profitability. They also enter and leave states over the profitability reviews. A financial rating does not measure a commitment of the company to its customers. MTMIC has been committed to Michigan employers for just shy of 40 years. We are owned by our members, our services are focused on them and the profits we earned belong to them. I think that should be a true indicator of our financial rating/strengths and customer stability.

Please call me if you have any questions so I can review in more detail with you. Enjoy the summer.