Industry Issues | ERM & Emerging Risks

AM Best Exposes Draft Rating Criteria: Scoring, Assessing Insurer Innovation

AM Best Requests Comments on Draft Criteria: Scoring and Assessing Innovation

Rating agency A.M. Best will specifically assess insurers according to their level of innovation, an important step toward increased recognition and adoption of technology and other means of innovation to modernize and grow the insurance industry.

A.M. Best defines innovation as a multistage process whereby an organization transforms ideas into new or significantly improved products, processes, services or business models that have a measurable positive impact over time and enable the organization to remain relevant and successful. These products, processes, services or business models can be created organically or adopted from external sources.

"AM Best now believes that the pace of innovation in the insurance industry is accelerating and that an insurer's ability to innovate is increasingly critical to its long-term financial strength."

While acknowledging that "historically" it has "captured innovation indirectly" through various rating criteria, A.M. Best is requesting comment from market participants and other interested parties on its March 14, 2019 draft of a new criteria procedure, "Scoring and Assessing Innovation."

This proposed procedure focuses on an insurer's innovation level based on the analysis of two overarching elements. First, A.M. Best proposes to measure a company's "innovation inputs" by scoring and assessing the components of a company's innovation process, including leadership, culture, resources (allocation, strategy, and management), and processes and structure. Second, A.M. Best would analyze a company's "innovation outputs" by scoring and assessing insurer results and the level of transformation achieved.

According to the draft rating criteria, insurers will be rated on a scale of one to four, with four being the highest:


  • Leadership. Top scorers in this category will have "the sponsorship of top management and support throughout the organization" for their efforts to innovate, including at the board level.
  • Culture. Companies earning the highest scores here will "approach the innovation process purposefully and systematically" and be able to "demonstrate that their innovation initiatives are integrated throughout the organization."
  • Resources: Allocation, Strategy and Management. The highest scorers in this category will devote "appropriate" resources to innovation "relative to [their] operations and financial wherewithal" and use their "resources efficiently and create value."
  • Process and Structure. Highly rated companies in this set will "promote organizational intelligence while avoiding innovation silos." Further, an insurer's approach to data management, innovation strategy, and governance will be considered.


  • Results. This category focuses on measurable results, including, for example, "a lower expense ratio; higher revenue growth; more robust customer-centric, data driven product design; better customer retention; greater brand recognition; or stronger data analytics."
  • Level of Transformation. A.M. Best will measure an insurer's level of transformation, recognizing that "transformation does not encompass splashy initiatives that do not create value; rather, it encompasses initiatives that create value, improve customer engagement and experience, lead to a superior business model, or significantly enhance growth opportunities."

A.M. Best proposes to publish its innovation scores and assessment, and further, "explicitly" use the assessment within its business profile building block in analyzing a company's long-term financial well-being.

Comments from participants and interested parties are due no later than May 13, 2019. APCIA members may also email any general or specific comments to

AM Best's Gillard: New Innovation Criteria Looks Beyond Technology
James Gillard, senior managing director, criteria, research and analytics, discusses "Scoring and Assessing Innovation."

"We think now is a good time to get out and start assessing the innovation in the industry because companies that don't embrace this change, adjust to it, ultimately will be disadvantaged, which will lead to an erosion in their financial strength, which is, obviously, what we care about most." - James Gillard

A.M. Best to Discuss Innovation Assessment Measures at APCIA Enterprise Risk Management Meeting, June 20 at APCIA Washington D.C. Office