Standard & Poor's has long rated the financial health of insurance companies, issuing letter-grade ratings that judged the ongoing abilities of insurers to pay their policyholders' claims and meet related financial obligations.

Such judgments are crucial in a marketplace where the product (an insurance policy) is often bought many, many years before its intended use (payment of a claim). Now, Standard & Poor's is creating a new ratings effort, called the Security Circle program, to provide consumers with understandable, reliable evaluations of insurance companies.

Customers must have confidence that their insurers will be around, and in sound financial condition, when it comes time to pay their claims. This is particularly true with life insurance and other death-benefit policies, but also applies to annuities, health care coverage, and property and liability insurance. 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.

To evaluate and meet this need, Standard & Poor's spent more than three years studying the marketplace. 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.

Among the major findings:

• An insurer's financial strength is always key to the buying decision.

• Ratings are the preferred way to judge an insurer's financial strength.

• Standard & Poor's is by far the most recognized and trusted name among buyers.

Standard & Poor's responded to these findings by launching Standard & Poor's Security Circle Icons.

The icons are awarded to insurance companies that voluntarily underwent Standard & Poor's toughest review and achieved one of Standard & Poor's top four ratings, known as "secure" ratings: BBB, A, AA, or AAA.

Standard & Poor's is also launching a concise, plain-language report, the Standard & Poor's Insurer Profile. These profiles will soon begin appearing on INN, which has published Standard & Poor's ratings on the Internet since 1995, and will be expanding its partnership with Standard & Poor's in these new efforts.

INN's expanded information services include a powerful interactive ratings tool that permits consumers to sort and access all of Standard & Poor's financial strength ratings. This tool will be enhanced in future weeks to include increasingly helpful and detailed information about rated insurers, so please bookmark it and make it a regular part of your Internet activities.