Carrier due diligence is the process of evaluating an insurance companyTMs financial strength, product integrity, claims-paying practices, and operational capabilities before recommending its products to clients. Advisors, BGAs, and broker-dealers examine ratings from agencies like AM Best and S&P, review statutory financial statements, and consider factors such as capitalization, reserve practices, investment portfolio quality, and regulatory history. They also assess product features, illustration practices, complaint trends, and service performance. Effective carrier due diligence helps ensure that clients rely on insurers that are both financially sound and operationally reliable over the long time horizons typical of life insurance and annuity contracts.

BGAs and home offices conduct carrier due diligence on an ongoing basis, maintaining approved product lists and issuing guidance to field advisors. They may downgrade or restrict certain carriers if ratings fall, capital pressures rise, or product practices raise concerns. Advisors reference due diligence materials when explaining to clients why particular carriers are recommended and how financial strength ratings relate to long-term promises. Understanding carrier due diligence enables advisors to balance competitive pricing and features with the stability and reputation of the insurers they use, reinforcing their fiduciary or best-interest responsibilities.