To help answer this question, we consulted two insurance experts: Dennis Howard, director of the Insurance Consumer Advocate Network (I-CAN) and a retired insurance adjuster, and Doug Heller, a consumer advocate at The Foundation for Taxpayer & Consumer Rights,
a California-based consumer advocacy group. Both had several ideas for
consumers determined to make sure their car insurance investment is
directed toward a trustworthy company, one that will pay on time and in
full.
1) Visit your state's department of insurance Web site.
Although you may not be familiar with it, your state, and every state,
has a department of insurance. Most departments have Web sites, and many
publish "consumer complaint ratios" for all of the insurance companies
that sell policies in their state. This ratio tells you how many
complaints a car insurance company received per 1,000 claims filed.
Both experts recommended that consumers use complaint ratios to
screen prospective insurers. "Just because they're a big name doesn't
mean that they'll be a 'good neighbor' or that you'll be 'in their
hands,'" Heller noted.
If you've done your homework, you should already have a list of car
insurance companies with the lowest premium quotes. Now jot down the
companies with the lowest (or best) complaint ratios. Then, compare your
two lists — the companies that rank best on both lists merit your
strongest consideration.
If you can't find complaint ratios for your state, Heller recommends
examining the complaint ratios published by other states. Keep in mind
that a single insurance company's practices can vary significantly from
state to state — a subpar ratio in one state doesn't necessarily mean
the situation is the same in your state. But watch for general trends.
If an insurer is getting a lot of complaints in several other
states, you probably don't want to get involved with this company. The
I-CAN Web site provides links and contact information for every state's department of insurance.
Also note that insurance department Web sites often provide basic
rate comparison surveys. These can give you a rough idea of which
insurers might interest you on a financial basis without the hassle of
typing in all your personal information (as you must when you use one of
the online quote sites).
2) Find out which insurers body shops recommend. One
of the best ways to identify reliable insurers, according to Howard, is
to contact local body shops that you trust and ask for their
recommendations. Body shop managers have a unique perspective to offer,
since they regularly interact with insurance adjusters. They know which
companies have the smoothest claim processes, which affects how quickly
the work can be completed on a damaged vehicle. And they know which
companies are pushing aftermarket parts, in lieu of genuine original
equipment manufacturer (OEM) parts, to cut costs.
3) Check the J.D. Power Ratings. J.D. Power and
Associates collects data from individual policyholders nationwide and
rates them according to coverage options, price, claims handling,
satisfaction with company representatives and the overall experience. A
quick visit to the J.D. Power Consumer Center will give you a feel for
how the major carriers stack up. J.D. Power also publishes an annual
survey of major auto insurers — Amica and Erie have finished at the top
for the last three years. These are also companies that Howard
recommends: "Erie is sold by independent agents, who are very
knowledgeable about the product. I like their claims handling approach.
Almost all other companies look at a claim and find a way to not pay it.
Erie and Amica will look at it and try to find a way to cover it."
4) Consider insurers' financial strength ratings. As a final check, you can take a look at the A.M. Best and Standard & Poor's
ratings. Both companies publish financial strength ratings for all
insurance companies — these "measure" an insurance company's ability to
pay out a claim (they have nothing to do with the way a company treats
its customers).
For the general consumer, looking up these ratings is only a
formality, since most of the well-known carriers are going to be a safe
bet. Moreover, independent agents would be unlikely to recommend a
company with dubious financial standing. Still, if you're considering a
smaller, unfamiliar insurance carrier, you might consider this research
time well spent. Insurance companies often provide this information on
their Web sites, but if not, you can run a search at the A.M. Best and
Standard & Poor's sites.
The A.M. Best rating is expressed as a letter grade from A++ (the
highest) to D. Some companies may be assigned ratings of E (indicating
regulatory action regarding the company's solvency), F (in liquidation)
and S (suspended). In any case, you should only work with companies that
have at least a B+ rating.
The Standard & Poor's ratings range from AAA (the highest) to CC.
Additionally, some companies receive ratings of R (under regulatory
supervision) and NR, which means "not rated." The letter grades might be
modified by a plus or minus mark. Consider only those companies that
have at least a BBB rating.
5) Still confused? Consider working with an agent.
It used to be that everyone purchased auto insurance from an agent, but
now, car insurance companies like Esurance, Geico and others allow you
to purchase insurance directly — over the phone from a customer
service representative or online. Still, many of the major players have
preserved their national networks of local agents — even if you use
State Farm's or Allstate's Web site, you will still be assigned a local
agent.
There are two kinds of agents:
- a) the captive agent, who represents only one insurance company (major carriers like AAA, Allstate and State Farm sell policies through captive agents).
- b) the independent agent, also known as a broker, who represents several insurance companies and therefore does not have a vested interest in selling you a policy from one particular company.
The main advantage in having your own agent is that this person has a
vested interest in keeping you happy. Accordingly, he can become
familiar with your situation and guide you toward a suitable policy.
Howard favors the use of agents and advised, "Don't rule out direct
providers, but my personal preference is to have an agent, preferably an
independent agent, write your policy for you.... An independent agent
would become aware of less advantageous conditions with one company [and
help you move to another]. You can change carriers without changing your agent. I encourage consumers to develop a relationship with their agent."
The prospect of good working relations with an agent may help you to
make a decision: When Heller purchased auto insurance for the first
time, two insurers gave him similar quotes, but he went for the slightly
higher one because the agent had been highly recommended by a friend.
"You shouldn't go direct without always checking out other options," he
said.
But, he cautioned, "Never feel pressured by a broker or an agent.
Take the time to talk with an agent or a broker as well as do your
online research. You may not need an agent — you may find a better deal
with a company that operates direct."
Independent agents sometimes charge a fee for their services, but you
may be able to negotiate that. You should agree upon any fee in writing
before making a purchase. Look for agents who are certified by
Independent Insurance Agents of America (Big "I") or Professional
Insurance Agents (PIA).
Of course, we know you have better things to do with your time than
think about car insurance. Realistically, most people won't be able to
do everything on this list before choosing an insurance carrier. But if
you feel that you've been burned during the claims process in the past,
consider at least one or two of these suggestions — you'll thank
yourself if you're ever involved in another accident.
