When it's time to choose a car insurance company, it's important to evaluate not only the quote but the company itself. Fortunately, there are many tools available to do so. In addition to customer reviews, insurance companies undergo formal evaluations by credit reporting agencies.
Purchasing insurance is a unique process because unlike other products and services, you'll buy it and then hope you'll never have to use it. Even so, before you choose an insurance company, evaluate their claims handling process, their financial stability, and their customer service.
How the company handles auto insurance claims matters
The goal with auto insurance is to have enough coverage to handle the problem without putting your personal assets at risk if your property is damaged or if your actions damage someone else's property. Unfortunately, it can be difficult to know how much insurance to purchase. Each state has rules about the minimum amount of coverage you must carry, offering a starting point. You have a lot of choices when it comes to the types of auto insurance you want and how much coverage to buy. Many people focus their attention on this aspect of purchasing auto insurance without taking the time to learn about the company's history of paying claims promptly.
When you suffer a loss that's insured, you'll need your auto insurance company to pay the claim as quickly as possible to avoid incurring additional financial losses. Like any other business, an insurance company can experience financial distress and become unable to pay their customers' claims.
The world of auto insurance is intensely competitive. J.D. Power released their 2018 U.S. Auto Claims Satisfaction Study to help consumers evaluate how their insurance company may behave during the claims process. Across all insurance companies assessed in the study, overall satisfaction with the claims process reached a record high. The entire industry improved with regards to customer service.
When researching an individual company, look for reports that use auto insurance related studies to inform their rankings. Sponsors heavily influence many blogs and websites, so it may be difficult to learn the truth about a company's reputation among consumers by depending on this type of information.
In addition to how they handle the claims process, be sure to consider the following customer service related criteria when researching a company:
- strong reviews from individual customers
- competitive overall pricing
- discounts for safe driving habits, paying in full, and insuring more than one vehicle
- solid online presence
- intuitive website
- roadside assistance
- mobile app
- quick approval process
- 24-hour claims service
- diverse policy options
You can also find information about your insurance company by checking well-known sites like Consumer Reports.
Learn about the company's overall financial stability
A highly-rated insurance company pays claims in a timely fashion, can pay their creditors, and compared to other insurance companies, performs well financially. Here are some of the criteria that various rating agencies use to evaluate the financial strength of an insurance company:
- company structure
- business focus
- claims payment history
- financial reserves
- management style
As part of your research process, check out the company's rating with Fitch, Moody's, Standard & Poor's, and A.M. Best. Companies that receive a good report from these insurance rating organizations have a solid history of treating their customers, vendors, and employees well. Here are the highest ratings available from each insurance rating company:
- Fitch: AAA indicates exceptionally strong
- Moody's: Aaa indicates the highest quality
- Standard & Poor's: AAA indicates a solid rating
- A.M. Best: A++ indicates a superior rating
Insurance companies with a low rating may be having financial difficulties that could prevent them from being able to pay a claim should you need their assistance.
In some cases, a major insurance company may have many smaller companies under its umbrella. Each of these has its own credit rating or satisfaction rating, which may differ from the rating earned by the primary insurance company.
Insurer financial strength (IFS) ratings are available to the public for use as a tool to help decide whether to trust an insurance company. Each rating agency has their own scoring system.
For example, an IFS rating of BBB from Fitch is comparable to an A- rating from A.M. Best. For this reason, it's vital to become familiar with the rating system of the organization before comparing a rating from Moody's to a score from Standard & Poor's or other insurance rating organization.
Why it's important to understand insurance company ratings before purchasing your auto insurance policy
Few people are able to pay costs associated with a crash, accident, or collision with only their assets. Insurance protects your property and bank accounts from a substantial financial loss. Your insurance policy won't help protect your assets if the company can't pay the claim, however. You'll pay a premium for good insurance, and to get the most out of that investment, do some research to confirm that if you need to make a claim, you can do so while feeling confident that your auto insurance company will pay the costs of your incident promptly.
Insurance rating organizations evaluate all types of insurance companies. It's crucial to check the ratings of every insurance company you assess, whether it's for an auto policy, a life insurance product, or even a business insurance policy.