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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.
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