What Auto Insurance Company Ratings Mean

Everyone is on the lookout for the best car insurance provider. Who wants to spend their hard-earned money with anyone but the best? Auto insurance company ratings are one way to discern the best from the rest.

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However, there are a large number of different ratings systems out there, and it is important to understand exactly what each rating can tell you. It is also important to understand that a positive rating is not a guarantee that your relationship with your car insurance provider will be only smooth sailing.

Why Ratings Are Important

There are so many car insurance providers out there that it can be hard to know which one to choose. Some people go with the cheapest provider, some go with the first company they try, and still others go with whichever insurance company they see the most commercials for.

Yet, basing your financial future and possible physical well-being on low prices and funny television commercial characters is really not the best way to choose an auto insurance company.

You need to make sure you have a car insurance company that will be there for you in the event of an accident or loss.

Auto insurance company ratings are a way to get a feel for an insurance company’s reputation or financial stability without having to experience it for yourself. Just as an auto insurance provider looks at your driving record and credit history to assess your risk as a driver, so too can you use ratings to assess a car insurance company’s worth. Companies with poor financial standings or low customer service ratings are a poor choice for safeguarding your interests in the event of a car accident or loss.

When using ratings to assess insurance providers, you want to make sure that you are using reliable sources for your ratings. Customer complaint websites will certainly tell you about a lot of bad experiences with a company, but you have no way to gauge a poster’s understanding of the issues or even if their information is reliable. Look for ratings companies that have a proven history in the industry of providing straightforward, unbiased ratings.

Financial Ratings

One of the most commonly used forms of car insurance company ratings is financial ratings. These ratings are analyzed and delivered annually by companies that are designated as Nationally Recognized Statistical Rating Organizations, or NRSROs, by the U.S. Securities and Exchange Commission.

There are a handful of NRSROS to date that provide ratings for insurance companies, financial investment corporations, and even entire countries.

These ratings are concerned with the financial standings of the company or entity that is being rated.

The oldest NRSRO is Standard & Poor’s, which traces its roots back to 1860. The company maintains a website where the public can access annual ratings for car insurance companies once they have registered an email address.

Standard & Poor’s utilizes an alphabetical system to denote its ratings. The highest is an “AAA” rating, and the lowest is a “D.” They also use a plus and minus system to signify whether a rating is likely to go up or drop in the future.

A high rating from Standard & Poor’s signifies that the insurance provider has the financial capacity to meet its monetary commitments. In short, the company will still be able to pay on your claim even in the event of economic depressions and natural catastrophes.

Another common NRSRO is A.M. Best. This ratings provider requires no registration whatsoever to use its website, and it is very user-friendly. A.M. Best also used alphabetical characters to signify the financial strength of an insurance provider, with “A” being the highest and “D” as the lowest.

Similarly, A.M. Best also utilizes the plus and minus system to signify a company’s outlook. An “A++” is the highest rating, labeled as Superior, from A.M. Best. A high rating from A.M. Best indicates that an insurer will have the ability to meet its obligations as an insurance provider.

Both A.M. Best and Standard & Poor’s have a cut-off point when a rating goes from basically good enough to poor.

For A.M. Best, any company that earns a rating of “B” or lower shows the possibility of being vulnerable to unfavorable changes in the market and the economy. The cut-off for the same indication from Standard & Poor’s is anything below a “BBB-.”

Customer Satisfaction Ratings

Another set of ratings that is really important to look at is customer satisfaction ratings. These ratings compile the range of positive and negative customer responses to get an average; this can lead to an understanding of the true nature of a car insurance provider.

Usually, when judging a car insurance company, you really only have the information in their commercials from celebrity spokesman or fictional characters telling about how great the company is and how dedicated they are to their customers. But the truth really comes out with customer satisfaction ratings. A handful of dissatisfied customers will be balanced out by positive reviews.

But if thousands of customers are relaying poor feedback, then that really says something about a company.

One of the most reliable industry experts from which to find customer satisfaction ratings is J.D. Power and Associates and its annual Power Circle Ratings surveys. J.D. Power & Associates provides ratings on a wide array of companies, and they have been doing so since the 1960s.

Ratings for the auto insurance industry are broken into three categories. The first category is Auto Insurance Provider Ratings, and it rates factors such as pricing, billing, and payments. The second rating is about Auto Claims, and it assesses factors from the first notice of a loss to the settlement. Lastly, there is the Purchase Experience, which rates agents, websites, and pricing. These ratings can really tell the true story of how a car insurance provider treats its customers.

Company Ratings

Overall company ratings can also be useful when assessing a car insurance provider. One source for such ratings is the Better Business Bureau, or BBB, which has been offering ratings since 1912. The Better Business Bureau has made it its mission to identify the best businesses in any industry.

The BBB takes many different factors about a company into consideration when compiling its ratings. One of the most important factors is how the company has resolved customer complaints lodged against the company with the BBB. Other factors include how long the company has been in business, if the company is honest in its advertising, and if there are any government actions concerning the business, to name a few.

The BBB utilizes an “A+” to “F” rating scale, with “A+” being the highest rating available. A low rating for a car insurance company could indicate a lack of transparency in business, misrepresentation in advertising, unresolved customer complaints, issues with state licensure, or government actions.

Using Ratings in Your Search for Auto Insurance

All of these ratings are only useful if you take advantage of them; millions in the business world do so every day. When you are trying to compare car insurance companies, ratings can be the tie breaker between two companies or a red flag that explains why one company’s quote is so much lower than all the others.

The best time to use auto insurance company ratings is after you have a short list of potential insurers, but before you have laid down any money. Look for a company that has a good to high rating in all three areas. A company that is financially strong might have really poor customer service or vice versa–either way you certainly are not getting the best car insurance provider for your money.

It is also a bit too late to look at ratings after you have purchased a premium policy with a company. While you could certainly cancel your policy at any time and take your business to another insurer, chances are you won’t until you are directly affected by poor customer service or a weak financial standing. The best time to research ratings and use them to choose an auto insurance provider is right before you buy.

Not a Guarantee

Every website that provides ratings, whether it is financially focused or customer service-related, will also provide a disclaimer to explain exactly what its ratings are not. And what the ratings really are not is a guarantee that your experience with the company will be a positive one.

The risk and financial nature of the insurance industry pretty much assure that customers and insurance providers will not always see eye to eye when it comes to money.It’s probably one of the few sure things in the insurance world!

However, ratings are a way for you to hedge your bets that you are doing business with a company that can back up its financial promises and offer the high levels of customer service that you deserve.

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