Why Staying with Major Auto Insurance Companies Is Important

There are many different kinds of auto insurance companies from which you can choose. There are large and small companies, as well as new companies and companies that have been in business for more than a century. While there is a wide range of insurers selling policies, a good rule of thumb is to stay with the major insurance auto companies.

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Major auto insurance providers have a lot of advantages over smaller, unknown companies. However, being a major name in the car insurance industry is not the end-all, be-all. While it does increase the possibility that you will get great rates, it is not a guarantee that the major providers will have the best rates.

Affordable Prices

First and foremost, the major auto insurance companies are generally able to offer really affordable car insurance rates; and the rates get better the cleaner your driving record gets. The major companies are so large that they are able to spread their risk around to reward the good driver with some really good rates.

Car insurance companies are concerned with how likely a driver is to make a claim in the future. Good drivers are unlikely to make a claim because they have a record of safe driving. Such drivers will make money for the car insurance company; they pay more in annual premiums than the insurance company pays out in their claims.

Major car insurance companies want to attract such safe drivers, so they offer really affordable rates or programs such as accident forgiveness and vanishing deductibles.

On the flip side of that equation are the drivers who have accidents and tickets in their driving histories.

 They seem like a bigger risk for putting in a claim because they have a history of doing just that.

Bad drivers cost money in claims, which eats into profits; and the claims that insurers must cover because of such drivers are higher than the premiums that the drivers pay. Generally, the leading car insurance companies have higher rates for high-risk drivers, but that is not always true.

Major insurance companies are usually required by certain states to cover part of the state’s reinsurance pool–because they have so many customers they can spread the risk out. A reinsurance pool is one option for high-risk drivers who can’t find car insurance anywhere else. Sometimes, major insurance companies may be able to offer less expensive rates to high-risk drivers, but this is usually an exception rather than the rule.

Customer Service

Major insurance companies have achieved their large size and stature by getting a few things right. One of these advantages over smaller insurers that has separated major car insurance companies from the rest is customer service.

Good customer service is worth its weight in gold. When you have a question about your policy, a problem with a payment, or an emergency due to an accident or theft, you want someone who is polite and helpful on the other end of the phone. Such practices create loyal customers who stay with a company year after year.

Good customer service includes the ability to quickly and easily reach a live representative; it also includes having expert, knowledgeable representatives who can answer your every question. On the claims end, good customer service includes helping process prompt and accurate claims, and delivering fair settlements.

Financial Strength

Another area where major auto insurance companies shine is their financial strength. Car insurance is basically a gamble, with the insurers betting that they will make more money in premiums than they have to pay out in claims in any given year.

However, some years are worse than others. A lagging economy or a natural disaster generates more claims and less total premiums for a car insurance company, narrowing profit margins. People cut back on coverage and multiple damage claims must be paid if there is a hurricane, flood, tornado, hail storm, or earthquake.

Car insurance companies that have a firm financial footing are able to absorb such losses without going out of business. They have enough assets and offering diversity to make it through tough times. Major car insurance companies have this firm financial footing much more so than smaller providers.

Financial security in an insurance company is an important factor. How would you feel if you paid your premiums on time for years, but find that your insurance company can’t pay your claim because they are going bankrupt? Who will cover your losses to make you whole?

Auto insurance companies promise security and financial support. They need to have the financial wisdom to be able to live up to that promise every time.

Financial strength is so important that the U.S. federal government charges rating agencies to keep tabs on the financial footing of companies in the insurance industry.

The U.S. Securities and Exchange Commission labels the best rating agencies as Nationally Recognized Statistical Rating Organizations (NRSROs) to provide an appraisal of the companies’ financial vigor.

Rating organizations such as Standard & Poor’s, Fitch Ratings, and Moody’s all keep track of the financial health of the major auto insurance companies, as well as companies in other industries. These ratings give an evaluation in the form of an alphabetical measure, with A, AAA or A+ designating the highest rating.

Most major car insurance providers have truly strong financial ratings. That means that you can rely on them to be able to pay your legitimate claim, even if it is the result of a natural disaster or during a time of economic crisis.

Availability

A further category that makes staying with a major insurance company important is the wide availability of policies. The major insurers provide insurance in all 50 states in the U.S., and possibly territories like Puerto Rico. Not all insurance companies can make this boast.

Every state requires insurance companies to be licensed before being able to lawfully sell insurance in that state. Insurers must pay for licensing and disclose their finances. Smaller insurance companies do not have the finances to sell insurance in every state.

If you move to another state, you will have to get insurance coverage with a new insurance company if your current insurer does not offer coverage in your new state.

With a major auto insurance company, all you have to do when you move is alert them to your new address so they can readjust your rates for the area where you now live.

Research and Compare Companies

Staying with a major auto insurance company seems like a good choice. However, being insured by one of the largest and most well-known insurance companies is not a total guarantee that you will find the best rates.

One drawback from getting so big is that there is not as much accountability within the company. An insurer can be so large that it is hard for company regulations and policies to be enforced in all areas. You might encounter rude agents, inexperienced representatives, and behaviors that are not aligned with best practices.

In a strange twist, the excellent customer service and policy pricing that made such an insurance company one of the most recognized can lead to a drop in quality. Then, customers start to feel like numbers rather than appreciated clients, and business drops off. Soon it becomes noticeable that there is a problem, and that is usually when you hear of a company being restructured or led by new management.

There is no way of knowing for sure if such a scenario will play out with any of the current major car insurance companies–some suffer from being too large and others keep up their standard of quality high. However, there is one way that you can check how an insurance provider is doing on the customer service front.

Consumer-based ratings, such as those presented by J.D. Power and Associates, allow you to view ratings taken from actual customer surveys. They cover customer service areas such as the buying process, contacting the company, pricing, and claims. One look shows that some major insurers have very high ratings and some have very low ratings.

Stick with those main auto insurance companies that have consistently high ratings in all areas, year after year.

Compare Rates Too

Furthermore, the major insurance providers are likely to have some of the best rates, but not always. It is still a good idea to get quotes, because rates can vary greatly for the same coverage even among the chief car insurance companies.

If you need to be made a believer that rates can vary widely, go check out the comparison tool offered by the Massachusetts Division of Insurance. While the tool pertains to insurers in the state of Massachusetts, the implications ring true for the rest of the country.

The comparison tool allows you to choose from seven different driver profiles and from a multitude of cities to view the annual premiums with approximately 30 insurance providers. Differences in pricing for identical coverage for the same drivers range from a few hundred dollars to more than $2,500 a year!

While sticking with a major auto insurance company is generally a safe bet, you want to make sure that you are sticking with the leading insurer who also offers you the best rates.

Compare quotes online, over the phone, or in person. While using quote comparison sites are the easiest and quickest way, the important thing is to compare as many quotes as possible.

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