Choosing the Best Auto Insurance: Is a Cheap Premium Worth the Price?

By Ryan Hurlbert on March 27th, 2010
Auto Insurance

You've shopped around for car insurance, and now it's time to make a choice. Although premium rates and the type of coverage you purchase is an important part of your decision, it is only half the story.

What good is your auto insurance policy if your insurer can't or won't pay your claim? When shopping for auto insurance, you should also consider an auto insurer's claims service, customer service, and consumer complaints against the company.

Ask a Friend or Family Member

If you know someone who was involved in a car accident within the last few months, ask how the claim was handled. Ask if he or she would recommend the company and whether they felt like they were treated well.

But remember that a person's feelings about how claim was handled often on whether the customer understood his or her coverage and had reasonable expectations --either of which could be skewed.

You should also ask how quickly the insurance adjuster made contact, how thoroughly the claim was investigated, and if adequate payment for injuries was received. For example, was the injured party allowed the number of physical therapy sessions the doctor recommended, or was the number of treatments limited by the insurance company?

J.D. Power Ratings

J.D. Power and Associates has been surveying consumers since 1968 and compiling reports and rankings on everything from cars to travel and hotels. J.D. Power and Associates also rates auto insurance companies and has three studies among their 2009 Auto Insurance Ratings, including the Auto Insurance Provider Ratings, Auto Claims Ratings, and Insurance New Buyer Ratings.

In its Auto Insurance Provider Ratings, customers were surveyed on their satisfaction with their current auto insurance company in five categories:

1. Overall satisfaction: All aspects of the service experience.

2. Contacting the insurer: The experience of contacting the insurer, from local agent to automated telephone service.

3. Policy offerings: The variety of coverage options available, and how well those options meet needs.

4. Billing and payment: Timeliness, clarity, and accuracy of billing statements and the payment process.

5. Pricing: Cost of policies given the extent of coverage.

The Auto Claims Satisfaction study focused on the entire claims process, so you can get a better picture of what each company does well -- or not so well. Finally, the Insurance New Buyer ratings evaluate the experience customers have when they're switched to a new insurance company. The study looks at factors from the overall purchase experience to the customer's satisfaction with the insurer's Web site.

The American Customer Satisfaction Index

Another way to gauge potential auto insurers is through customer satisfaction. The American Customer Satisfaction Index (ACSI) links customer expectations, perceived quality, and perceived value to customer satisfaction. ACSI reports customer satisfaction on a 0-100 scale for many industries, including Property and Casualty Insurance. Although limited in scope, the report spans several years, so you can see if a company is improving or slipping in their satisfaction rankings.

State Insurance Departments & Consumer Complaints

When someone complains about an insurance company to their state's insurance division, it is logged and investigated. Most state insurance departments publish consumer complaint ratios on their Web sites. However, be careful if your state publishes raw numbers of complaints and not ratios: Raw numbers could be misleading because they don't take into account an insurer's amount of business in the state. A large company with 100 complaints is doing better than a small company with 100 complaints.

A complaint index compares the number of complaints received relative to the amount of business an insurer does in that state (typically stated in terms of premium dollars collected) to produce a score. A score of 1.00 is average, so any company with a higher score has received more complaints than would be expected for the relative amount of business.

Complaint indexes are handy, but there are a few things to keep in mind. We tend to think of insurance companies as one big entity, but in reality most insurance companies are made up of many smaller companies. By separating a large conglomerate into different companies, an insurer isolates losses in any one compan, while protecting the solvency of the others.

For instance, in Oregon there are nine different companies under one well-known carrier. The complaint indices for this large carrier range from 0.00 to 42.41. If you don't know exactly which of the nine companies your policy has been written under, it may be hard to discern an accurate complaint picture from the index. It is also important to keep in mind that the state insurance division determines if a complaint is valid, but no determination is given to a complaint's severity and the index counts each complaint equally.

If you just can't decide between two companies, go with the insurer that has the best claims satisfaction rating. The quality of your insurer is most apparent when you file a claim and you have the least amount of time and patience.

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