When shopping for insurance, saving money is not the only consideration. For insurance that you want, as opposed to insurance you are required to buy, this goes double. So, how do you make sure that you don't end up with one of the worst insurance companies in America?
One way to make sure the company is not in the business of denying claims, is to check the loss ratio or combined ratio. Loss ratio, in insurance, is loosely defined as the amount of the premium you pay that goes in claims. As Health Care Reform progresses, government regulators will be enforcing more stringent requirements.
Companies that are proud of their loss ratios will likely advertise them. Some state Insurance Commissioners make that information available for consumers. I like looking to the channel where insurance carriers will brag about not paying claims, in their investor communications. You can look up the financial statements for publicly traded companies at the Securities and Exchange Commission. Just keep in mind that losses that are reported in paying benefits is good for you, but losses paid in commissions and administration tends to be bad for you. It is not always bad, since it can reflect customer service.
Second, you want to be sure that the insurance company can pay out claims without constantly raising your rates. Several services rate the financial stability of insurance companies. The most commonly used rating is A. M. Best. The rating is like the grades you received in school. Most of the companies you recognize are rated at least a B.
I caution against using the most commonly used method, word of mouth. Recommendations are a good source for finding opportunities that you may not have known about. Recommendations from individuals tend to be horrible ways of comparing competitors offering similar services. It is not systematic, comprehensive or unbiased.
Comparing the experiences of two different people is hard because they rarely speak about the same thing. On a website, you will often see a star system. That helps to standardize the information by prompting the reviewer to think about the whole experience. If you are talking to a customer, ask about specific information. How do you file a claim? How does the company bill? Have they raised your rate?
Individuals can only tell you about their personal experience. They don't go around evaluating many different companies looking to compare them. Make a list of your choices and find comparable information so that you can make an informed comparison. Just because the people you know have never heard of an insurer called American Collectors does not mean that it is not the most suitable car insurer for you.
Most importantly, anecdotal information tends to be very biased. People rarely take notice of the insurance company that succeeds in giving you zero hassles. Hopefully, paying your insurance bill and filing a claim will take as little time or thought as possible. The customers who would give you the best recommendations are the least likely to think about their insurance at all.
For more help with evaluating your insurance options, please contact me directly.
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