According to the Insurance Information Institute, there are over 3,000 insurance companies in the United States alone. With so many insurance companies to choose from, how can the average consumer be sure to pick the right insurance company for their specific insurance needs?
Fortunately, there are only two key factors that determine an insurance company's value to the consumer, and these factors are fairly easy for the average person to research. What are the two factors which make or break an insurance company? Financial stability and quality of service.
Key #1: Choose an Insurance Company With Financial Stability
The number one consideration when choosing an insurance company is its financial strength. Buying insurance is a long-term proposition and consumers need to be sure the company they choose will be around when they need it, and also be able to pay their claims.
How to Determine the Financial Stability of an Insurance Company
Consumers can use a publication called Best's Insurance Reports to identify an insurance company's financial stability. Published since 1905 by A.M. Best Company of Oldwick, New Jersey, the report can be purchased for about $200 or it be viewed for free at many public libraries.
Best rates insurance companies either A+, A, B+, B C+ or C. Savvy consumers should only choose insurance companies with an A+ rating. To be extra safe, consumers can check the insurance company's past ratings as well as their current rating. Because ratings can change in a relatively short time, it's important to get a recent report by calling Best's 900 number for the most up-to-date insurance company score.
How to Interpret A.M. Best's Insurance Company Ratings
When using Best's recommendations, it's important to know their “code.” Insurance companies with the strongest recommendations are described by Best as having “most substantial margins for contingencies” and “most favorable operating results.” If the insurance company's description qualifier is “very” instead of “most” this means that the company is weaker than other companies with a “most” rating. If there is no qualifier at all, the company is weaker still.
Key #2: Choose an Insurance Company with the Best Customer Service
Although financial stability is important, it's not an indicator of how fast an insurance company pays claims or how well they service their customer. Unfortunately there is no universal ranking for customer service, but an insurance company's complaint ratio is a good indicator of their service.
How to Find an Insurance Company's Complaint Ratio
To find an insurance company's complaint ratio, consumers can go to the National Association of Insurance Commissioners website and type in the insurance company's name and the consumer's resident state to generate the complaint ratio score. Compare the insurance company's score to the national median score. If the insurance company's complaint score is higher than the national median score, that's a red flag and the consumer should look elsewhere for insurance.
Choosing the best insurance company is an important financial decision. Consumers should be sure to research the insurance company of their choosing to insure that their insurance policy purchase is a sound investment.
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