Mathew B. Sims is Editor-in-Chief and has authored, edited, and contributed to several books. He has been working in the insurance industry ensuring content is accurate for consumers who are searching for the best policies and rates. He has also been featured on sites like UpJourney.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that exis...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Sep 18, 2020

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Here's what you need to know...

  • Auto insurance competition helps customers lower rates, as insurers are looking to increase their customer base
  • Every U.S. state has its own insurance regulatory body and commissioner
  • The Insurance Information Institute maintains that the hugely competitive auto insurance market is driving down the of insurance services for all Americans

Auto insurance competition helps customers get lower rates by keeping companies sharp and constantly on the lookout for ways to increase their customer base and subsequently, their revenues and profits.

There are limitations on just how competitive an insurance company can be. Like other insurance concerns, auto insurance providers are heavily regulated by each state in which they do business.

Each state in the United States has its own insurance regulatory body and commissioner, which controls the agencies that are licensed and duly authorized to provide insurance services to consumers. This insures that prices aren’t too expensive, making it easier for you to find cheap auto insurance.

As auto insurance is a highly competitive industry, make sure you get the absolute best rates available by entering your ZIP code in the free tool on this page.

Competition Forces Premium Rates Lower

According to recent reports by an insurance industry website, insurance coverage is becoming more affordable for a wider variety of people in the United States. Why? Insurers who ask what to do when your competitor lowers their prices will generally lower their prices as well.

The study completed by the Insurance Information Institute (III) finds that other organizations, including the Consumer Federation of America (CFA), have the wrong idea about insurance company competition.

The III believes that groups such as the CFA have incorrectly asserted that company-rating practices were in fact, driving insurance rates higher, for low income and moderate-income households.

The Insurance Information Institute maintains that the hugely competitive auto insurance market is driving down the price of insurance services for all Americans.

In fact, research conducted by the National Association of Insurance Commissioners (NAIC) has found that the cost of annual auto insurance premiums have been steadily dropping since 2005.

Thus far in 2012, insurance rate increases have stayed well within the general 3 percent rise in consumer prices as a whole according to III.

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NAIC Annual Reports

The NAIC news release summarizes the findings of a comprehensive two-year study. The complete report may be purchased from the NAIC store.

On average, the NAIC found that drivers in the United States typically paid about $4.00 less for auto insurance in 2008 than they did in 2005, $785.

The typical policy considered in this study includes not only liability coverage but optional coverage for collision and comprehensive damages. The same policy in 2005 cost the average consumer $832 per year.

Why is the NAIC important?

Who oversees auto insurance companies? The NAIC sets the standard for and provides regulatory support for the United States’ insurance industry.

Participants include the chief insurance regulators from all 50 states, the District of Columbia, and five current territories of the United States.

State commissioners use the NAIC guidelines as a model to establish their own standards and practices.

While each individual state remains autonomous and in complete charge of its own insurance systems, the NAIC is an important regulatory agency and oversight group.

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Advertising and Insurance Competition

A recent article in Forbes Magazine chronicles the lack of results from a recent deluge of radio, television, and print advertising by a number of the nation’s largest insurance groups.

Industry sources comment on the explosion in insurance advertising via the mass media in the last several years. Expenditures topped $5.7 billion in 2011 but the insurance companies saw very little return on their huge investment.

Even the charming gecko character from Geico hasn’t been able to reel insufficient new clientele to justify the company’s tremendous advertising budget.

Five years earlier, in 2006, the auto insurance industry spent only $3.3 billion, and with greater effect.

Consumers today are less influenced by snappy ads and professional pitchmen and are more interested in finding out what insurers are actually the best companies. Commercial dollars that were once used to protect a company’s existing customer base as well as bring in new business as a bonus are no longer as effective.

All available insurance providers have a new online presence through their own websites and web-based marketing as well as multiple identities on the numerous generic insurance shopping sites.

With a click of the mouse, you can easily and quickly shop rates for dozens of competing companies.

Comparison websites also provide helpful articles and expert advice for policy seekers. Handy calculators and other tools help make insurance shopping online quick, easy, and relatively painless.

What are the 10 best insurance companies? Traditional top ten auto insurance companies like Allstate, Farmers, and State Farm have been consistently losing ground to the young upstart insurance carriers like Progressive and Geico, which is owned by the Berkshire Hathaway financial group.

Take a look at the table below to see how rates among the top ten companies compare.

U.S. Average Auto Insurance Rates by Company
CompaniesAverage Annual Auto Insurance RatesAverage Six-Month Auto Insurance RatesAverage Monthly Auto Insurance Rates
USAA$2,537$1,269$211
Geico$3,214$1,607$268
State Farm$3,260$1,630$272
American Family$3,443$1,722$287
Nationwide$3,450$1,725$288
Progressive$4,036$2,018$336
Farmers$4,194$2,097$350
Travelers$4,435$2,217$370
Allstate$4,888$2,444$407
Liberty Mutual$6,073$3,037$506
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The insurance industry as a whole isn’t growing, so it’s up to the newer and hungrier competitors to steal away customers from their competition in order to increase their own customer base.

While not expanding their market share, the traditional companies like Farmers and State Farm are at least holding on to their existing customers.

Insurance carriers have realized that they have to advertise more than their prices to maintain their customer base and woo new customers into the fold.

Only 25 percent of insurance customers said that they were shopping for a new insurance provider in the most recent 12 months. This is down from 33 percent just a year ago, in 2011.

The good news for auto insurance companies is that of the 25 percent of auto customers who shopped for a new provider last year, 43 percent actually found a new provider, went ahead, and switched.

Forbes goes on to say that there is usually a large group of consumers each year whose circumstances may have changed and are therefore looking to change or upgrade their auto insurance. So if you want to know what are the worst insurance companies and the best auto insurance companies, see where customers are flocking to.

These changes can be prompted by marriage, divorce, job changes, or having children reach driving age.

Free Auto Insurance Comparison

Enter your ZIP code below to view companies that have cheap auto insurance rates.

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Consumers’ Preferences When Insurance Shopping

QuinStreet, Inc. recently released a marketing report that studied consumers’ auto insurance buying habits and preferences.

Not surprisingly, consumers rank affordable auto insurance as the most important factor in making a buying decision. More than 65 percent of consumers indicated that price was the primary reason to shop for a new insurance provider.

According to CPI values from the Bureau of Labor, auto insurance premiums have increased by a third over the last 10 years.

Auto insurance has outpaced increased housing and medical care costs and is almost on par with rising food prices in the past few years.

Auto insurance shoppers, the study suggests, can find widely variant premium rates, with rate quotes in some cases many hundreds of dollars different from the highest to the lowest.

Topping the list of auto insurance shopping concerns is confidence that they are getting the best possible prices.

Next, on shoppers’ minds is finding information that is accurate and that can be trusted. This important consideration for consumers is that they have the confidence that they are really going to get the coverage amounts that are needed.

After price, accuracy, and proper coverage, insurance shoppers are then looking to build an insurance package that suits their needs.

Finally, in order of priority, consumers are looking for great customer service after the sale.

Shoppers rate comparison-shopping websites highly in their search for new insurance providers.

As mentioned above, customers no longer base their buying decisions on advertisements and recommendations from a business associate or friend or family member.

Comparison-shopping can give you all the information you need to make informed choices about your auto insurance as well as helping you make the most economical choices possible when researching what is the number 1 insurance company.

Ready to find the best auto insurance near me? Take advantage of auto insurance competition by entering your ZIP code below to find all the top car insurance providers in your area with our free tool.