How can I tell how to rate auto insurance?
A.M. Best and JD Power rate U.S. auto insurance companies in annual reviews. All State and Geico were both rated highly by JD Power in recent studies.
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UPDATED: Nov 4, 2021
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- Determine how much auto insurance you need and then compare auto insurance quotes from auto insurance providers
- If you can’t find reliable financial information about the auto insurance company, it’s usually best to find another auto insurance company for your business
- Make sure to research possible insurance companies through A.M. Best, Standard & Poor’s, Moody’s, Fitch’s, or Weiss
Knowing how to rate auto insurance is fairly simple. Determine how much auto insurance you need and then compare auto insurance quotes from auto insurance providers.
Large and small auto insurance companies must register with your state’s department of insurance.
If you receive an auto insurance quote from an insurer but can’t find any financial information about the company, the auto insurer may be owned by a larger parent company.
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In some cases, the auto insurance company may be owned by one or more intermediate parent companies with an ultimate parent, or holding company, at the base of the financial structure.
If you can’t find reliable financial information about the auto insurance company, it’s usually best to find another auto insurance company for your business.
What kinds of auto insurance rating organizations exist?
Reputable auto insurance companies, whether they’re publicly traded or private companies, must submit financial information to insurance regulatory bodies and nationally recognized statistical rating agencies like:
Dun & Bradstreet and other financial databases collect information on a variety of public and private insurance companies.
A.M. Best, the country’s first credit-rating organization focused on the insurance industry, started rating insurance companies in 1906.
The company applies more than 100 different financial tests to the insurance company’s financial statements to determine the firm’s financial health and resiliency.
After comparing each company to the specific industry niche and allowing for economic conditions, A.M. Best assigns ratings to the auto insurer.
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Why should I use an auto insurance rate to help me choose auto insurance?
Many insurance companies, like other financial institutes, simply fail.
The auto insurance industry is based upon the insurance company’s ability to take in premium dollars and then pay out auto insurance claims in the event of property & casualty damages.
When an auto insurance company doesn’t have enough financial resources to pay out policyholder claims, the auto insurance company becomes insolvent.
Depending on the state in which the company operates, the auto insurance company submits to a winding down process.
Administrators assigned by the insurance department in that state must oversee the distribution of the auto insurer’s assets to those holding claims against it.
Usually, the warning signs of the auto insurance company’s pending insolvency are visible to financial analysts reviewing the auto insurance industry.
When the insurance company takes on more debt as a percentage of capitalization than other insurance companies, a rating organization asks why the company is taking on so much risk.
If the market moves against the auto insurance company, the chances of insolvency increase.
The insurance company must pay its debts to other businesses, and it must pay the claims presented by policyholders.
If the company sells bonds to bring in additional capital, bond interest and principal must be repaid on a timely basis.
Sometimes, cataclysmic events like hurricanes, tornadoes, or tsunamis hit an area in which the auto insurance company does business and has many customers.
If the auto insurance company hasn’t planned for the eventuality of such an event, insolvency of the company may occur almost immediately.
A.M. Best offers relatively easy-to-use grading system of auto insurance companies.
If the company receives an “A” most people automatically equate the grade with excellent performance and financial stability.
For that reason, consumers choose to purchase auto insurance more often from an auto insurance company with an “A” rate than one with a “B.”
Although A.M. Best says “B” is a “Good” insurance company, most people prefer to see that their auto insurance company is rated “Excellent” or “Superior.”
How do I compare auto insurance companies?
After you’ve researched the auto insurance company’s history of operations in your state, obtaining the company’s financial rate from A.M. Best or other NRSOs is the next step.
Compare each auto insurance company’s quote on a line by line basis. For example, if you want $300,000 in comprehensive coverage, comparing larger amounts of coverage isn’t an accurate comparison.
Who is the best person to call to get auto insurance quotes?
That’s the very best question you could ask. You should have a few quotes in hand before you opt to speak to a live person with any one provider.
There’s no reason to call individual auto insurers to obtain individual auto insurance quotes. Request fast, free auto insurance quotes by typing in your home zip code now!