How do I tell what are substandard auto insurance companies?

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Things to Remember...
  • As a result, consumers can easily land coverage policy options with a good list of auto insurance companies as well as not-so-stellar ones
  • Each state has an insurance commissioner and regulatory law to make sure such operations don’t exist, using licensing and audits to find questionable operations
  • The way to avoid these kinds of outfits, which typically take on the role of independent insurance brokers or small companies, is to demand proof of their licensing and then check them out with the local state insurance commissioner
  • Be sure to check their customer ratings and reviews as well as compare their rates with other insurance providers


There are many auto insurance companies that operate in every state and town. Some are national companies that operate in every 50 states or most of them.

Some are small, one-office outfits barely covering a couple of counties. For drivers on public roads car insurance is a basic legal requirement, but whom they do business with for coverage is up for grabs in a free market.

As a result, consumers can easily land coverage policy options with a good list of auto insurance companies as well as not-so-stellar ones.

This unpredictable risk gets emphasized with the fact that many people choose car insurance coverage first based on cost rather than other factors.

Unfortunately, the lowest bidder is not always the best to do business with. Enter your ZIP code into our FREE auto insurance comparison tool to see a number of quotes offered to you from reliable companies.

Signs of a Fly-by-Night

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The most suspect of substandard auto insurance companies are those that are close to or actually operating as scams.

Each state has an insurance commissioner and regulatory law to make sure such operations don’t exist, using licensing and audits to find questionable operations.

However, criminals tend to be very creative, and they still find a way to operate.

Fly-by-Night operations typically work with fast talking and high-pressure sales. The goal is to get the payments and cash from the consumer as quickly as possible.

Then the operation will fold and disappear before anybody can make a claim and figure out what’s going on. While there may be paperwork, it’s all fraudulent and make-believe.

The way to avoid these kinds of outfits, which typically take on the role of independent insurance brokers or small companies, is to demand proof of their licensing and then check them out with the local state insurance commissioner.

If they are legitimate, the company will be validated. If not, the outfit will likely disappear to avoid an investigation. In order to be safe with a cheap auto insurance policy, know how to interact with them before you buy quickly.

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Problems with Paperwork

Another more subtle sign of a problem car insurance company can be seen with the paperwork involved.

Insurance is a highly documented business. Substandard outfits giveaway their presence when it comes to meeting all the necessary paper requirements.

Companies that are not following the rules as required or are looking to cut corners tend to get sloppy with their forms and details. This becomes apparent when mistakes are made.

When confronted with the issue, such company’s personnel then typically try to brush off the issue as a non-problem. When these signs and behavior appear, it’s time to walk away and find another insurer.

Good insurance companies won’t allow sloppiness in records to occur. There’s too much at stake and a regulatory agency could shut them down until the matters get straightened out.

Insurance companies are audited regularly so eventually mistake patterns will be found, triggering regulatory responses.

As a result, such businesses depending upon good reputation and open selling don’t want to let these problems occur in the first place, even if it happens to catch more customers.

Very Small Market

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There are a number of good auto insurance companies that exist, but they operate in small markets because they have yet to build up enough assets to work a bigger market.

Unfortunately, even good management can operate in a company that runs into financial problems and goes into insolvency.

Many small insurance outfits never last long enough to realize larger markets because their finances don’t work out.

Consumers can have a hard time discerning between a good or bad insurance company when outfits are small.

Be sure to check their customer ratings and reviews as well as compare their rates with other insurance providers.

Many are not public so their financial records are not available through stock market information. They operate as private outfits, only reporting to state insurance commissioners.

While their status is available, it is hard to find in government reports.

Without good references, customers searching for a new insurer may be better off working with a bigger, more established company operating nationally than a small outfit.

Ways of Avoiding Problems

While seeking insurance coverage with larger companies can avoid some shaky operations that operate at a smaller level, it doesn’t mean that the customer service will automatically be stellar.

One of the best ways for customers to avoid substandard service still remains referrals and other customers’ opinions of how they are served.

Customer car forums and Internet chat sites offer some bits of knowledge.

Enter your ZIP code into our FREE car insurance comparison tool to get valuable information about the companies available to you.

More descriptive sources come from others who already have car insurance with different companies.

With a bit of poking around, a consumer can find out quite a bit of information about which companies treat customers well and which ones just want premiums paid and claims delayed.

Finally, local Better Business Bureaus and commerce monitors can help identify problem companies versus good ones maintaining their excellent ratings.

Even though such sources are not guarantees combined with other sources the information can help pick out the substandard players from good companies.

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