Know the health of an auto insurance company before you buy

AM Best and the NAIC both have national rating systems which measure the best companies. If you need auto insurance, the average rate is around $79.58/mo.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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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 and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Nov 17, 2021

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Here's what you need to know...

  • The financial health of an auto insurance company is important
  • There are several financial rating websites you can use to investigate your insurance company
  • It’s a good idea to compare at least three different companies before making a final decision

The health of an auto insurance company can make the difference between being able to depend on them for financial protection if you need to file a claim.

There are numerous ways to learn about the financial health of an insurance company before you buy.

In most cases, it is a matter of doing a little investigation on your own and reading reports from several different sources so that you get an overall picture of an insurance company.

Find FREE car insurance quotes to compare by entering your zip code above!

Financial Health


One of the central aspects of health is their financial stability. Insurance companies are built on the premise of making money. They are not nonprofit organizations, so their profitability is a key factor in determining financial health.

When you pay premiums, they are used by insurance companies to invest and profits from those investments are put back into the company to build their financial reserves.

The most unusual discounts offered by auto insurance companies are obscure because they want to keep premiums high.

A good list of auto insurance companies needs to have companies with financial reserves available to pay claims.

The larger their financial reserves, the better able they are to pay large numbers of claims if events occur that result in massive losses for policyholders.

A good example of this kind of event is the storms of the spring of 2011 in the southeastern United States. These storms resulted in billions of dollars in damage.

Insurance companies were hit with literally hundreds of thousands of claims on homeowners and auto policies.

Companies in with strong financial reserves were able to mobilize within hours or days and start issuing claim payments immediately.

Some companies have pulled out of the region and are no longer doing business in the area. A few insurance companies did not survive and are out of business completely.


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Ratings Sytems

The three best-known company evaluation organizations are AM Best, Standard and Poor’s and Fitch.

These companies regularly monitor and evaluate the financial health of insurance companies and publish their finding on their websites.

You can find out about the financial health of insurance companies by looking at rating reports from independent monitoring and evaluation organizations.

Rating grades are issued based on a ranking system similar to school grades. Companies with superior ratings are given grades of “A++.”

Insurance companies with excellent ratings are given grades in the “A” range.

Insurance companies with grades in the “B” range have good financial stability and those with grades of “C” or below are not considered financially healthy.

Evaluation companies consider the level of financial reserves. Additionally, they look at credit ratings and financial and business practices.

They also consider the length of time an insurance company has been offering insurance products and the strength of those products.

Many insurance companies will publish grades from monitoring organizations on their websites and promotional materials if those grades are in the A range or higher.

Consumer Satisfaction


Another way to evaluate the health of a prospective auto insurance company is to review reports on consumer satisfaction.

Insurance companies in good health will have happy customers who are content to continue renewing their existing car insurance coverage with their current company.

Customer service is one area that is extremely important when it comes to consumer satisfaction.

Most of your interactions with an insurance company will be through the customer service department.

An excellent customer service department is available around the clock and agents are polite and as helpful as possible in answering questions and resolving problems.

If a customer service department is only available during business hours or via email, it is cause for concern.

Many accidents occur outside of business hours and you need to be able to talk to someone immediately, particularly if you need assistance arranging a rental car.

Claims Processing

Claims processing is also another factor in consumer satisfaction. Claims processing can be simple or it can be tedious and difficult.

An auto insurance company with excellent claims processing will have systems in place to make filing a claim easy and efficient. Automated claims processing allows you to file a claim online or over the telephone.

From that point forward, you can track its progress online.

Automated claims processing also eliminates the need for an adjuster to view your car in person. Instead, you can take your car to an approved body shop and they can submit an estimate online.

Additionally, they can receive approval, submit bills and receive payment online. As discussed above, an auto insurance company in strong financial health will be able to approve and pay car insurance claims quickly and efficiently.

JD Powers and Associates and Consumer Reports regularly publish consumer satisfaction survey and evaluation results on their websites.

Additionally, Consumer Reports publishes their findings in their magazine. Both of these organizations evaluate ease of access to the auto insurance company, premium rates, customer service, claims processing and overall consumer perceptions.

If you are purchasing car insurance, it is important to consider the overall health of a prospective company before making a purchasing decision.

While it can be tempting to only look at the lowest priced car insurance, that should not be your only criteria when buying a policy. Instead, compare several prospective companies and look at their financial stability and consumer satisfaction.

Enter your zip code into our FREE car insurance tool to get quotes to compare now! It will give you a good idea of how well they will provide you with financial protection when you most need it.



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