Auto Insurance Companies: Dubious Practices Revealed

When shopping for car insurance, it's important to be vigilant about dubious companies. While no one company claims the title of the worst car insurance provider, there are ways to judge them.

The National Association of Insurance Commissioners (NAIC) tracks customer complaints about most car insurance companies and creates a ratio for the level of complaints vs. the size of the company. The national average is a rate of 1.0 — anything higher is above average. A company with a lower score means it receives fewer complaints.

Another way to look at customer service is through Better Business Bureau (BBB) ratings. The BBB assigns a score to car insurance companies based on the number of complaints filed against them and how many get resolved.

While these ratings don't paint a complete picture of what a company has to offer, it's a good place to start looking.

It's also important to look at a company's financial strength, which indicates its ability to pay future claims.

Customer service

While there is no one auto insurance company that stands out as the worst, there are several ways to determine the quality of a company's customer service.

Customer Satisfaction Ratings

One way to evaluate a company's customer service is through customer satisfaction ratings. Amica Mutual, USAA, and State Farm are consistently ranked as the companies with the best customer service. Amica Mutual earns top marks for its personalised service, while USAA and Auto-Owners are ranked highly for their specialised services for military members.

Customer Complaints

Another way to assess a company's customer service is by looking at customer complaint reports. The National Association of Insurance Commissioners (NAIC) rates companies based on the number of complaints they receive relative to their size. According to the NAIC, United Automobile Insurance has the highest number of complaints in the US. Other companies with high complaint rates include Liberty Mutual, Allstate, and Progressive.

Claims Handling

The speed and efficiency of claims handling is another important aspect of customer service. Erie Insurance, The Hartford, and State Farm are known for their quick claims resolution, while companies like Liberty Mutual and Geico have been criticised for their slow claims processing.

Digital Experience

For some customers, a company's digital experience, including mobile apps and website functionality, is an important aspect of customer service. Geico stands out in this area, offering a user-friendly website with live chat, online quotes, and a highly-rated mobile app.

Overall Customer Service Ratings

Based on a combination of customer satisfaction, complaint data, and claims handling, the following companies are ranked as having the best overall customer service:

• Amica Mutual
• USAA
• State Farm
• Erie Insurance
• Geico

High premiums

Auto insurance companies that charge high premiums can be considered dubious. Premiums have been rising steeply in recent years, with the cost of auto insurance in the US rising by 22.2% in March 2024 compared to the previous year, and by over 50% compared to 2021. This is partly due to the increased cost of repairing or replacing vehicles, which have become more expensive since the COVID-19 pandemic. A shortage of mechanics is also pushing up repair costs.

However, high premiums can also be a result of a company's reaction to losses. For example, insurance companies may try to make up for steep losses incurred in 2021 due to a sharp rise in fatal car accidents. In addition, some states have regulations that require insurance to include unlimited personal injury protection, which can increase costs for insurance providers and lead to higher premiums for customers.

When it comes to judging an auto insurance company, it is important to consider not only the price but also the quality of service and coverage. While some companies may offer lower premiums, they may also have poor customer service or fail to provide adequate coverage in the event of an accident. It is crucial for consumers to compare quotes from multiple providers and read reviews to ensure they are getting the best value for their money.

To avoid dubious auto insurance companies with high premiums, consumers should research a company's NAIC complaint index score and BBB rating. These scores can provide valuable insights into a company's customer service and complaint resolution track record. By considering both price and quality of service, consumers can make informed decisions and choose a reputable auto insurance company that offers competitive rates without compromising on coverage or customer satisfaction.

Poor claims handling

Secondly, some companies make it challenging for customers to file claims. They may constantly request more information, fail to provide clear reasons for denying or accepting a claim, or make the process of reporting a claim overly complicated. This can cause claimants financial strain and pressure them into accepting lower settlements.

Thirdly, some companies engage in bad faith practices, such as unreasonably delaying claims handling, denying claims without valid reasons, or failing to conduct thorough investigations. These practices can result in court cases and penalties for the insurance company.

Finally, some companies have poor communication and customer service regarding claims. They may not provide timely updates, respond to queries adequately, or make it difficult for customers to reach them. This can add to the stress and frustration of dealing with an insurance claim.

Lack of transparency

The difficulty in comparing insurers means that consumers may not realise they are overpaying for their auto insurance or that they are not getting the coverage they need in the event of a serious car accident. In fact, a study by insurance analytics company ValChoice found that US consumers overpaid for auto insurance by $101 billion in just five years (from 2011 to 2015). The study also revealed that policyholder-owned insurers that pay dividends to members offered the best value to consumers, while publicly traded insurers provided the worst value.

The issue of lack of transparency is further exacerbated by the fact that insurance companies are often judged more on their customer service and claims handling than on the actual coverage they provide. While it is important to consider customer satisfaction when choosing an insurance company, it is also crucial to look beyond this and evaluate the company's coverage options, financial stability, and pricing.

To address the lack of transparency, consumers should research customer reviews and ratings that reflect how the company treats its customers, especially during times of need. They should also shop around and compare quotes from multiple companies, ensuring that the quotes are based on the same types and amounts of coverage. Additionally, consumers should ask about discounts offered by the insurance company, as this can be a way to save money on their premiums.

By taking these steps, consumers can make more informed decisions when choosing an auto insurer and ensure they are getting the best value for their money.

Poor financial strength

When it comes to auto insurance companies, it is important to assess their financial strength and stability. This is because you are dependent on the company to pay your claim in the event of an accident or financial hardship. A company with poor financial strength may not be able to pay out your claim efficiently, or at all.

Financial ratings companies assess a wide range of factors to determine an insurance company's financial strength, including their financial health, how responsibly the company is run, and external factors like vulnerability to natural disasters. For instance, a car insurance company based in a state that is frequently hit by hurricanes may find its ranking lowered due to the increased likelihood of damage to policyholders' vehicles.

One of the most prominent financial ratings agencies for insurance companies is A.M. Best, which provides letter-based ratings from A++ to F, with A++ being the highest possible rating. According to A.M. Best, insurance companies with an A rating or higher are considered to have excellent to superior financial strength. Examples of auto insurance companies with strong financial strength include:

• Auto-Owners Insurance: Available in 26 states, Auto-Owners offers a wide variety of insurance products, including auto, home, business, and life insurance. The company has superior financial strength and receives fewer customer complaints than expected.
• Geico: Geico is one of the largest underwriters of auto insurance in the country, offering policies in all states. The company has the highest possible financial strength rating from A.M. Best and is known for its wide range of discounts.
• State Farm: As the largest auto insurer in the country, State Farm has a strong financial backing and receives high customer satisfaction ratings. The company offers numerous discounts and extras, including travel expense coverage.
• USAA: USAA provides insurance exclusively to active military members, veterans, and their families. The company has a strong financial strength rating and offers competitive rates, high customer satisfaction, and military-specific perks.
• Amica: Amica offers high customer satisfaction and has low consumer complaints. The company provides a wide range of discounts and free perks for good drivers, including accident forgiveness and a disappearing deductible.
• Travelers: Travelers is one of the largest insurance providers in the nation, offering a broad range of coverage options and discounts. The company has excellent financial strength and receives fewer customer complaints than expected.

In addition to A.M. Best, other notable financial ratings agencies include Standard & Poor's, Moody's, and Demotech. It is worth checking the ratings from multiple agencies, as they may differ due to varying evaluation criteria. When considering an auto insurance company, it is important to assess their financial strength and stability to ensure they will be able to meet their financial obligations to you in the event of a claim.

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