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Company Ratings for Car Insurance

Here's what you need to know...
  • Most state legislatures have opted to codify minimum liability requirements
  • Comparison tools allow the consumers to compare policies and with their respective price points
  • A number of companies rate auto insurance carriers from both a customer-centric and fiscal health perspective

Per the United States Bureau of Transit Statistics, there were 255,917,664 passenger vehicles in this nation in 2008. In every state, except New Hampshire, auto insurance is compulsory.

Residents are mandated by law to carry auto insurance. Most state legislatures have opted to codify minimum liability requirements. Not all the states have the same laws, see the differences in car insurance rates by state.

The justification for imposing such laws is resoundingly clear. There is an inherent risk to driving; auto insurance mitigates that risk. It leaves non-fault drivers with a readily accessible recourse for their injuries and property damage.

The presence of millions of private passenger vehicles in this country coupled with compulsory auto insurance being the virtual law of the land means there is a widespread consumer need for auto insurance.

Savvy consumers can make informed choices by arming themselves with information.

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Auto Insurance Profits

AdobeStock_62082716-1600x1600Auto Insurance is one of the most lucrative segments of the insurance industry, outpacing revenue from homeowners’ insurance.

According to the Insurance Information Institute, in 2010 $165 billion of direct premium can be attributed to the insuring private vehicles. Big profits entice more companies to enter the fray which could often lead to “analysis paralysis” for the weary consumer.

Customer Service and Company Ratings

Many websites allow consumer to compare quotes for auto insurance. Comparison tools allow the consumers to compare policies and with their respective price points.

Comparing quotes is of limited utility because it fails to provide consumers with any meaningful or actionable information on the companies providing the quotes.

Examining auto insurance company ratings can provide a fairly comprehensive picture of policyholders’ customer service experience.

JD Power and Consumer Reports are two of the more prominent companies that rate .

JD Power

AdobeStock_23831446-1600x1600JD Power is a global marketing firm founded in 1968. The company is headquartered in Westlake Village, California. The McGraw-Hill companies acquired JD Power in 2005. The company serves and has offices in the United States, Canada, Europe and the Asia Pacific region.

JD Power has multiple revenue streams including: client-commissioned studies, media research, business training and operational analyses. The company is most known for conducting extensive independent customer satisfaction surveys.

The 2011 Annual National Auto Insurance Study, administered by JD Power, considered four facets of the customer service experience, including:

  • Policy Offerings
  • Pricing
  • Billing & Payment
  • Contacting the Insurer

Policyholders were also asked to rate their “Overall Satisfaction” with the auto insurance carrier. JD Power has a proprietary rating system, Power Circle Ratings.

Each component receives one of the following designations:

  • 5 Power Circles – Among the Best
  • 4 Power Circles – Better than Most
  • 3 Power Circles – About Average
  • 2 Power Circles – The Rest

Profiled carriers are only eligible for rank/awards if they meet the requisite market share and saturation benchmarks. Carriers that explicitly limit their policyholder pool by association membership, state residency, military affiliation or other factors are also excluded.

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Consumer Reports

Consumer Reports is a subscription-based monthly non-profit publication established in 1936. The magazine has a circulation of over seven million monthly subscribers. The magazine compiles and publishes reviews of consumer products and services.

Each issue is topically devoted to a specific type of product/service.

Products and services are evaluated in Consumer Reports’ in-house laboratory.

Products with similar functionality and comparable price points are weighed against one another.

The company goes to great lengths to ensure objectivity. The magazine does not accept free product samplings, print advertising, or allow their product reviews to be used commercially.

Consumer Reports rates auto insurance companies based primarily on the claim adjudication process. The three rated categories include:

  • Overall Satisfaction
  • Problems with Claim
  • Delayed Payments

The “Overall Satisfaction” category was rated on a 0-100 scale. The other two categories were rated with Better / Worse representing the bipolar opposite ends of the spectrum.

Financial Strength

JD Power and Consumer Reports ratings have a customer centric focus. Other companies are exclusively devoted to a carrier’s fiscal health. Succinctly stated, other companies examine an auto carrier’s ability to pay claims on a long-term basis.

Consumers purchase auto insurance to mitigate the risk of catastrophic loss. An auto insurance policy is rendered essentially useless if an insurance company is unwilling or unable to pay.

A.M. Best

adobestock_86295927-1600x1600The New Jersey- based company was founded in 1889. A.M. Best is an officially designated Nationally Recognized Statistical Rating Organization (NRSRO) by the United States Security and Exchange Commission.

The company, relying on its proprietary formula, assesses the financial strength of insurance companies. The rating computation holistically considers policyholder obligation, company balance sheet, and executive leadership.

Additionally, A.M. Best rates financial instruments issued by insurance companies. In stark contrast to other rating agencies, A.M. Best exclusively focuses on the insurance industry. A.M. Best’s ratings range from Superior to Poor.

Standard & Poor’s

Standards and Poor’s is a division of The McGraw-Hill Companies, headquartered in New York City. It was established in 1860. It is a behemoth financial services firm primarily known for its stock market indices, including the S&P 500.

The company is a CRA (Credit-Rating Agency) and in this role rates the public/private debt of corporations. Ratings are largely categorized as Investment Grade and Non-Investment Grade, more commonly known as junk bonds. A highly leveraged auto insurance carrier may have problems meeting claim obligations.

In summary, there are many companies who rate auto insurance carriers from both a customer-centric and fiscal health perspective. Ratings can be an invaluable tool in assessing an auto insurance carrier’s ability to meet the needs of any consumer.

The best way to compare car insurance quotes is to enter your ZIP code in our car insurance comparison tool!

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