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For one illustrative Menlo Park couple, annual premiums for standard auto
insurance coverage would range among area companies from $1,266 with GEICO
to $1,947 with Farmers and $2,024 with State Farm, two of the state’s largest
auto insurers—for a difference of $681 to $758 per year.
If you’ve recently had an accident and have a male, teenage driver on your
policy—a nightmare for most insurers (and most parents)—the rate differences
loom even larger: from about $2,300 to over $4,000 per year.
These and other comparative rates, obtained primarily from company websites,
are shown on our price comparisons for the largest insurers in California,
along with details of the assumptions underlying the companies’ rate quotes.
It takes a little effort to shop for insurance. But it is easier these
days than it once was to get at least a reasonably competitive rate using
the insurance companies’ websites. Even if you have to request quotes by
phone from companies and agents, the effort is small compared to the potential
year-after-year savings.
You won’t want to give up having a company that will deliver quality service,
financial soundness, and a willingness to stick with you if you have an
accident or violation or two. But you don’t have to. Such concerns are
not a reason to stand pat.
In this article, we will give you the background you need to shop successfully
and, on our price comparisons and Ratings Tables, comparisons of
individual companies to help you focus your shopping efforts on the best
prospects.
The first step in shopping is to decide on the types and levels of coverage
that will keep your risk to an acceptable level, at a reasonable annual
premium cost. You will have to decide among a broad range of available
auto insurance coverage options. When thinking about how much coverage
to buy, try to keep in mind that the purpose of insurance is to protect
you from losses that you can’t afford to cover yourself. When you buy more
insurance than you need, you are wasting money that simply goes to insurance
companies’ profits and administrative costs.
When you injure someone else or damage someone else’s property, you may
be required by law to pay for the loss. Your home, your savings, and even
your future wages are vulnerable.
“Liability” coverage pays the amount of money for which you may be liable
for bodily injury and property damage to others, up to certain limits,
and covers legal fees incurred in your defense. Bodily injury claims can
include wage losses, medical expenses, rehabilitation costs, and “pain
and suffering.” Property damage can include damages to someone else’s car,
building, or other property.
Your liability coverage will generally protect you, your spouse, other
members of your household, and anyone else who drives your car with your
expressed or implied permission. But any liability coverage you buy will
come with payout limits. If the damages for which you are found liable
exceed the limits specified in your policy, you’ll have to pay out of your
own pocket. It is up to you to decide the limits you are comfortable with,
keeping in mind that the higher the limits you choose, the higher the premium
costs.
The limits your insurance company will pay are usually specified in the
policy as a set of three numbers divided by diagonal lines. For example,
a 100/300/50 policy pays a maximum of $100,000 for bodily injury to one
person, a maximum of $300,000 for total bodily injuries when more than
one person is hurt in an accident, and a maximum of $50,000 for property
damage in a single accident. Some policies are simply written with a single
limit, say, $300,000, and will pay up to this limit even if only one person
is injured or if only property is damaged. Because of its greater flexibility,
single-limit $300,000 coverage is worth somewhat more than 100/300/50 split-limit
coverage.
Since your insurance not only protects your assets but also ensures that
there will be financial relief for anyone you may injure, California law
requires you to provide for at least a minimum level of financial responsibility.
You can meet this obligation either by carrying liability insurance with
at least a 15/30/5 level or by posting a $35,000 bond with the Department
of Insurance.
If you are considering driving without liability insurance, or if you are
considering a policy at the minimum coverage amounts, you should realize
that once you have driven without insurance or with low insurance coverage
levels, most companies will treat you as a person who takes unnecessary
risks, and will charge you very high premiums for future coverage.
Most drivers buy liability insurance and insure beyond the legal minimum—perhaps
out of a social concern for the possible victims of their negligence or
perhaps out of a personal concern to protect their assets from catastrophe.
Individuals with substantial assets (or with expectations of substantial
assets in the future) have the strongest reasons to purchase sizable liability
coverage: they have the most to lose; they are the most attractive targets
for suit; and they may get the least sympathy from juries.
Although buying coverage with higher limits will cost more, the cost increases
are often modest. As Figure 1 shows, a policyholder with 100/300 bodily injury liability
coverage (and $500 collision and comprehensive deductibles, discussed below)
might expect to increase his or her total annual premium by only about
four percent by moving up to 250/500 coverage and might expect to save
only about four percent by moving down to 50/100 coverage. And for most
auto insurance buyers, doubling the limits of property damage coverage
from $50,000 to $100,000 costs only about $20 per year. Most consumers
consider these extra costs a bargain for increased peace of mind.
If you want to protect your assets and future income from claims in excess
of $500,000, you’ll want to consider an “umbrella” policy. Such a policy
will give you liability protection in addition to that provided by your
auto and homeowners policies. In addition to protecting you from claims
by others for bodily injury and property damage, an umbrella policy will
protect you against suits for other types of injuries, such as libel, slander,
defamation of character, false arrest, and invasion of privacy, which are
not covered by your auto or homeowners policies. Before selling an umbrella
policy, many insurance companies will require you to increase the liability
coverages in your auto and homeowners policies to the maximum amount offered.
“Collision” and “comprehensive” coverage pay for repair or replacement
of your car, regardless of who is at fault. This coverage is not required
by law, but if your vehicle is financed, your lender may require you to
purchase it.
Collision coverage pays if your car rolls over or collides with an object,
including another car. Comprehensive coverage pays for damage to your car
from almost all other causes—including vandalism, explosion, fire, wind,
and collision with animals. It will even pay if your pet chews the upholstery.
Comprehensive also pays if your car is stolen.
Both collision and comprehensive pay only up to the “actual cash value”
of your car. If you expect compensation for upgraded stereo equipment or
a special paint job or other unique feature, you will have to arrange in
advance for special coverage—and pay an extra premium.
As the actual cash value of your car diminishes, the cost of comprehensive
and collision coverage declines—but only declines significantly for the
first few years of the car’s life. You pay about the same collision premium
for a 10-year-old car, for which if you had a complete loss your insurance
company would pay you almost nothing, as someone else pays to insure a
six-year-old car. Accordingly, collision coverage becomes an increasingly
wasteful purchase as your car grows old.
Collision and comprehensive coverages are sold with a “deductible,” a specific
amount you agree to pay out of your own pocket on a claim before you are
entitled to collect from your company. By taking a high deductible, you
protect the company from the paperwork of processing small claims and you
do so without exposing yourself to the possibility of catastrophic loss.
In general, the wisest way to manage your money is to take as a deductible
as large an amount as you can afford to lose without seriously disrupting
your life.
The considerable savings that can be made in this way are illustrated on Figure 1.
For example, the sample couple for whom we did the calculations for Figure 1 would probably save about 10 percent off their total insurance bill by
increasing their collision and comprehensive deductibles from $500 to $1,000
and would add about nine percent to their total insurance bill by reducing
their collision deductible from $500 to $250.
The virtues of substantial deductibles are more obvious when you consider
that you may not even want to file claims with your insurance company unless
damages exceed $1,000 or so. Filing small claims might lead a company not
to renew your coverage or might lead to higher premiums.
“Medical payments” coverage takes care of medical bills if any member of
your family is injured in an auto accident, or your funeral expenses if
death results from such an accident. Whether a family member is driving
your family’s car, driving a rented or borrowed vehicle, riding as a passenger,
or walking and is struck by a car, you can collect these payments. Moreover,
medical payments protect passengers who ride in your car. Most important,
payment is regardless of fault. Limits on the amount of payments are stipulated
in your policy.
Most of the expenses that would be paid by your medical payments coverage
will be paid by your family’s health insurance policy. Since medical payments
coverage is relatively inexpensive, usually about $50 to $60 per year for
a $2,000 limit, it is reasonable to buy a minimal amount of coverage to
fill in possible gaps in your health insurance and to help cover medical
expenses for your passengers who may not have their own health insurance.
But beyond that, you may do better to spend your money on liability insurance
or on a more comprehensive health insurance policy—to protect you and your
family from any disease or injury that might befall you, not merely to
cover those injuries that involve automobiles.
If you are the victim of an accident in which another driver is at fault,
you might expect to collect from that driver’s insurance company. But despite
mandatory coverage laws, many drivers are uninsured. Also, even an insured
driver may be underinsured if your loss is large. If you are the victim
of an uninsured or underinsured motorist, you can turn to your collision
coverage (if you have it) for repairs to your car, or to your medical payments
or personal injury protection coverage (if you have it) for your medical
bills. But you will need other coverage if your losses exceed these coverages
and to compensate you for “pain and suffering.” “Uninsured/underinsured
motorist” coverage fills this gap if you can show that the other driver
was at fault or if you were the victim of a hit-and-run driver. This coverage
must be offered by insurance companies but you are not required to purchase
it.
All the reasons that argue for higher limits on liability coverage—where
you are protecting someone else—also argue for high limits on uninsured
and underinsured motorist coverage—where you are protecting yourself. The
cost of increasing your limit from 25/50 for uninsured and underinsured
motorist coverage to 100/300 will generally be less than $50.
For an additional premium, most insurers will broaden your collision or
comprehensive coverage to include reimbursement for the expense of a rental
car while damages to your car are being repaired.
Since just about all the auto insurance companies are shameless in promoting
rental car coverage, we’re guessing that it is a lucrative line of business
for them. Given that even a modest level of coverage—typically $30 per
day with a limit of $600 per claim—usually costs $50 to $150 per year,
depending on the insurer, our advice is to decline it altogether, since
the additional premium costs over time are very likely to exceed the benefits
you will collect.
“Towing” coverage will pay for the costs of towing; “emergency road service”
will pay the labor charges for any repairs that can be made at roadside
(such as, changing a tire). Some companies offer only towing coverage,
others offer both towing and road service coverage together. Most companies
offer these coverages for about $10 to $25 per year, and a few companies
don’t charge anything for towing coverage. Under many policies, this optional
coverage will reimburse you only for $25 per claim. But for $3 or $4 more
per year, you can get coverage for up to $75 per claim. Though these coverages
are inexpensive, an auto club membership that includes towing and road
service might be a better deal for you if you would use other club benefits.
Recently, some insurers have begun to advertise new policy features such
as “accident forgiveness.” When considering these types of plans, be aware
that some can be useless, and others need to be carefully evaluated on
a cost-benefit basis before buying.
As an example, Allstate heavily promotes its accident forgiveness feature.
With this option, if you have an accident, your premiums will stay the
same. Considering that your premiums might increase by 12 percent to more
than 60 percent, depending on the company, as a result of having just one
at-fault accident, Allstate’s offer might seem like a pretty good deal.
Allstate actually offers a few different plans: a “gold” plan that provides
the accident-forgiveness benefit after you have had a claims-free policy
with the company for at least five years; and a “platinum” plan that provides
the accident-forgiveness benefit immediately, and also refunds customers
up to five percent of their premiums for maintaining accident-free driving
records. To get either of these options, Allstate will charge you an additional
premium, starting right now. In essence, Allstate is trying to sell you
insurance not only against losses and claims you might experience because
of a future accident but also against future insurance-cost hikes that
might result from an accident. For our sample, 30-something couple with
totally clean driving records, with two cars and living in Menlo Park,
adding Allstate’s gold option would cost an extra $86 in premiums per year.
That means our sample couple would pay $430 in extra premiums over the
course of five years before they could actually benefit from the accident-forgiveness
part of the plan, and they would benefit after that time only if they had
an accident. To add Allstate’s platinum plan, which would provide immediate
accident-forgiveness coverage, the extra cost is $210 per year.
Are these add-ons really worth it? If you have a clean driving record,
there’s a very good chance you won’t have an accident that would cause
your premiums to increase for a long time, if ever. If you don’t have such
an accident, this premium protection will do you no good. If you have a
poor driving history, the chances are higher that you will have a future
accident, but the price you will pay for accident forgiveness will be much
higher than the price increase for our sample couple. In any event, you
have to decide whether even a substantial increase in premiums as a result
of an accident or accidents would be a catastrophe for you. If not, don’t
insure against it; insurance is to protect you from catastrophes.
Armed with a knowledge of various possible coverages, you can ask each
company you consider to give you a breakdown of its premium by type of
coverage and to quote premiums for different liability limits and deductible
levels. A typical annual premium quotation for a married couple with clean
driving records and two cars in San Jose might look like the following:
Bodily Injury Liability—$100,000/$300,000 $272
Property Damage Liability—$50,000 $386
Medical Payments—$2,000 $42
Un/Underinsured Motorist Bodily Injury—$100,000/$300,000 $84
Comprehensive—$500 deductible $92
Collision—$500 deductible $648
Rental Reimbursement—$30/day, $600 max. per claim $84
Emergency Road Service $12
Total $1,620
California laws set out “rating factors”—that is, how a driver’s characteristics
may influence the premium he or she is charged. Under state regulations,
companies are required to give the greatest weight in determining rates
to three “Primary Factors.” These three factors are: driving record, number
of miles driven annually, and length of driving experience. After these
three factors, companies are permitted to select “Secondary Factors” in
determining rates. The average weight of these secondary factors must not
exceed the weight given to the primary factors in the company’s premium
calculations. Note that because it is the average weight of the secondary
factors that is considered, the individual weights of some of the secondary
factors may be greater than those of the primary factors.
Knowing the factors insurance companies consider will give you a sense
of how warmly you can expect the companies to greet your requests for coverage
and may also give you some ideas for changes you can make in your life
to cut your insurance rates.
Your driving record is very important. Industry data indicate that an individual
who has had two accidents in the past two years is almost two-and-a-half
times more likely to have an accident in the coming year than someone who
has had no accidents. Similarly, the accident rate for individuals with
two traffic convictions in a three-year period is twice as high as the
rate for those with no convictions.
It will come as no surprise, then, that your previous driving record will
have a big impact on the best rate you can get.
How much weight companies give to driving record is up to them, but in
California, companies are required to give you at least a 20 percent discount,
compared to what you would otherwise be charged, if you qualify as a “Good
Driver.” You qualify as a Good Driver if you have been licensed to drive
a motor vehicle for the previous three years and during that time you have
not had more than one violation point and were not a driver of a motor
vehicle involved in an accident that resulted in death or in total loss
or damage exceeding $500 in which you were principally at fault.
As you can see for the illustrative couple for whom we did the calculations
for Figure 1,
if the husband had received just one speeding ticket in the last three
years, the couple’s rate would jump by $272 per year, on average. With
some companies, having only one speeding ticket would have affected the
couple’s premium by less than $200, but with others, one speeding ticket
meant a penalty of over $400 per year. If the husband had two speeding
tickets in the last three years, the resulting premium increase was much
more substantial; they’d pay an additional $877 per year, on average.
Most companies consider the driving records of everyone who will be driving
your car or cars. Therefore, if you have a good driving record but your
spouse, who will be driving your car, has had violations or accidents,
your rates may reflect your spouse’s record. But California law requires
that a driver who has a good enough driving record to qualify under the
legally mandated definition as a Good Driver must be offered a policy with
a “named driver exclusion” so that he or she need not be saddled with the
poorer driving experience of another person.
In California, insurers are not allowed to use age as a factor in setting
rates. But years of driving experience can be used. The longer you have
been driving, the lower your premium will be. This hurts younger drivers
as well as older drivers who did not start driving until later in life.
If you are a younger driver, make sure you ask about and take advantage
of any discounts for driver training courses or for good grades (firms
often give discounts for a “B” average or better) while you are in school.
Studies have shown that driving training courses do not make better drivers,
but careful drivers tend to enroll in them, so driver training serves as
an identifier of these better risks. Most companies will also offer a discount
if you are married.
The fewer miles you drive each year the lower your premium will be. If
you live in a remote area and have to drive long distances just to do your
shopping, there is not much you can do to reduce your annual mileage, but
if you live in an urban or suburban area carpooling and public transportation
are simple ways you can cut your insurance bill. Not only will you gain
by reducing your annual mileage, but with many companies you will get an
additional discount for using your car only for pleasure driving.
Some areas present more chances for accidents than others or have higher
repair costs or medical and legal charges. These differences sometimes
result in auto insurance rates that are considerably higher in some areas
than in others.
Insurance companies charge more for insurance on cars that are relatively
expensive to replace, expensive to repair, or prone to damages or theft.
Some companies charge extra for, or refuse to insure, high performance
cars (Corvettes, for instance) because they think people who drive them
are likely to be less responsible than other drivers.
Table 1 shows vehicle-to-vehicle differences for one illustrative driver
we checked. For example, comparable coverage from GEICO might cost $875
for a Ford Freestar and $1,072 for a Volvo XC90—a difference of almost
$200 per year. There are some vehicle types that tend to be relatively
expensive with all insurers, as you can see by looking at the rates for
a Nissan Maxima and the luxury sedan examples shown on Table 1, but the
patterns are not always consistent across companies.
|
| Ford Focus SE | 1140 | 1007 | 1116 | 1326 | 1237 | 908 |
| Honda Civic EX | 1265 | 1043 | 1178 | 1268 | 1238 | 980 |
| Toyota Corolla DX | 1220 | 1011 | 1114 | 1294 | 1177 | 894 |
| VW Jetta GLS | 1250 | 1043 | 1154 | 1258 | 1208 | 932 |
| Chevrolet Malibu LS | 1150 | 1007 | 1094 | 1360 | 1243 | 910 |
| Honda Accord EX | 1215 | 953 | 1178 | 1482 | 1213 | 1086 |
| Nissan Maxima SE | 1428 | 1167 | 1254 | 1746 | 1485 | 1292 |
| Toyota Camry SE | 1229 | 953 | 1112 | 1410 | 1143 | 1034 |
| BMW 530i | 1597 | 1167 | 1090 | 1896 | 1586 | 1324 |
| Cadillac Seville SLS | 1548 | 1043 | 1134 | 1628 | 1611 | 1428 |
| Lexus ES330 | 1533 | 1007 | 1132 | 1732 | 1314 | 1086 |
| Lincoln LS Premium | 1548 | 1103 | 1180 | 1434 | 1365 | 1388 |
| Ford Explorer XLT | 1187 | 934 | 1052 | 1412 | 1138 | 914 |
| Honda Pilot EX | 1248 | 912 | 1052 | 1460 | 1164 | 900 |
| Jeep Grand Cherokee Laredo | 1261 | 953 | 1124 | 1248 | 1238 | 948 |
| Volvo XC90 | 1365 | 1072 | 1178 | 1306 | 1225 | 1004 |
| Dodge Grand Caravan SE | 1091 | 966 | 1078 | 1220 | 1168 | 874 |
| Ford Freestar SE | 1172 | 875 | 1060 | 1268 | 1113 | 804 |
| Honda Odyssey EX | 1145 | 925 | 1078 | 1244 | 1113 | 852 |
| Toyota Sienna LE | 1187 | 966 | 1120 | 1318 | 1138 | 874 |
|
1 Prices are annual premiums for 2004 model years for the coverages and driver characteristics for a single female, age 30, living in Menlo Park. |
Your insurance premiums may also be slightly reduced if your car has safety
devices or anti-theft features. For example, most companies give small
discounts for cars with four-wheel, anti-lock brakes; passive disabling
systems (which deactivate the car’s ignition system when the key is removed);
and anti-theft tracking devices (such as “LoJack”). But keep in mind that
these discounts are usually very small—typically only one to three percent
off the total premium.
In short, you will want to consider insurance costs when deciding what
vehicle to buy (and to some extent, how to equip it), but the impact of
your choice may be larger or smaller depending on which insurance company
you select. You can find information on relative insurance costs in The
Car Book, by Jack Gillis, which can be ordered from the Center for Auto
Safety at www.autosafety.org or by calling 202-328-7700. For information
on safety ratings, you can consult Consumer Reports and the Insurance Institute
for Highway Safety (www.iihs.org).
If you have had a lapse in insurance coverage at any time in the last five
years, including for non-payment of premium, expect your rates to skyrocket.
Insurers view potential customers who have had insurance lapses as high-risk
policyholders and most will not offer these potential customers their lowest
rate plans.
Similarly, many insurance companies will not offer their lowest rate programs
to potential customers who have recently maintained their liability coverage
limits below the 300/100/50 level.
If you are considering switching insurance companies, and have been “loss
free” with your current company for a while, you will want to consider
in the calculation any longevity discounts your company will be granting
you in the future. Many companies offer discounts of five to 10 percent
for three years of coverage without an at-fault accident and may increase
the discount at six years and nine years. Another benefit of longevity
is that your current company might examine your entire history with it
when deciding whether or not to re-assign you to a higher risk category
(and charge you higher premiums) if you have accidents, whereas a new company
might examine only your driving record in the last three years. Some companies
give “accident forgiveness”—not raising rates after an accident—to drivers
who have been with them five years or more and had no accidents. This is
different from the “accident forgiveness” policies, discussed above, that
are offered to new drivers for a price by some companies.
Many insurance companies offer a discount off their auto insurance rates
if you insure both your car and your home with them. Some knock off five
percent, 10 percent, or even more.
From a consumer’s point of view, this dual-policy pricing is an undesirable
practice because it makes shopping more difficult; to find out the exact
savings you might realize by switching companies, you have to shop for
both types of coverage at once. But the discounts aren’t usually so large
that they have a major effect on the relative rankings of companies.
You have two main considerations in choosing among auto insurance companies:
how much they charge and how good their service is. You may also want to
give some thought to a company’s record on terminating policyholders, its
financial stability, and a few other factors.
Our price comparisons show annual premiums quoted by insurance companies
for four illustrative profiles in six Bay Area locations. The table includes
rates for the companies for which we received 10 or more ratings from CHECKBOOK’s
survey of policyholders (described on the How We Rated the Insurers
page). The listed companies account for the vast majority of the auto insurance
business in California.
The rates on our price comparisons were obtained whenever possible
directly from the companies’ websites. A few companies did not have available
online rate quotes or would not provide an online rate to us; for these
companies, our researchers called insurance agents and, without disclosing
their affiliation with CHECKBOOK, obtained rate quotes over the phone.
As you can see, the company-to-company rate differences are dramatic—annual
differences of hundreds of dollars in all cases, and over $1,000 in some
cases. The rates on our price comparisons will probably not apply to
you exactly; most readers will differ in location of residence, vehicle
usage, vehicle type, or other ways. But the rates on our price comparisons
will give you a good starting point for your own shopping. Companies with
low rates for profiles and locations close to yours will likely be excellent
prospects for you.
When you have identified a few possible companies, you can begin shopping
on the Web. Many companies enable you to get quotes directly from their
company websites. Or you can check the companies’ websites or the Yellow
Pages to locate agents. You can then ask each agent for a price quotation
for the coverage you want. Before shopping, it’s a good idea to make a
list of the coverages you plan to purchase.
Some “independent” agents sell policies offered by many companies; so one
of these agents can give you quotes from various companies. But other companies
are not available through independent brokers or agents; to get these companies’
rates, which often are the lowest rates available, you have to get a quote
from a company website or contact company agents directly.
If you will be contacting agents, you may have to push hard to get reliable
information from them. For our article on homeowners insurance, we found that many insurance agents were inept at providing
accurate price quotes and that some agents could not correctly answer even
the most basic questions about coverages. For auto insurance, most of the
agents we dealt with were able to quote accurate insurance rates, but problems
still exist. Some agents quoted wildly inaccurate rates, while others persisted
in attempting to sell more insurance than we asked for or failed to mention
the most attractive available plans. Always ask an agent whether he or
she has any other plans with better rates.
In addition to seeking out companies based on their relative rankings on
our price comparisons, you may want to try using one of the insurance
comparison websites. These sites tend to sound better than they are. Insweb.com,
for example, claims it will enable you to “compare quotes from the most
respected names in the industry” and lists about 20 participating companies
on its website. But when one of our researchers went through the process
of entering the detailed information necessary to get a quote from Insweb.com,
the site returned quotes from only four companies. On the other hand, we
have often found that among the few returned quotes, there is at least
one quote that is competitive—especially if you use several of the comparison
sites. The sites we found most useful were—
www.insweb.com
www.insurance.com, and
www.answerfinancial.com
Most insurance companies write auto policies by assigning prospective customers
to a “tier” depending on their driving and credit records. When dealing
with agents, make sure you ask whether you qualify for the best rates companies
offer, and if not, why.
If you have so many accidents or violations that it is difficult for you
to qualify for coverage, you have the right to get insurance through the
state’s “assigned risk” plan (discussed below). Rates in the assigned risk
plan are often three times or more what you’d pay for a “preferred” policy.
You will want to consider price in relation to the quality of service you
can expect the different companies to provide. Probably the most important
type of service is claims handling. We give you three types of information
to help you evaluate companies’ service: a survey of policyholders, a survey
of auto body shops, and an analysis of complaints. Our Ratings Tables
contain our data on 17 companies or insurance groups rated by 10 or more
respondents in our survey of policyholders.
Our Survey of Policyholders
We surveyed CHECKBOOK and Consumer Reports magazine subscribers and collected
over 2,500 ratings of individual insurance companies from Bay Area policyholders
who said they had made an auto insurance claim within the preceding three
years. These consumers rated their companies “inferior,” “adequate,” or
“superior” for “simplicity of claim procedures,” “adequacy of claim payment,”
and other elements of service. Our Ratings Tables show what percentage
of policyholders rated each company “superior” on each of these elements.
As you can see from our Ratings Tables, there are big differences in
how companies were rated by their customers. For example, Amica Mutual,
California Casualty, Travelers, and USAA were rated “superior” for “speed
of claim payment” by at least 80 percent of their surveyed customers. In
contrast, Farmers got “superior” ratings from only 44 percent of its surveyed
customers. (For a further description of our policyholder survey and how
its results and our other research results should be interpreted, click
here.)
Asking the Experts: Auto Body Shops
As a second way to assess service quality, we surveyed area auto body shops,
asking them to name the two insurers they considered “most desirable” for
“treating their customers (car owners) fairly” and the two insurers they
considered “least desirable.”
Our Ratings Tables show the number of times each company was mentioned
(either favorably or unfavorably) by area shops and the percentage of the
mentions that were favorable. As you can see, with only a few exceptions,
the body shops we surveyed agreed on which insurers they thought were fair
(or unfair) to car owners. CSAA, Mercury, Safeco, and USAA were all highly
recommended by surveyed body shops. Allstate, Farmers, GEICO, and Progressive
were often cited as “least desirable.” It is also worth noting that in
each of the seven metropolitan areas where we publish CHECKBOOK, Progressive
consistently was one of the lowest scoring companies on this measure (see
Table 2).
|
| Chubb | 20 | 20 | 100% |
| USAA | 83 | 86 | 97% |
| Amica Mutual | 31 | 35 | 89% |
| Mercury | 14 | 16 | 88% |
| State Farm | 210 | 240 | 88% |
| Ameriprise/IDS | 5 | 6 | 83% |
| AAA/CSAA | 17 | 23 | 74% |
| The Hartford | 13 | 19 | 68% |
| 21st Century | 13 | 20 | 65% |
| Travelers | 11 | 18 | 61% |
| Metropolitan | 10 | 17 | 59% |
| Liberty Mutual | 28 | 55 | 51% |
| GMAC | 2 | 5 | 40% |
| Safeco | 6 | 26 | 23% |
| Allstate | 22 | 120 | 18% |
| Farmers | 14 | 81 | 17% |
| GEICO | 12 | 84 | 14% |
| Nationwide/Allied | 6 | 82 | 7% |
| Progressive | 4 | 234 | 2% |
| Encompass | 0 | 10 | 0% |
Complaints
Another way to assess quality is to count policyholder complaints and to
look at each company’s number of complaints in relation to its volume of
business. While customers might have rated a company less than “superior”
on our survey of policyholders even if the company’s deficiencies were
minor, filing a formal complaint with the California Department of Insurance
presumably reflects serious dissatisfaction.
On our Ratings Tables, we have reported the number of “justified” private
passenger auto insurance complaints filed with the California Department
of Insurance in 2007. (To be considered “justified,” a complaint must meet
certain criteria set out by the California Code of Regulations and usually
involves an insurer’s acting against insurance regulations or breaching
the insurance contract in some way.) We have also reported a “justified
complaint ratio” for each company. The complaint ratio is intended to take
into account the fact that some companies do much more business than others
and therefore are more exposed to incurring complaints. It is calculated
as a company’s number of 2007 justified complaints per 100,000 “exposures”
(an “exposure” is generally defined for auto insurance as a vehicle covered
by the policy). The companies with the lowest ratios were Allstate, Amica
Mutual, Ameriprise/IDS, CSAA, Mercury, State Farm, and USAA, while Farmers,
GEICO, The Hartford, and Safeco had the highest.
The data reported here are for groups of companies; we have combined personal
auto complaint data for individual companies within the groups.
If the price is right and service appears satisfactory, your next question
will be whether you can be confident that the insurer will not terminate
your coverage or dramatically raise your rates because of accidents or
traffic violations. Termination by your company at best is inconvenient
and at worst can force you to pay rates hundreds of dollars higher when
you find a new company or enroll in a special plan for high-risk drivers.
California places certain legal restraints on termination. The law allows
cancellation or non-renewal of an issued policy only in cases of fraud/misrepresentation,
non-payment of premium, suspension or revocation of license or registration,
or substantial increase in the hazard insured against. An insurer may not
non-renew coverage solely based on age or the fact that there is an outstanding
claim on the policy.
The procedures for termination generally involve sending a notice to the
policyholder at least 20 days before the termination date (10 days in the
case of non-payment or during the first 60 days of a policy). Notice of
non-renewal must occur at least 30 days prior to the policy expiration
date. The policyholder has the right to know the reason(s) for termination
or non-renewal.
In fact, except in cases of non-payment of premiums, termination is relatively
rare. Accordingly, we don’t recommend spending more than an extra $100
or $200 per year to have a company with a particularly good record of sticking
by its policyholders through a string of accidents or violations. And you
shouldn’t have to pay even that, since some of the lowest priced companies
get high ratings for their termination practices.
On the survey, we asked policyholders who had filed claims to rate their
companies on “not unreasonably cutting coverage.” You can see the results
on our Ratings Tables. The table shows the percent of survey respondents
who rated each company “superior” on these questions.
Of course, termination by a company is not the only disruption you might
experience. If a company raises your rates dramatically in response to
an accident or violation or two, you may be faced with having to terminate
on your own, or take a big hit to your budget. On our customer survey,
we also asked consumers to rate companies on “not unreasonably raising
premiums.” That is the question on which most companies scored lowest.
There was big company-to-company variation, with several companies rated
“inferior” by more than 20 percent of their surveyed policyholders.
In shopping, you will want also to be alert to news of a company’s financial
instability. You will not want to sign on with a company that may soon
have to cut many policyholders or raise prices sharply to stay alive. Nor
do you want a company that may go out of business soon, forcing you to
begin your shopping again. This may be more of a concern now than a few
years ago.
On the other hand, there is no reason for great anxiety about insurer stability.
If a company goes bankrupt, policyholders may have to wait to recover money
owed them but generally are protected from major losses. A special “insolvency
guaranty fund” exists in every state to assess all insurers doing business
in the state on a pro rata basis to pay off outstanding claims of an insolvent
company and reimburse paid-in premiums. In California, the claims reimbursement
is subject to a $100 deductible and there is a $500,000 limit on claims.
Paid-in premium reimbursement is not subject to deductibles or limitations.
You can check on a company’s financial soundness using any of several sources:
You should be able to find copies of ratings from at least one of these
sources in the reference section of your local library. If you are unable
to find them, or if the ratings in your library are outdated, you can contact
the services directly. All four services will provide ratings over the
phone or on the Web. On the Web, you can learn about the specifics of the
rating criteria each of these sources uses.
Some individuals—usually the young and those with a record of accidents
or violations—find it difficult to locate a company that will agree to
insure them.
The only answer if you are one of these “high-risk” individuals is to shop.
Try several of the major groups and ask that you be considered for their
“preferred,” “standard,” or “nonstandard” plans. Then try the special publicly
created insurance arrangement—the “assigned risk” plan for California,
which is the California Automobile Assigned Risk Program (CAARP). Under
this arrangement, drivers who are not eligible for even non-standard rates
with insurance companies are able to buy insurance. Eligible drivers must
apply with the help of an agent who is a Certified Producer with CAARP.
These individuals are then assigned to regular insurance companies. Each
company is assigned a pro rata share of policyholders according to its
share of business in the state, and the policyholder pays the same premium
no matter what company he or she is assigned to.
Don’t assume that because you have been turned down by one “preferred”
company you must turn to a high-risk company or the assigned risk plan.
Companies’ standards for accepting new policyholders vary widely and change
from day to day as their rates and volume of business change. To enhance
your chances, remind an agent that you or members of your family have other
business with a company—for instance, a homeowner’s policy or automobile
policies for other drivers. On the other hand, don’t stop shopping even
if you are accepted by a “preferred” company. Sometimes the high-risk companies
or the assigned risk plan offer better rates. If you must join the assigned
risk plan at a very high price, try to get other coverage after a year.
The California Low-Cost Automobile Insurance Program (CLCA) was established
to help drivers with low incomes afford the costs of maintaining legally
required auto insurance levels. The program is available only to “Good
Drivers” who meet other requirements regarding income and the value of
the insured vehicle. The CLCA provides only minimal coverage, and although
optional coverage for medical payments and uninsured motorist bodily injury
is available, physical damage coverage is not available. The program is
administered by the Department of Insurance. For more details, call 866-602-8861.
At the Scene of the Accident
1. Stop! You are required to stop your car.
2. Give all possible aid to the injured. Stop severe bleeding and keep victims
warm. Do not attempt to move a seriously injured or unconscious person.
3. Call the police as soon as possible. If someone is injured, tell the
police when you call.
4. Prevent further damage to your vehicle. Flares, warning signs, or signaling
by a police officer or pedestrian should alert oncoming traffic. Aside
from the safety consideration, you may be liable for the cost of any further
damage to your car if such preventive measures are not taken.
5. Get the driver’s name, address, license number, and name of the owner
for any car involved in the accident and give information on yourself to
any person whose property is damaged, or who is injured.
6. Get the names, addresses, and phone numbers of any witnesses who may
have seen what happened.
7. Be careful in discussing the accident. Cooperate with the police, but
if you are not composed, or if you feel that your answers to questions
from a police officer or anyone else could bear on future liability, you
do not have to discuss the details of the accident until you feel better.
Do not disclose any information about your insurance coverage except the
name of your company, your agent, and your policy number.
8. If you are asked by a police officer to submit to a breathalyzer test,
or any other test to determine the amount of alcohol in your blood, it
is advisable to comply. Refusal will be grounds for the suspension of your
license. You may want to request such a test as evidence that you were
not drinking.
9. Note carefully the circumstances of the accident, especially any special
hazards such as faulty traffic signals or road obstructions that might
have contributed to the accident.
After You Have Left the Scene of the Accident
1. If there are injuries or vehicle damage is more than $750, you must report
the accident to the Department of Motor Vehicles (DMV) within 10 days.
Failure to notify the DMV may result in the suspension of your driver’s
license.
2. After any serious accident, contact your insurance agent or company as
soon as possible. A contact by phone is sufficient. It is a good idea to
report to your company any accident if it is serious enough to be reported
to the DMV. Although you may be right in fearing that the accident will
drive up your premiums or lead to termination of your coverage, you have
little choice; companies check Department of Motor Vehicles records anyway.
3. If you have been injured, do not sign any waiver or release with an insurance
company or anyone else until you are certain all expenses (wages, medical,
etc.) have been determined. Keep a record of all medical costs incurred,
loss of earnings, or any other inconvenience.
4. If your car has been damaged, do not sign any waiver or release right
away. Do not accept a cash settlement for the damage to your car until
you are certain exactly what it will cost to have it repaired, or to have
it replaced if it is considered a total loss.
5. If you do not have collision coverage, you can collect for the damage
to your car only if the other driver was at fault. Submit the bills to
the insurance company of the other driver. Include any costs you incur
for a rental car.
6. If you do have collision coverage, some insurance companies will pay
your repair bill (minus any deductible) and collect on their own from the
other driver or the other driver’s insurance company. When your company
collects, it must refund your deductible (or a pro rata share of the deductible
if its net recovery is less than your original claim). Letting your own
company handle all the work can save time, aggravation, and delay in recovering
the amount necessary to repair your car—although, in some circumstances,
particularly when the other party admits fault, the other driver’s insurance
company may be willing to pay you fully and promptly.
7. Before you have repairs done, give the company that will be paying a
chance to estimate the damage to your car. This is required if you will
be relying on collision coverage and desirable if you intend to collect
from the other driver’s company. If the company decides it is cheaper to
replace the car than to repair it, be sure that the value the company computes
for the car from the “book” corresponds to the condition the car was in.
8. If you have collision coverage, within a few days your company should
arrange for an appraiser or adjuster to inspect your car and estimate how
much the company will pay to repair or replace it. It is a good idea to
get your own estimate of the repair or replacement cost in advance and
in writing from a reliable body shop (see our auto body article). At the very least, insist on taking the car to a shop
you trust for the needed repairs.
9. If you have a dispute with an insurance company, complain to the Department
of Insurance:
California Department of Insurance
Consumer Communications Bureau
300 South Spring Street, South Tower
Los Angeles, CA 90013
800-927-4357
www.insurance.ca.gov
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