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Here are our main messages on auto insurance, starting with advice on choosing
a company.
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It is very likely that you can save $300 or more a year by switching auto
insurance companies. Many consumers will save more than $1,000. Our
premium
comparison table shows
you how companies’ rates compared for two different policyholder types
at four different Puget Sound area locations.
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On our Our premium
comparison table, companies that have especially low rates across all four locations
for both policyholders are Safeco, MetLife, and National Merit. Other companies
with low rates in some locations or better-than-average rates in most locations
are AARP, PEMCO, and Liberty Mutual.
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Most companies, even those that are not the standouts for service, seem
to provide most customers satisfactory claims handling and other services.
About 93 percent rated all aspects of the claims services they received
at least “adequate.”
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Our Ratings Tables show how companies were rated for service in our
survey of policyholders who had made claims. Companies rated especially
high for their claims service included USAA, Amica Mutual, MetLife, and
PEMCO.
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You will want a company that will stand by you if you have a few accidents
or violations. Our Ratings Tables show substantial differences among
companies. Some companies were rated “inferior” by 10 percent or more of
their surveyed policyholders when we asked about “not unreasonably cutting
coverage” and some were rated “inferior” by more than 15 percent of surveyed
policyholders when we asked about “not unreasonably raising premiums.”
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You can use the Our premium
comparison table as a starting point in deciding which companies to
check for rates, but be sure to check several companies, since no company
wins for all drivers. You can check rates on many companies’ websites,
or you can find agents in the Yellow Pages and call. We give you this worksheet
to help you organize the
information companies will want.
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You might find it helpful to check premium-comparison websites like www.insweb.com,
www.insurance.com, and www.answerfinancial.com.. But be wary of
these sites. You will have to put in time entering information and they
will generally give you rates from only a few companies with which they
have business relationships. On the other hand, we have found that they
sometimes identify companies with very good rates.
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It makes sense to check competitive rates every few years. Although some
companies tend to be consistent price winners, many companies do change
their ranking substantially over the period of several years.
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When you shop for premiums, you’ll have to push hard to get reliable information.
Agents frequently fail to mention the most attractive available plans and
sometimes quote inaccurate rates for the plans they do offer. Always ask
an agent whether he or she has any other plans with better rates.
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Even if you are an inexperienced driver or have a poor driving record,
you have the right to get insurance with the state’s “assigned risk” plan.
But don’t turn to this “high risk” arrangement quickly. Shop several regular
companies. Keep trying even if you are turned down by the first; each company’s
standards are different and they change continually. Be sure to remind
the agent if you or a family member has insurance for your house or another
car with the agent’s company. If you must join an assigned risk plan, try
again to get regular insurance coverage after a year of good driving. Many
of the policyholders in these plans get out after a year.
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Don’t terminate your insurance with one company until you have arranged
coverage with another. You might even consider starting your new coverage
about 60 days before your old coverage expires because the new company
can reject you fairly easily in the first 60 days of your coverage.
Whatever company you choose, be careful to select just the coverage you
need and to explore any available price breaks based on your driving habits
and other circumstances—
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Consider purchasing a policy with high “deductibles.” By agreeing to pay
small losses out of your own pocket, you can avoid paying the company to
do a lot of paperwork. You may not want to collect from the company on
losses of less than $500 or so anyway—for fear the company will refuse
to renew your policy or will raise your rates.
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Consider dropping collision coverage when your car’s value drops to a level
that you could lose totally without serious disruption to your life. Although
your company would not pay you much for the loss of an old car, it won’t
continue to lower your rates significantly once the car’s value drops below
a few thousand dollars.
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Try to take at least as high dollar limits on the coverage that protects
you if you are a victim of an uninsured motorist as you take on the coverage
you buy to pay other people’s claims. Increased limits on “uninsured motorist”
coverage cost relatively little.
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Before purchasing “medical payments” coverage or “personal injury protection
coverage,” consider whether you could spend the money more wisely improving
your family’s general health insurance or disability insurance coverage.
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Keep your agent or broker informed of any change in your circumstances
if that change might make you eligible for a premium discount under your
company’s rating plan. Be sure to inquire about price breaks if—
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You have, or will consider, other insurance with the same company (homeowners,
for example);
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More than one car is insured by the same company;
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No one in the family has had a serious accident or traffic violation in
the past three, four, or five years;
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You drive a car less than 12,000 miles or, better still, less than 7,500
miles each year;
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Your car is parked in a garage or off the street;
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Your car has air bags, anti-lock brakes, or antitheft devices;
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Your car is not used to commute to work or for business;
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Your commute is short, or you work less than a five-day work week;
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You are a member of a car pool;
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You are driving a relatively inexpensive car and/or one with a relatively
good “loss experience” (the loss experience reflects how frequently a car
is involved in accidents and how much it costs to repair if it is damaged);
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You’ve moved to a less urbanized area;
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You are insuring no regular driver under 25 years old;
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Insured drivers under 25 have completed driver training, have good grades,
are students at a school over 100 miles away, or are restricted to a less
expensive car;
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You are 55 or over and have completed a defensive driving class within
the last three years;
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You are a nonsmoker.
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Consider the cost of insurance along with the cost of gas and parking when
you are deciding how to commute to work. A car pool or public transportation
might save you $250 or more in insurance per year.
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Consider the cost of insurance when you are buying a new or used car. Most
companies have discounts (or surcharges) on certain makes and models of
cars based on the loss experience of each car.
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Maintain a strong credit record. Insurance companies may use information
on your bill-paying habits as a factor in setting premiums. A bad credit
record might cost you $500 or more per year in higher insurance premiums.
You pay dearly for auto insurance. Be sure you get what you have coming
if you have a claim.
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Report claims promptly. But don’t sign any settlement until all your bills
are in or you know definitely how much you have lost. For auto body repairs,
insist on using a repair shop you can trust—as long as it charges reasonable
rates.
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Be sure not to overlook available claims. For example, your “medical payments”
coverage might pay for the deductible amount under your health insurance.
Also, you can claim under your comprehensive coverage for some losses that
are often overlooked—such as accidentally damaged upholstery.
For one illustrative Seattle couple for whom we shopped, annual premiums
for basic automobile insurance coverage would range from $1,225 with Safeco
to $2,220 with State Farm—a difference of nearly $1,000 between two of
the state’s largest auto insurers.
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
rate-comparison websites and websites maintained by many of the companies.
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 premium comparison table and our 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 cost. You
must decide among a broad range of available auto insurance coverage options.
When you injure someone else or 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. 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.
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 assures financial
relief for anyone you may injure, Washington law requires you to buy at
least a minimum level of liability insurance. You are required to have
at least 25/50/10 coverage.
If you are considering driving without liability insurance, you should
realize that once you have driven without insurance and have had an accident,
you may be treated by the insurance industry as a person who takes risks;
you may have to purchase insurance at a higher rate or under an “assigned
risk” plan.
Most drivers buy liability insurance even when it is not required 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.
If you are prepared to pay for even a modest 25/50/10 coverage level, the
cost of much fuller coverage may be modest. As this figure
shows, a policyholder with 100/300 bodily
injury liability coverage (and $500 collision and comprehensive deductibles)
might expect to increase his or her total annual premium by only about
two percent by moving up to 250/500 coverage and might expect to save only
about nine percent by moving down to 25/50 coverage.
You may also want to consider “umbrella” liability coverage. Although the
terms of such coverage vary from company to company, umbrella policies
generally take over above your basic auto and homeowners liability insurance
to cover injuries you might be liable for in connection with your car,
your home, a boat, or other property, and your liability for other injuries
you might cause, for instance, through libel or slander. When you purchase
an umbrella policy, you must first raise the liability limits on your auto
and homeowners policies to the maximum offered by the company.
“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 less than $50 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 want a broader type of medical coverage that will also compensate
you for wage and other losses, consider purchasing Personal Injury Protection
coverage (described below) instead.
Under Washington law, car owners have the option of purchasing “personal
injury protection” (PIP) coverage. Insurance companies must offer this
coverage, but you are not required to purchase it. PIP pays for medical
expenses, funeral expenses, and lost wages for anyone in your car and for
anyone in your family driving any other car regardless of fault. (Washington
law does not limit your right to sue the negligent party in an accident,
as is the case in some states that offer PIP coverage.) The minimum level
of PIP coverage, which companies are required to offer, is $10,000 for
medical payments, $2,000 for funeral expenses, compensation for wage loss
up to one year, and compensation for loss of services. Companies must also
make available more than this minimum package, including at least additional
medical payments coverage up to $35,000, and many companies offer even
more. Companies must also provide you with a simple rejection form so you
may deny PIP coverage easily if you do not wish to purchase it.
Medical costs that you could collect from personal injury protection coverage
might be available under your health insurance policy. Furthermore, lost
wages might be collectible under your disability insurance, if you have
any. In addition, retirees who are unconcerned about wage loss might be
better off purchasing medical payments coverage instead of PIP. But for
many car owners, who may have no disability insurance and some cost-sharing
requirements in their health insurance, personal injury protection coverage
fills important gaps. In addition, it may be the only protection for your
passengers if they have no health or disability insurance.
“Collision” and “comprehensive” coverage are often referred to jointly
as “physical damage” insurance. They pay for repair or replacement of your
car, regardless of who is at fault. This coverage is not required by state
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 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 physical damage
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 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
this figure. For example,
the sample policyholder for whom we did the calculations in this figure
would probably save about
six percent of his total insurance bill by increasing his collision deductible
from $500 to $1,000 but would add about 12 percent to his total insurance
bill by reducing his collision deductible from $500 to $100.
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 $500 or so. Filing small claims might lead a company not
to renew your coverage or might lead to higher premiums (however, under
Washington law, a company may not refuse to renew your liability or collision
coverage simply because you have made a claim under your comprehensive
coverage).
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 was a hit-and-run driver. Like PIP, 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/underinsured
motorist coverage—where you are protecting yourself. The cost of increasing
your limit from 25/50 for uninsured/underinsured motorist coverage to 100/300
will generally be less than $50.
“Debt and financing coverage,” also referred to as “gap” coverage, protects
you if your financed or leased car is declared a total loss in an accident.
It will pay off the balance of your loan or payments — the “gap” between
what you still owe and the current value of your car. Debt and financing
coverage must be requested by the consumer; companies may not advertise
this type of coverage.
“Towing and road service” coverage will pay not only the costs of towing
but also labor charges for any repairs that can be made on the road. Most
companies offer this coverage for less than $20 per year. Under some policies,
your towing and road service coverage will reimburse you only for $25 per
claim. But for $3 or $4 more per year, you can get coverage up to $75 per
claim. Though towing and road service coverage is 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.
For a small additional premium (usually $30 to $70), some insurers will
broaden your collision or comprehensive coverage to include reimbursement
for required car rental while damages to your car are being repaired. The
reimbursement may be capped at $20 or even less per day, so take a look
at whether this coverage makes sense for you.
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 the Puget Sound area might look like the
following:
| Bodily Injury Liability | $100,000 / $300,000 | $435 |
| Property Damage Liability | $50,000 | $290 |
| Personal Injury Protection | $5,000 | $120 |
| Uninsured Motorist Bodily Injury | $100,000 / $300,000 | $195 |
| Underinsured Motorist | $100,000 / $300,000 | $115 |
| Comprehensive | $500 deductible | $135 |
| Collision | $500 deductible | $400 |
| Emergency Road Service | | $30 |
| Rental Reimbursement | $25/day, $750 maximum per claim | $40 |
| Total | $1,750 |
What you’ll pay for insurance depends not only on the coverage limits you
select but also on your driving record; your age, sex, and marital status;
the kind of driving you do; your credit record; and other factors. Knowing
these factors will give you a sense of how warmly you can expect insurance
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.
Most companies consider the driving records of everyone who will be driving
your car or cars. Therefore, if you have a perfect driving record but your
spouse has had violations or accidents, you may not qualify for the “preferred”
rate. Different companies treat driving records differently for families
with more than one car. Some companies will charge a higher premium only
to the car driven by the driver with violations and/or accidents, while
others will pool the “points” from the violations and accidents together
and spread them out over all the cars, or will assign the driver with the
worst record to the highest-cost car.
Men under 25 have the most accidents per 100 drivers; after age 30, accident
rates are lower and fairly constant right up to age 65; married men generally
have better rates than those who are unmarried; and women, especially married
women, do best of all.
This does not mean that women or older persons are better drivers than,
say, 25-year-old men. Their accident frequency may be lower simply because
they tend to drive fewer miles.
Low accident frequencies result, of course, in lower premiums. If a company
agrees to insure him at all, a single 17-year-old male can expect to pay
about four times as much as a 30-year-old male and twice as much as his
17-year-old twin sister for comparable insurance coverage. Even at 25,
he can expect to pay about one-and-a-half times as much as his 30-year-old
counterpart.
A few of the common rating guidelines are as follows:
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Young drivers will generally find that between the ages of 16 and 20 their
rates will be slightly reduced each year, then will remain level between
the ages of 21 and 24. But a few companies offer married women “adult”
rates (which are relatively low) beginning at age 21.
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Rates for 25 to 29-year-old single males are often the same as for 21 to
24-year-olds. But single females in this age bracket may be classified
as “adults.”
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Married males in the 25 to 29 age bracket are often offered “adult” rates
and married females almost always are.
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Most companies will classify single males as “adults” at age 30, but some
will continue to charge higher premiums up to age 49.
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Rates for drivers over 64 are normally either the same as, or slightly
lower than, the “adult” rate. Some companies offer a “senior discount”
for persons as young as 50.
Since youthful drivers have especially high accident rates, companies have
sought various ways to identify better risks so that better rates can be
offered to attract these youths and their parents.
Many companies offer special rates, perhaps four to eight percent lower,
for youths who have taken approved driver training courses. Studies have
shown that these courses do not make better drivers, but “good risks” simply
seem to take the courses; so driver training serves as a convenient screening
device for the companies.
Many companies also give a break—often 10 to 20 percent—to youths who have
good grades (usually “B” or better). The combination of discounts for driver
training and good grades may total 15 to 25 percent of a family’s premium.
Most companies will also cut premiums if a youth goes to school more than
100 miles away from home without taking a car. In addition, by agreeing
to restrict a youth’s driving to a single, less-expensive car, a family
may be able to cut the rates on other cars it owns.
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 twice as high in some areas as
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.
This table shows vehicle-to-vehicle
differences for one illustrative driver we checked. For example, comparable
coverage from Amica Mutual might cost $1,094 for a Honda Odyssey and $1,470
for a BMW 530i—a difference of $376 per year. There are some vehicle types
that tend to be relatively expensive with all insurers, as you can see
by looking at the luxury sedans on the table, but the patterns are not always consistent across
companies.
In short, you will want to consider insurance costs when deciding what
vehicle to buy, 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 Center for Auto Safety, 1825 Connecticut Avenue, NW, Suite
330, Washington, DC 20009-5708.
Costs are higher for drivers who use their cars heavily. Compared to a
driver who uses his or her car only for pleasure, one who drives to work
can expect to pay 5 to 10 percent more for coverage—10 to 15 percent more
if the commute is more than 15 miles each way—and about 40 percent more
if the car is regularly used for business. You might save more than $250
per year in insurance costs by using public transportation or by joining
a car pool.
Companies also look at the number of cars they are insuring for a family.
The second car usually costs considerably less than the first because companies
assume you will drive each car less than you would drive a single car.
If you can show that the total mileage per year is less than, say, 12,000
miles or, better still, 7,500 miles, you might get a further break.
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 reassign you to a higher risk category
(and charge you higher premiums) if you have accidents, whereas any new
company might examine only your driving record in the last three years.
Many insurance companies offer lower rates if you insure both your car
and your home with them. Some knock off five percent, 10 percent, or even
more from either the auto rate or the homeowners rate; some knock off a
percentage from both.
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.
Another way insurance companies attempt to judge what kind of risk you
are is by looking at your credit history with one of the credit reporting
bureaus—Equifax, Experian, and TransUnion. Many companies have concluded
that consumers with poor credit histories are also more likely than others
to make claims.
Using complicated, secret formulas, insurance companies, or credit bureaus
on their behalf, calculate an “insurance score” that may be used to decide
what your rates will be, or even whether you will be covered at all. The
insurance score formulas are not the same as those used by lenders (such
as banks or mortgage companies) to calculate your “credit score,” but they
draw on the same types of data. The formulas vary from company to company,
since different insurers (or the scoring companies they use) weigh different
factors differently.
The appropriateness of using credit histories in making insurance decisions
is a hotly debated topic among the insurance industry, consumer groups,
and state legislatures. Aware that there is risk of discrimination and
unfair treatment under such practices, many states are beginning to pass
laws designed to protect consumers by limiting the insurance companies’
use of credit data. A Washington law went into effect on January 1, 2003
making it illegal for a company to use your credit history to cancel or
nonrenew your existing personal insurance policy. In addition, companies
may not refuse you new coverage or determine your premiums based on the
following factors:
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Number of inquiries on your credit report;
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Collection accounts identified as medical bills;
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Initial purchase of a home or car that adds a new loan to your history;
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Use of a particular type of credit, debit, or charge card;
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Total available line of credit; and
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Lack of credit history (this last factor may be used in setting premiums
if a company has filed statistical evidence with the Washington Insurance
Commissioner showing that consumers lacking a credit history are more likely
to file claims).
There are other requirements companies must adhere to in their use of credit
data, relating to the use of inaccurate credit history, notifications that
must be provided in the event a company takes adverse action, and filing
with the insurance commissioner the calculation systems used for determining
scores. The protections provided by the federal Equal Credit Opportunity
Act also apply, meaning companies may not use factors such as race, sex,
marital status, national origin, or religion in credit scoring models.
Insurance companies do not have to tell you they are looking at your credit
history or get your permission to do so.
The impact of your credit history on the rates you might pay can be dramatic.
For example, when we shopped for insurance for one sample driver with Progressive,
we found a difference of $834 between the rate we were given before the
company had the driver’s credit record versus the rate we were given when
we gave the company a Social Security number that it could check to determine
that the driver actually had an excellent credit record.
Clearly, saving on insurance is one of many reasons that consumers need
to maintain good credit records—for example, by paying bills promptly,
not opening too many lines of credit, and keeping balances relatively low
on the lines of credit we do have.
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 premium comparison table shows annual premiums for 15 companies doing business in Washington.
We show sample premiums for all companies for which, at the time we began
data-gathering for our last full, published report, we had 10 or more ratings
from CHECKBOOK’s survey of policyholders (described here)—except for three companies that did not
provide rate information we requested and for which we were unable to collect
rates independently. The listed companies account for a vast majority of
the business done in the region.
The rates on the premium comparison table are rates we collected from the companies’ websites,
from insurance rate comparison websites, or from the companies themselves
in response to a direct request for information for this article. All companies
have had an opportunity to check and correct the rates we collected.
The rates on the premium comparison table are for two different policyholder households, a
married couple ages 34 and 35 and a married couple ages 61 and 62 with
a 19-year-old daughter. We collected rates for four Puget Sound locations—in
Seattle, Tacoma, Bremerton, and Everett.
For the premium comparison table we sought to get the lowest rates offered by each company for
the driver types specified.
As you can see, the company-to-company rate differences are dramatic—annual
differences of hundreds of dollars in many cases, and more than a thousand
dollars in some cases. The rates on the premium comparison table
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 give you a good starting point
for your own shopping. Companies with low rates on the premium comparison table
are good 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 Yellow Pages to locate an agent
or broker. You can then ask each agent or broker for a price quotation
for the coverage you want.
You might fill out this worksheet as a guide for talking in person or by phone with several agents,
or you might make copies of a completed worksheet to send or fax to a few
agents. Some “independent” brokers or 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 contact their offices or agents directly.
In addition to seeking out companies based on their relative rankings on
the premium comparison table, you may want to try using one of the insurance comparison websites.
But these sites tend to sound better than they are. Insweb.com, for example,
claims it will enable you to “compare quotes from the most trusted companies
in insurance” and lists more than 25 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 seven companies. Other insurance shopping sites
returned quotes from even fewer companies. On the other hand, we have often
found that among the few returned quotes, there is at least one quote that
is very 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.
As you shop, you might find that you don’t qualify for a company’s best
rates if you don’t have a clean driving record. Just ask the agents you
deal with for the best rates for which you qualify.
If you have so many accidents or violations that it is difficult for you
to qualify for coverage at all, you have the right to get insurance through
the state’s “assigned risk” plan. Rates in the assigned risk plan are often
three times or more what you’d pay for a “preferred” policy.
Companies’ actual underwriting practices—which drivers get the best rates,
which pay more, and which they won’t insure at all—are not publicly disclosed.
And they may include factors other than such obvious matters as age and
accident histories. For example, even if two drivers are the same age and
have the same accident history, which makes them borderline cases for getting
the best rates, one with a poor credit history might not qualify for a
good rate because the company considers credit history as an underwriting
factor while the other who is a homeowner might qualify because the company
looks favorably on homeowners.
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 two types of information
to help you evaluate companies’ service: a survey of policyholders and
an analysis of complaints. Our Ratings Tables contain our data on companies
or insurance groups rated by 10 or more respondents in our survey of policyholders.
(The survey data on our Ratings Tables are for a group of companies
to the extent that customer survey responders identified companies that
are part of the group.)
Our Survey of Policyholders
We surveyed CHECKBOOK and Consumer Reports magazine subscribers and collected
ratings of individual insurance companies from 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. The Ratings Tables show what percentage of policyholders
rated each company “superior” on each of these elements.
At the time of our last full, published article, USAA, Amica Mutual, and
PEMCO were all rated “superior” for “simplicity of claim procedures,” for
example, by more than 75 percent of their surveyed policyholders. In contrast,
Liberty Mutual/North Pacific, National Merit/Unigard, and Progressive got
such favorable ratings from fewer than 50 percent of their surveyed policyholders.
(For a further description of our policyholder survey and how its results
and our other research results should be interpreted, click here.)
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 Washington State Office of the
Insurance Commissioner presumably reflects serious dissatisfaction.
On our Ratings Tables, we have reported the number of private passenger
auto insurance complaints filed in 2002. We have also reported the “complaint
rate” for each company. The complaint rate 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 2002 complaints per million dollars in 2002 direct private passenger
auto insurance premiums written. The companies with the lowest complaint
rates were Amica Mutual, Grange Insurance, and State Farm, while Hartford/AARP
and AIG had the highest.
The data reported here are for groups of companies; we have combined the
complaint data for all individual companies within the applicable group.
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.
There are certain legal restraints on termination in Washington—by cancellation
or nonrenewal. State law provides some protections against discrimination
on the basis of race, sex, age, and other factors.
With regard to cancellation, the law allows relatively easy termination
during a policy’s first 60 days while a company checks the accuracy of
its policyholders’ applications. Termination is then very difficult until
the end of the “policy period,” generally occurring only in cases of failure
to pay a premium or suspension or revocation of a driver’s license. At
the end of the “policy period,” termination is again relatively easy as
long as certain procedures are followed.
With regard to nonrenewal, an insurer may not refuse to renew your liability
and/or collision coverage because you filed one or more claims under your
comprehensive, road service, or towing coverage.
Insurers must follow certain procedures when canceling or nonrenewing a
policy. The procedures for termination generally involve sending a notice
to the policyholder at least 20 days before the termination date (10 days
when termination is for nonpayment of premium or during the first 30 days
of the policy). The policyholder has the right to protest to the state
insurance department.
In fact, except in cases of nonpayment 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 on our policyholder survey for their termination practices.
On the survey, we asked policyholders who had made claims to rate their
companies on “not unreasonably cutting coverage.” You can see the results
on our Ratings Tables. The tables show the percent of survey respondents
who rated each company “adequate” or “superior” on these questions. Those
who didn’t rate their companies “adequate” or “superior” rated them “inferior.”
Several companies are rated “inferior” by three percent or fewer of their
surveyed policyholders, but a few of the companies got such low ratings
from 10 percent or more.
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
premium.” 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 15 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.
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 with the duty to assess all insurers
doing business in the state on a pro rata basis to pay off all outstanding
claims of an insolvent company and reimburse each policyholder’s paid-in
premium. There is a $300,000 limit on most covered claims and paid-in premium
reimbursement, with a $100 deductible.
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, at no charge. 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 Washington,
which is the Washington Auto Insurance Plan (WA AIP). Under this arrangement,
drivers who are not eligible for even the nonstandard rates with insurance
companies are able to buy insurance. The driver’s insurance agent or broker
applies to the WA AIP on his or her behalf. 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.
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. You must file with the police a full, written report of the accident
within 24 hours if there are any injuries, deaths, or damage to any one
person’s property exceeding $750.
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 your department of motor vehicles. 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 CHECKBOOK, Volume 1, No. 2).
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:
Office of the Insurance Commissioner
P.O. Box 40255
Olympia, WA 98504
1-800-562-6900
www.insurance.wa.gov
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