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Price
While price isn't the only factor to consider, it is a major one. Most
important
factors about an insurance company are reflected in the price of their
product!
If you are considering an insurance company that has been doing business
in your state for at least five years, you should have enough history
to make several
conclusions on price alone.
The first conclusion is based on customer selection and payment of claims.
You must ask yourself, "Is the insurance company being careful in
customer selection
and being fair on claims settlements?" If they have a competitive
rate structure,
chances are they are careful in customer selection and claims adjusting.
You don't
want an insurance company that overpays claims or isn't customer selective;
those errors will be reflected in the rate structure.
A reason for the five year time frame is many insurance companies new
in an
area will, for the first few years, sell their coverages at artificially
low rates to attract
new customers. This type of activity will usually be corrected within
the five years.
Here's how it works. A company comes into an area with low rates. After
a few
years, their rates become as artificially high as they were low. A series
of large rate
increases are made in an attempt to regain the premium lost initially
in the early
years. The reason for this is that they lost too much money in their entry
into the
state and are now cutting their losses short. This activity causes them
to lose
preferred customers and then be left with an undesirable customer base
so their
problems escalate. In some cases, they will withdraw from the state altogether
and
discontinue writing new business or servicing existing customers. Increased
problems
are due to customers with good loss history leaving for other companies
with less
expensive rates. The company is left with a majority of customers who
have a poor
loss history and cannot obtain coverage at a lower rate. This is called
"adverse
selection." The insurance company finally withdraws from the state
entirely to end
their unprofitable venture leaving many customers to obtain coverage from
other
companies.
The other possibility is if after five years an insurance company continues
to offer low rates, chances are they're doing things right and worth investigating
further.
This is the type of company that will continue to offer low rates for
many years to
come and that's the type of insurance company you want. Just a word of
caution;
If the insurance company you currently have is competitive one year and
not the
next and then competitive the next year, etc., chances are the management
of the
company lacks direction and the necessary skills required to successfully
manage
the company. If you experience this kind of rate fluctuation, it's time
to look for a
consistently managed company. I have seen both types of companies in my
many
years of experience and found that companies improperly managed tend to
remain
small and provide poor service along with non-competitive rates.
Service
Initially you should check the company out as outlined in Section 2. You
can
also talk to several people who have this particular company and get feedback
on
their experiences, although this is not always a reliable source as mentioned
earlier.
If you wish to continue your investigation, you could visit the claims
office that would
service your account and ask to speak with the claims manager. If you
have a good
feel for people, you will see the company's attitude reflected in the
claims manager's
attitude; an attitude that will be reflected throughout the claims process.
In my opinion, probably the best way to check out a company's claims
procedures is to visit several auto body repair shops in your community.
Ask the
shop managers about the company you are considering. They will be able
to tell
you how hard or easy your prospective company is to work with. These visits
will tell
you a great deal about how the insurance company pays claims and give
you an
overall indication of how they deal with their customers, as well as others
who may
be involved in your claim.
Size: Bigger Isn't Always Better
In the past you were usually correct in your assumption that the bigger
the
insurance company, the better; but not anymore! The giant companies of
today are becoming the dinosaurs of tomorrow simply because they are unable
and, in some
cases unwilling, to change fast enough to provide the kind of business
environment
needed for the future. The newer, smaller and smarter companies are meeting
that
challenge. They are appearing on the scene and providing better rates
and ease of
service to their customers.
Size isn't an issue of importance if other things such as price, claims
settlement,
financial strength, and the customer's ability to communicate with the
company are
in order.
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