QuestionWhy do the big name car insurance company's charge so much more than the lesser know company's? All state insurance will charge me 3 times more in premiums compared to say Farmers insurance a lesser know company. I'm getting all the same types of coverage. My insurance agent told me its just how fast claims get settled that dictates premiums. What's your ideas, thoughts on this? OK thanks back to you, Steve
Answer
Buying auto insurance—premium differences
Intelligent money-wise buying auto insurance
Avoid cheap auto insurance
UIM claims—insurance forcing jury trials
Hi Steve,
I am going to give you a link to an insurance commissioner who also cannot figure out the difference in quotes. But first, let's take a general look at why some companies may be cheaper than others.
The basic difference between companies can be attributed to the kinds of service and payment policies they offer. In other words, if one company is more likely:
1) to delay its payments to its own insureds in first party claims (i.e. Personal Injury Protection—PIP—medical costs or wage loss); or
2) to cut their first party rights and payments off sooner; or
3) to make their own insureds undergo a so-called "Independent" Medical Examination (IME); or
4) to fight their own insured tooth and nail in their Uninsured Motorist Coverage (UIM) claims; or
5) to make their own insureds go through a JURY TRIAL against their will just to make their UIM claim,
THEN, YES, one could expect lesser cost in terms of reduced premiums. I would STAY AWAY FROM THE CHEAP COMPANIES because there are good reasons they are cheap, as detailed above.
GOOD COMPANIES IDENTIFIED
The website badfaithinsurance.org ranks the top three good companies as Chubb, Fireman's Fund, and Amica Mutual http://www.badfaithinsurance.org/indexdetaillist.html
But back to your question for a minute. The example you cite is strange, inasmuch as Allstate is pretty much identified by trial attorney groups as one of the leaders for non-payment of claims. In other words, when a number of state trial attorneys' associations put on continuing legal seminars with titles such as "How to Hammer Allstate" (go ahead and Google that CLE title!), one can conclude that they have found that company to be difficult to deal with.
And if your company is difficult to deal with, guess what: YOU, their insured will get a front row seat to learn all about our jury trial system, because you are a lot more likely to get sued as a defendant. True story. Last year it was reported that a number of those lower cost companies (led by Allstate) made their insureds go through a trial because they did not want to pay up on the claims for negligence of their insureds.
I would like to butt in on those reassuring insurance ads on TV and ask the announcer for the lying insurance carrier to tell us what the chances are of having to go through a trial if one should cause an accident. I believe that one TV news story reported that in Washington State, Allstate subjected its insureds to a trial for OVER HALF OF ITS CLAIMS!
Hey, nothing like opening your door and getting served with a lawsuit, spending countless hours with an insurance attorney, going through depositions, missing work, and having to undergo cross examination at a ten day jury trial—all just because you "saved" some money when you bought cheap auto insurance that does not pay out on its claims.
That also means not just the claims people have against you, it also means the claims you have against your own company, for a UIM claim for example. Allstate was the leader in sneaking in a little policy clause years ago that allows it to require their insureds who claim against their UIM coverage to be FORCED INTO A JURY TRIAL AGAINST THEIR WILL.
Since then, other companies have adopted the same language, including (unfortunately) some formerly "good" companies, such as USAA.
So what? Well, as the insurance companies all realize, cases scheduled for a jury trial will settle for less because no claimant wants to undergo that kind of torture AND expense. For example, for many companies that still offer their insureds the choice of UIM arbitration, their insureds are blessed with the choice of admitting the medical records without the doctor present. By contrast, it is almost always a requirement that in a jury trial you will have to bring in at least two of your doctors, at your own expense.
By the way, Farmers has joined Allstate in recent years as a poor payout company, thus subjecting its insureds to the same kind of abuses as Allstate. In Washington, Farmers was recently exposed in another TV report as having based employee evaluations on how often adjusters could get away with forcing the claimant to discount his claim by insisting that the claimant was somehow also partly at fault!
Both companies were shown for what they are in a special on Seattle's KIRO TV entitled "The Great Insurance Gamble". Here is a link: http://www.kirotv.com/programming/9585482/detail.html
Among the more interesting findings of the program was the same thing you encountered: wildly differing quotes, including within the same company! Here is a link to that part of the story, and a second link to the chart that shows how the quotes varied within the same geographic area for the same guy with the same car.
http://www.kirotv.com/money/9588330/detail.html
http://images.ibsys.com/2006/0501/9141794.jpg
Note that even Mike Kreidler, the highly regarded Washington State Insurance Commissioner (look up your insurance commissioner http://www.settlementcentral.com/links.php) could not figure out the reason for the different quotes. Maybe each agent has a different profit percentage tucked in there somewhere.
See these pages for more general information on the smartest way to buy auto insurance http://www.settlementcentral.com/page8006.htm
Check out the second part of that article to learn some tricks that they will pull on you so you can be educated to avoid them when buying auto insurance http://www.settlementcentral.com/page8008.htm
I trust this little excursion has been of some help to identify some issues to consider when buying auto insurance.
Best Wishes, Steve,
Doctor Settlement, J.D. (Juris Doctor)
Http://www.SettlementCentral.Com
