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Which Car Insurance Companies Offer Low Premiums & High Payouts?

By Keith Stachowiak on December 7, 2016 // Leave a Comment

how-to-choose-car-insurance-companyThere are many options when it comes to buying car insurance: online insurance carriers, big national corporations and smaller local companies. Some important question you need to ask before you sign on the dotted line are:

  • What type of car insurance company offers the lowest premiums
  • What options do I want to purchase, such as uninsured motorist, underinsured motorist, collision, comprehensive, gap coverage, and
  • Which company has better claim payout ratios, which benefit the policy holder, instead of their stockholder?

As a Milwaukee car accident lawyer, I have seen thousands of accident cases come through my personal injury law firm, and I have dealt with a lot of insurance companies employing many tactics to reduce cost. But there a lot of things you and your fellow consumers may not be aware of.

Below I summarize a recent study on car insurance company value and payouts. I encourage you to take a look at the key takeaways and perhaps reconsider your policyholder.

I ran across as article in the New York Times recently “The Kind of Car Insurer that Gives Consumers the Best Value.

Here are some of the key points that explain the study highlighted in the article:

  • ValChoice, an insurance market data analytics company, competed a comprehensive study examining the claims-paying history of 312 auto insurers in the past five years.
  • The study compared the premiums insurance companies took in with the amounts they paid out on claims, a metric known as the paid loss ratio.
  • The study examined two types of insurance companies; publicly traded companies, and mutual companies. Publicly traded corporations are responsible to shareholders, account for 48.3 percent of the market, and include companies like Allstate, Geico and Progressive. Mutual companies are private businesses that either keep earnings and profits within the company, or return earnings to policyholders in the form of dividends. Mutual companies that do not consistently pay dividends to auto policyholders, account for 42.3 percent of the market. One example of this type of insurer is Liberty Mutual. Mutual companies that do pay dividends, sometimes called reciprocal insurance exchanges, account for 8 percent of the market. USAA and Amica Mutual are two examples.

how-much-do-insurance-companies-pay-in-claimsThe Findings of the Car Insurance Study

The study concluded that dividend-paying mutual insurance companies, which currently only account for 8 percent of the market, offer the best value to consumers.

Over a five-year period from 2011 through 2015:

  • Mutual insurance companies, which pay dividends to consumers, paid out an average 72.6 percent of their premiums in claims.
  • Mutual companies that do not pay dividends paid an average 64.5 percent of their premiums in claims.
  • Publicly held insurers with shareholders paid 62.8 percent of their premiums in claims.

What does this mean for you when you buy car insurance?

  • The price you pay in premiums shouldn’t be the only thing you look at.
  • Consider the value you are receiving for the insurance premiums you pay.
  • Lower pay loss ratio means the insurance company is paying more for salaries, defense costs, and advertising, rather than paying the policyholders who purchased their coverage. All other things being equal, try to find car insurance companies with a higher pay loss ratio.

Key Article Takeaway:

When it comes to buying car insurance, don’t only look at insurance plans offered by publicly held companies offering you cheap insurance rates. When you are involved in a car accident or truck accident, you are likely to fare better if you stick with a company that has a higher pay loss ratio.

Other car insurance articles of interest:

At Murphy & Prachthauser we practice personal injury law the way it should be practiced – motivated and equipped to do our best for you. We take pride in being good lawyers who help people.

If you have a potential car accident lawsuit that you would like to speak to a lawyer about, please contact us toschedule a free case evaluation and get an experienced team of lawyers working on your behalf.

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