It's impossible to avoid advertisements from the largest insurance companies and their iconic "mascots"— from the Geico gecko to the ubiquitous Flo from Progressive, to the Allstate Mayhem Man. You may be wondering: with all that money spent on advertising and sponsorships, are these companies paying more attention to attracting customers than to meeting their needs? Would I be better off with a smaller insurance company? The answer to that last question depends on what type of insurance you are buying, and what coverage elements are most important to you.
Regardless of the type of insurance or size of company, you will want to consider the following:
- Financial Rating and Stability – Organizations such as A.M. Best, Standard and Poor's, and Demotech assign financial strength ratings to insurance companies. A stronger company is in better position to pay your claims in case of a mass catastrophic event. Search for a company's rating with one of these agencies. If a company won't give you those ratings, that's a huge red flag.
- Complaints – Any insurance company is going to have complaints. You want to know the relative percentage of complaints, or if they are concentrated in a particular area or field. The A.M. Best website provide links to your state insurance commission – and, in most states, you should be able to look up complaints by insurer and type of complaint.
- Licensing – Make sure any insurance company you use is licensed to operate in your state. State insurance agencies control all licensing. The big-name companies are almost certainly registered in all states, but it never hurts to check.
With respect to the size of a company, consider what you want most from your carrier and whether the larger or smaller company is more likely to provide it.
- Lower Rates – Smaller companies with lower overhead may be able to provide lower rates. Larger companies have to cover the gecko's overhead, if you will, as well as other large company facility expenses – but they also have more resources to work with, and can be more creative with discounts. So check out pricing from both large and small companies and see whose are best.
- Level of Service – Is service more important to you than price? Do you take comfort in having a dedicated agent in your hometown who knows you – and your insurance needs -- personally? Or are you satisfied with simply having a toll-free number to call if you need to speak with your carrier? To answer these questions, you’ll have to look beyond the mere size of the company to its business model. For example, both Allstate (which uses local agents) and GEICO (an online and call-center-based company that does not assign dedicated agents) are both large companies. They both have a reputation for providing solid service. However, your local Allstate agent is more likely to be proactive, checking on you personally to make certain your coverages are up to date. Larger companies also tend to provide faster, more accessible claims services than small ones. The tradeoff for that support is that you may feel like just a number, insignificant among many other claims. A smaller insurer may provide more personal service – if they are sufficiently accessible.
- Specialized Needs – Are you looking for homeowner's insurance in a hurricane zone? Are you an independent truck driver specializing in hazardous cargo? These situations require more in-depth analysis. In general, a larger insurance company will provide more options, but a smaller niche company may have specialized policies tailored to your needs.
- Bundling with Other Forms of Insurance – Larger carriers are more likely to offer multiple lines of insurance than smaller carriers are. This permits you to “bundle” one type of insurance (such as for your car) with one or more other types (such as fire insurance for your home) to save money.
Your first step in comparing large and small insurance companies should be to gather quotes and look for the best rates and coverage for your situation, and then consider the above factors when making your final decision. In the end, only you can determine whether your situation makes it worth paying extra for the gecko, Flo, or the Mayhem Man.
Remember your credit score may also affect your insurance premium. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.