Four large companies control nearly half the country’s car insurance business: Allstate, GEICO, Progressive, and State Farm. And while there’s myriad reasons you may prefer a large insurance company, it may also be worth considering a smaller, regional insurer. It could end up saving you money.
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According to a January 2017 survey, 39 percent of U.S policyholders have never shopped their auto insurance for a better rate. As a result, many customers simply renew their policy year after year, potentially missing out on savings. In an April 2016 study published by AAA, insurance rates increased by 9.2 percent. It may be time to shop around and consider a small auto insurance company.
In J.D. Power’s 2017 U.S. Insurance Shopping Study, price has become a more influential factor in brand consideration and quoting, surpassing the importance of a good past service experience. For small insurers to compete with their larger competitors, some of the lowest rates can be found with the lesser-known and smaller companies. And while these smaller companies may not be able to offer all the frills and extra benefits of the larger companies, with less overhead, they may be in position to offer lower rates.
Don’t assume that all companies, large or small, are created equal. No single company can claim to have the lowest price for everyone, regardless of what their commercials might lead you to believe. The industry is regulated at the state level, which is why the pricing varies from state to state. What one individual pays for coverage with one provider in one region may be the cheapest, while another individual with the same provider and same coverage in another region may pay more in premiums.
The Bottom Line: You’re going to have to shop around to determine if going with a small insurance company may save you money. But before you do, here’s a few things to consider.
While larger companies target the masses, a small insurance company may have local agents who are in better position to personalize your coverage. These agents may be familiar with the local scene and the nuances of the region, and if you have individual needs, a smaller company may be able to customize your policy. For example, some customers may have specific commercial needs or want to insure an antique or modified vehicle. Additionally, going with a small insurance company may mean keeping your business in the local economy, another consideration if this is appealing to you.
While smaller companies by nature have less employees and may be able to provide a personal touch, conversely, they may not be able to offer robust 24/7 customer service. If around-the-clock customer service is a priority for you, be sure to research customer reviews and testimonials to determine which company might be the best fit for you.
Policyholders should also be aware of the relative financial strength of insurers when shopping around. Companies who are at risk of folding or who are exposed to huge amounts of debts may not be able to pay off claims. Although each state offers a safety net to pay claims in case an insurer goes bankrupt, this could be time consuming and leave you in a bind should you find your car inoperable and in need of repair due to an accident.