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Are the Largest Insurance Companies the Best?

Are the largest insurance companies the best?  There are a lot of factors to consider in determining that answer, and more often than not, the answer depends upon your insurance needs.  Large insurance companies can offer benefits to customers such as:

–         More Claims Service Centers

–         More Conveniently Located Agents (depending on their business model)

–         More Property Damage Evaluators

So what are some other possible benefits?  A larger volume of policies and clients who hold them can make a difference for you as an individual policyholder. When there are many people who have insurance with the same company, it can focus less on the profit margin made from each individual customer.  More clients mean a greater chance for an insurer to make profits, even with a lower profit margin on each policy.

For example, if two companies had a goal to make $100 profit, a company with 100 customers would need to charge those customers just $1 above and beyond the cost of the policy, while a company with only 50 would need to charge $2 per customer.  Customers with the second company will be paying more than with the first.  There are economies of scale in play.

But Not Always

There is a downside to working with a larger business that can factor in to how much you would pay as its customer.  The cost of doing business, from the overhead, to advertising, to attracting as many customer as possible, to the number of claims that must be paid out, can put a greater burden on a large insurance company and forces them to pass those expenses down to their customers.

Typically, though, a large company will closely monitor its business expenses and limit their expenses.  This may even mean lower payouts for claims as evidenced with all the controversy of the Colossus computer claim evaluation system.

Smaller companies have also gotten more efficient and some have even switched to a largely automated system, which can greatly reduce their overall costs.  Smaller companies may also target specific types of customers with a lower risk of accidents.  With fewer costs, these businesses can offer lower rates to their customers, which can be even lower than their larger competitors.

Size Isn’t Always a Mark of Better or Worse

Sometimes, whether one company is better or worse than another is not a matter of price alone and isn’t something that you will be able to decide without knowing a bit about the individual business.  Businesses large and small have moved toward more automated systems, and that can mean less personal contact when you need answers and less familiarity with your agent if you should get in an accident.

In other businesses, smaller businesses tend to have a more personal touch while larger corporations appear cold or faceless, but that isn’t always true when it comes to insurance.  While the overall company may be large, individual offices and local agents provide the same one-on-one interaction that you might come to expect from a small business.

Size will also have little effect on the company’s willingness to pay out should you be involved in an accident.  Some companies can be notoriously terrible to work with if a claim is filed while others will make the process go as smoothly as possible.  Take the time to research the company to make sure you are comfortable being an insured and they strike the right balance of price and service.

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April 3, 2012 um 8:08 am
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