OAI Discusses Significance of an Auto Insurance Co.'s Financial Rating

RANCHO CUCAMONGA, CA, February 08, 2011 (Press-News.org) Statistics have shown that a majority of consumers look only for the cheapest auto insurance companies when shopping for coverage, but this predominant emphasis on price may be leading drivers to overlook other key factors.

Financial status, for instance, often carries little weight for the average consumer. But researching this aspect of a carrier can give policyholders the assurance that they are paying hundreds or thousands of dollars in premiums every year to an insurance company that is--and will remain--capable of making good on that coverage.

An inherent aspect of insurance is the fact that the future is unpredictable. Though coverage providers have developed incredibly refined methods for predicting future losses, some guesswork is still involved. That means insurers must have enough money to pay for their overhead and the claims they expect policyholders to file, but they also must have reserves that can be used to cover the costs of unexpected, catastrophic claims or unusual spikes in the average severity or frequency of claims. Insurers that have more than enough capital to cover unexpected claims trends are those that have a good or exceptional financial status.

Of course, there's plenty of reason that this factor takes low priority in most consumers' minds. Part of the role of state regulators is to make sure that the insurers operating in the state are not at risk of becoming insolvent and to rehabilitate them if they are, so the chance of having a coverage provider go under are not very high. Nevertheless, eight auto insurers went into insolvency in 2009, and policyholders who had outstanding claims with those companies likely had an unpleasant experience in collecting payment for those claims.

To assess financial status, consumers can check the websites of a number of independent rating agencies like A.M. Best, although it should be noted that a positive rating does not necessarily guarantee that an insurer will remain solvent.

Source: http://www.doi.ne.gov/brochure/out02127.pdf

To learn more about this and other car insurance issues, readers can go to http://www.onlineautoinsurance.com/cheap/companies/ where visitors will find informative resource pages and a free-to-use quote-comparison generator that can help consumers find the carriers with the most affordable policies. Readers can access the full FAQ by clicking on the "Questions" page located at the top of every page on the site.