Doing a Background Check on Your Insurer

Before they hire employees, companies often do a background check. This is normally just what is called a criminal background check, to discover if an applicant has ever been convicted of a crime. Some businesses such as banks may check to see if an applicant has poor credit or civil actions pending against them. This is considered a prudent business activity, to protect a business against taking unnecessary risks when hiring staff. It is just as prudent for a consumer to know who they are getting into business with. This is true for those of us looking for auto insurance. Not finding out more about who you are buying your insurance from is taking a risk. Just because an auto insurance company is quoting the right price, or they are a large and well known insurer, doesn’t mean they are trustworthy. Fortunately there are some simple things you can do to get the information you need to make an informed decision.

Here are some questions you should ask yourself before choosing a provider:

• Rating: Insurance companies are rated, based on their performance and financial solvency. Several organizations review the companies and offer ratings, including A.M. Best Company, Duff & Phelps, Moody’s, and Standard & Poor’s Corporation, with A.M. Best being the most popular. You can find the A.M. Best Company Insurance index on their webpage.
• Additional Consumer Studies:J.D. Powers and other consumer advocacy and reporting groups perform yearly studies on companies providing goods and services to the average consumer. These studies will rate companies on various criteria and typically use customer feedback polls to determine ratings. They are not as strict as the ratings from A.M. Best and other organizations, but are still helpful in assessing a company and their products better.
• Law Suits and Regulatory Infractions: You can check with both your state and the federal attorney generals’ offices to see if your potential insurance provider has been in trouble due to any illegal or questionable practices. In some cases this can be done by searching on the department website for the government office. Otherwise it may require a phone call or a letter. If you have access to a legal site like Lexus-Nexus this may also have any information regarding this. In addition however, you may check with your state’s Department of Insurance website, which will usually have information regarding any legal inquiries into companies as well as any class action lawsuits brought against them.
• Wall Street: If the insurer you are considering is a publicly traded company then you can hit up investing forums and websites to see what investors and analysts are saying about the present and future economic situation of the insurance company

Whether you are shopping for insurance or making a business deal it is always prudent to know who you are doing business with. Doing the research and making an informed decision when you are selecting an auto insurance provider, minimizes risk and will help ensure that should the occasion arise that you need to file a claim, it will be handled as you expect and the insurer will process it fairly.