Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jul 14, 2021

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In a nutshell...

  • When comparing the quality of car insurance policies, you must take into account all the fine print in the policy contract
  • Some insurance carriers will take on more business and earn higher profits
  • Remember to ask what the customer satisfaction rate has been and find out how many complaints have been recorded

Smart consumers can always save money by comparison shopping. Whether you can save money just by switching insurance companies, however, remains to be seen.

Car insurance companies are regulated and licensed in each state in which they do business, and like all insurance companies, auto insurers are in business to make a profit.

To be profitable, auto insurance companies must write more business and collect more insurance premiums than they have to pay out in claims each year.

Car insurance rates are based on many risk factors such as how likely you’ll have an accident or file a claim during the next policy year and your driving record.

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Do actuaries indeed predict the future?

Actuaries evaluate and mathematically analyze the likely occurrence of events; in this case the accidents, injuries, and deaths that their policyholders may suffer because of a large variety of potential causes.

They determine, in advance, the most likely outcomes of their policyholders’ lives over a given period. With this knowledge, the carrier can minimize its financial losses.

However, clients also suffer emotional losses from events such as death, which cannot be avoided and using these formulas can also help a company take active steps to mitigate the financial impact of these losses as well.

To be a successful actuary requires strong analytical skills, a thorough knowledge of the business environment they work in, as well as an intimate understanding of human behavior.

These skills, in combination with modern information systems, allow actuaries to not only design but also manage programs that control the risk of their employers’ companies.

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Do all insurance companies use an actuarial system?

Yes! As you would expect with any group of companies, some are better at guessing the future than others. Therefore, some insurance carriers will take on more business and earn higher profits than other less successful firms earn.

The larger and more successful companies will often set rate standards that may be difficult for their smaller competitors to match.

If they choose to be, our nations’ largest automobile insurance firms can be very competitive, undercutting their smaller competitors’ rates, by just enough of a margin to attract a large volume of new customers, while continuing to show profits to their stockholders.

There are several other significant factors to be considered:

  • The service
  • The quality
  • The value

What kind of service should I expect from a car insurance company?

Consumers put their trust, loyalty and hard-earned dollars in the hands of insurance professionals who have local offices; often located in their customers’ neighborhoods.

There are also local brokerage firms that represent a variety of insurance carriers, giving their clients the added benefit of comparison shopping under one roof.

In some ways, shopping is harder to accomplish in the digital age, where companies are often represented by media ads and websites that often have little to do with the actual product.

Ask what the customer satisfaction rate has been and find out how many complaints have been recorded in your state against a particular company.

How do I measure value?

The best way to measure the value of an insurance product is to compare all the benefits. Some companies may offer more coverage for the same policy dollar if you look closely enough.

Informed consumers should also know that mandatory coverage amounts vary from state to state, so a policy that includes only essential coverage in Maine, liability is going to be very different from primary, or mandatory coverage in Florida.

Whatever your insurance needs, the Internet can provide a wealth of information and smart consumers should investigate all available companies and options before switching their insurance carrier or buying any new insurance.

It’s very possible to save money but the cost of insurance is just one factor. Your goal should be to find the same or superior coverage at a better price and not just a lower premium bill.

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