Cheap car insurance: what to look for in an insurance company
Most people looking to buy auto insurance will shop around and end up choosing the cheapest quote, or one with the best coverage at a reasonably low rate. Very few people will actually look at the financial strength of the insurance company before making a decision about whether or not to use it. This could very well end up being a big and expensive mistake for a number of reasons.
Today, most people use the Internet to purchase their car insurance. They will use one of the many cost comparisons available or possibly approach an insurance company directly. Before the Internet it was a very different approach. There were no cost comparison sites and most insurance companies preferred to be approached by the general public through an insurance broker. The insurance broker would receive a commission from the insurance company in the form of a percentage reduction in the quoted premium, usually around fifteen or twenty percent. One of the functions of the insurance broker was, and still is, to get the best offer for his client. This involves the cheapest possible quote, together with the greatest financial stability of the possible insurance companies involved. Now that most people use an insurance company directly online, either directly or through a cost comparison site, those checks aren’t done.
There is a simple reason why this is important. While insurance policies last for one year, if you are involved in an accident that could lead to a third party damages claim, this could last for several years. Most third party personal injury claims (other than whiplash claims) tend to be claims that take a long time to assess in terms of how much harm the person involved has suffered. This means that it could be five to ten years before a claim is finally settled, and it will be for a lot of money. One thing you need to be absolutely sure of is that your insurance company still exists. If they are not, you will still be responsible for paying for the damage yourself. The reality is that issuing companies go bankrupt and get into financial difficulties for many reasons, but mainly because they are in the risk business and think in terms of probabilities, which don’t always turn out right.
Additionally, there are often periods of time when insurance companies enter a market like auto insurance and undercut other companies to do business. Auto insurance premiums are a very good source of cash flow for many insurance companies. Once they’ve been in it for a few years, they get out. While they may still be liable for any claims, it becomes much more difficult to resolve, because they are no longer actively trading in that type of business.