Premiums Paradoxically Soar With Approval Ratings

By Author: Marcus Stalder
Total Articles: 491
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How could it possibly be bad news that customers are happy with their insurance? Doesn't that mean that the insurance providers are doing a good job? Providing good service? After all, this information comes from consumer reviews!

It's really not bad news exactly. Unfortunately, the news that came along with it is that rates are going up.

Consumer Reports found that 86% of customers are highly satisfied with the way that the 22 largest insurers have handled claims for their cars. The study surveys nearly 30,000 people who had filed claims between January '06 and June '09. Claimants responded with a number score between 0 and 100, 100 being the most satisfied of course. Roughly speaking, the study said that 60 was fairly satisfied, 80 was very satisfied, and those who responded with 100 were completely satisfied.

However, it is easy to be skeptical of the findings. Naturally, most people whose claims have been agreed upon would give a 100, while those who received less than they thought they deserved would reply somewhere in between. If someone's claim was denied, no matter if the claim was silly, a 0 score ...
... could bring the data down significantly.
Still, because of the vast amount of responses, the results are likely pretty accurate and are very positive for the industry as a whole.

The criteria behind the decisions might also have included the response time on their claims. Three-fourths of claimants got a response in under two weeks, whether positive or not.

The logic, then, would dictate that since insurers are doing so well and consumers are confident, more people would buy insurance for their vehicle and rates would be able to be lowered or at least stay the same. However, 1 in 6 Americans who drive still do not have auto insurance. When asked why they did not have an active policy despite it being required by law, they explained that they simply could not afford it.

Considering rates have increased 10% over 2.5 years according to the study, it is unlikely that these uninsured will take out a policy any time soon.
The one-tenth increase in premiums could represent thousands of dollars a year which might mean that more people will soon by uninsured.

But if the insurance companies are doing well, why are they raising rates?

They have been fairly silent on the matter. There is no necessary correlation between customer satisfaction and profits, however. If so many people are happy about their claims, that means that insurance providers are paying out a lot of money, so they could be hurting a bit financially.
It is also possible that people are simply getting in more accidents and seeking fewer discounts.

The study itself is unclear as to whether the people who saw an increase in premiums were just those who got into accidents or if it was the general public of auto insurance carriers who responded.

At a time like this, with an economy that has not quite done anything worthy of the word "recovery", and more stressed drivers on the road than ever, people have never needed reliable and cheap auto insurance this much.