How to research a car insurance company before you buy

Before you buy, confirm four things about a car insurer: that it is licensed in your state, that it is financially strong, that its complaint record is reasonable for its size, and that its claims service holds up. All four can be checked for free in under an hour using regulator and rating-agency tools. Price matters, but a cheap policy from a company that fights or slow-walks claims is not a bargain.

Step 1: Identify the exact company

The name on the ad is often a brand, not the insurer. Large groups write policies through several legal companies, and smaller brands may be agencies or programs placing your policy with another insurer. Find the issuing company on the quote or the declarations page; that is the company you are researching. If a quote does not name the insurer, ask before you pay. For how program and fronting arrangements work, see texas county mutuals and fronting carriers: who really insures you.

Step 2: Confirm it is licensed in your state

An admitted insurer holds a license from your state's insurance department. That license means it files its rates and forms with the state, answers to the state's regulators, and belongs to the state guaranty fund that pays claims if an insurer fails.

• Use your state insurance department's company lookup, or the NAIC's Consumer Insurance Search, which shows licensing information by state.
• Check the agent too. Several state insurance departments link to the NAIC's license lookup for producers.
• If you cannot find a license, stop. Fake insurers and "ghost brokers" sell worthless policies; see how to spot a fake car insurance company.

Step 3: Check financial strength

Look up the company's AM Best financial strength rating at ambest.com. Ratings of A- (Excellent) and higher raise no concern for a short-term auto policy; ratings of B and lower, or any E or F designation, deserve questions. Check the outlook and the date. See AM Best financial strength ratings explained for the full scale.

Step 4: Read the complaint record

The NAIC complaint index compares a company's confirmed complaints with its share of premiums, with 1.00 as the national baseline. Use the private passenger auto line and look at several years and the reasons behind the complaints. See The NAIC complaint index: how to look up an insurer.

State data can add a local view. The Texas Department of Insurance publishes complaint indexes and policy counts by company, and California's Consumer Complaint Study ranks insurers by justified complaint ratio.

Step 5: Look at claims and customer satisfaction

• Industry studies. J.D. Power publishes annual auto insurance shopping, satisfaction and claims studies by region. Note the study name and year; see J.D. Power auto insurance studies explained.
• Reviews. Online reviews skew toward angry customers, so read them for patterns (repeated stories of slow total-loss payments, for example) rather than star averages.
• Regulatory actions. Many state insurance departments publish market conduct exams and enforcement orders. A large fine for claims-handling violations is more meaningful than a scattering of one-star reviews.

Step 6: Understand how it sells and services

How you buy affects how you are served. A captive agent sells for one insurer, an independent agent can place you with several, and direct writers sell by phone and online. None is better in general, but it tells you who you will call at claim time. See captive agents vs independent agents vs buying direct.

Step 7: Check rates and rules on file

Insurers file their rates and rating rules with state regulators, and many states make those rate filings searchable through the SERFF Filing Access system; Texas, for example, links to it as search company filings. You do not need to read actuarial exhibits, but filings can show recent rate increases and which discounts and surcharges a company uses.

Research checklist

Record your findings and the date for each company you are quoting in the compare auto insurers side by side, next to the prices from your quote comparison worksheet.

Researching a newer or smaller insurer

Regional mutuals, Farm Bureau companies, digital startups and nonstandard specialists can be good choices, but the usual data is thinner. A small insurer's complaint index can swing widely from year to year because a few complaints move the ratio, so look at the raw count and the reasons. Some smaller or newer companies are not rated by AM Best; check whether another agency rates them and which scale it uses. For digital brands, find out whether the company is itself a licensed insurer or an agency or managing general agent placing your policy with another insurer, because the issuing company is the one whose license, rating and complaint record matter. See digital-first car insurers: how the insurtechs work.

Repeat the quick checks at renewal. Ratings, complaint records and ownership change, and a company you vetted three years ago may look different today.

Red flags

• The seller cannot or will not name the insurance company.
• Payment is requested by gift card, wire transfer, cryptocurrency or a personal payment app.
• You cannot find a license for the company or the agent in your state.
• The price is far below every other quote for the same coverage and driver.
• The "policy" arrives without declarations pages, policy forms or a way to verify it with the insurer directly.

Key takeaways

• Research the issuing company named on the quote, not just the brand in the ad.
• Confirm the company and agent are licensed in your state before paying anything.
• Check the AM Best rating and the NAIC complaint index for the private passenger auto line, over several years.
• Add claims satisfaction studies and state enforcement records to see how claims are handled.
• Treat an unnamed insurer, unusual payment methods or a price far below the market as warning signs.