Imagine you make the following deal with a friend: You agree to pay your friend $20 each month and in return your friend will give you a ride to the airport any time you need it.

You make this deal because you think it will bring you peace of mind.

There’s a chance you won’t need a ride to the airport each month. In that case, your friend gets $20 for doing nothing. But at least you know that when you do need a ride, your friend will be there and you won’t have to worry about getting into a taxi with a lead-footed driver. Plus, you might even save some money. The price to take an Uber to the airport adds up fast. More than one trip to the airport a month and you’ve easily surpassed the $20 you’re paying your friend.

You believe this arrangement has limited downside and could help you save quite a bit of money. And your friend likes the steady income, so you both agree to the deal.

Sounds like a win-win situation, right?

But there are a few important things missing from this story:

  • Does your friend have reliable transportation?
  • Is he habitually late for appointments?
  • How will he respond to last minute requests?
  • Would he have a backup plan if he couldn’t give you a ride?

What originally seemed like a great deal with limited downside could become worthless if your friend cannot deliver on his promises.

The scenario I described is not unlike your arrangement with your home or auto insurance carrier. Much of your policy’s value is based on your insurance carrier’s ability to deliver when it counts.

This is the first article in a three-part series where we discuss the steps consumers should take when shopping for insurance.
Click the links to read Part 2 and Part 3.

Going back to my hypothetical situation, let’s say you had another friend who would take $5 a month. That’s a lot better than $20. Quite a discount! But is that discount worth it if your friend’s car is filled with dog fur and corn dog wrappers from Sonic? What if he consistently got lost on the way to the airport and dropped you off just 10 minutes before your flight was scheduled to depart?

The point I am making is that discounted insurance premiums are only of value to you if you don’t have to sacrifice the service you receive during the claims process.

So how will you know whether relying on your friend for rides to airport is a good idea? Or know that your insurance claims will be handled professionally? Well, you don’t want to wait for your first ride to the airport or go through your first insurance claim to find out. That’s why you need to conduct adequate research before you sign up.

How to Research Customer Satisfaction with Claims Handling

Every state has its own fair claims handling laws that govern insurance companies operating in that state. In theory, these documents are designed to protect consumers. The problem is, however, that these laws establish incredibly low standards.

For instance, a claims adjuster satisfies Arizona fair claims standards as long as he acknowledges the receipt of a claim within 10 working days. Not calendar days, working days. Therefore, a claims adjuster could wait two weeks to call you back after your house was burned to the ground without risking being confronted by the State Department of Insurance. That is an incredibly slow response time for something so traumatic and life-altering.

But that is the minimum standard required by Arizona state law. Of course, there are companies that will far exceed those baseline requirements, just as there are companies that will do just enough to get by. The question is, which insurance providers will raise the bar to provide exceptional service.

To figure that out, we need to analyze some data about which companies deliver the best claims service.

The best data for the insurance industry that I have found comes from J.D. Power.

Check out these study rankings for overall customer satisfaction among homeowners filing property insurance claims.

JD Power Study

According to the study, Amica Mutual has delivered the best claims satisfaction in the country for the last six years. Meanwhile, other well-known insurance providers like Travelers and Mercury sit near the bottom of the pack in customer satisfaction.

If you have time to take a more grassroots approach to researching insurance providers, I recommend that you sit down with several independent agencies and interview the agents as potential clients. Asking several local agents about their claims experiences with various companies might not give you the same data sample size that a JD Power survey offers, but it will give you a sense of the quality of claims handling within the region where you reside. Most JD Power surveys, on the other hand, gather data from a wide range of geographic locations.

By conducting online research or connecting with a few independent agents, you can put yourself in a position to make a well-informed decision when you select the insurance company you want to protect your home or car.

Maybe you’re wondering if this research is really worth it. After all, how many claims will you actually have in your lifetime? In reality, the answer is quite a few.

The auto insurance industry estimates that you will file a claim for an auto accident approximately once every 17 years. That means you can probably expect to file at least three to four claims during your lifetime even if you’re an average driver.

And that figure is for just you. That doesn’t include your wife and children. Now you’re probably looking at upwards of 10 auto insurance claims during your lifetime. Now throw in claims for your home insurance and you probably get the picture.

Even the most cautious drivers and prudent homeowners are going to have claims. It’s inevitable. So make sure the company handling your claims makes their customers a priority.

This is the first article in a three-part series where we discuss the steps consumers should take when shopping for insurance.

You can read the other articles here: Part 2 | Part 3.

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