Insurance for Leadfoots

I saw an interesting post on Autoblog this morning that described a relatively new service called Ticket Assurance. Ticket Assurance, as the company's title implies, pays for your speeding tickets should you "accidentally" (cough, cough) exceed the speed limit while Johnny Law is watching. The individual service plan costs $9.95 per month (recently discounted from $15.95 for some reason.) In return, the company will pay for 3 moving violations, 3 non-moving violations and 2 tow and/or boot fines, with a total yearly limit of $1,000. Two people can be covered for $19.95 per month.

Insurance by another name is still insurance

While I commend the company's founder Terrence Byrd for grabbing an interesting idea and running with it (but not too fast, ha, ha) I can see a few "potholes" in the "road" ahead (don't you just love my car analogies?) First of all, I hope that the insurance commissioner in the company's home state has approved of this little operation, since this looks a lot like insurance. Insurance is very highly regulated by the states, and practicing insurance without a license is a big no-no.

Can you say "moral hazard" and "adverse selection?"

Second, this business is exposed to the two biggest problems that plague all insurance companies - moral hazard and adverse selection. Moral hazard means that people who know they have a "backstop" will tend to exhibit more risky behavior. I can imagine a new customer saying "hey, I'm covered, so I'll just drive a little faster today." Now, this issue may not pose too much of a problem, since the insurance policy won't "fix" your ticket or prevent your insurance company from jacking up your premium. However, adverse selection may pose more of a problem, which is similar to the difficulties facing the flood insurance program. Who do you think will buy this insurance? People who drive slow? Maybe Mr. Byrd has looked at the data closely and adjusted his pricing to account for this issue, but he only has about 1-1/2 years of performance data, so he better stay on top of his claims trends.

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Flood Insurance: The best deal out there

If you've read enough of my posts, you've probably figured out that I don't think it's wise to try to "game" the insurance system. Insurance companies make money for one reason - because someday, maybe, something big and expensive will break, and you won't have nearly enough money to replace it. If you can somehow amass enough money (that you will never spend on anything else - not even an ice cream cone at Baskin Robbins on a hot Summer day) to pay cash for a replacement car, or house, or medical bills for the family of four that you ran into a ditch one rainy night, then you can probably justify not giving your money to an insurance company. Otherwise, they deserve to make a profit (or else they won't be around to pay your claim, would they?) Like one of my favorite authors liked to say, TANSTAAFL.

However, there is one flavor of insurance that does make the customer money, on average. Its called flood insurance. Flood insurance is issued by the federal government (FEMA, to be specific) via the National Flood Insurance Program (NFIP). In case you haven't noticed, homeowners insurance policies do not cover flood damage under any circumstances (some business policies do, but we'll keep things simple.) Many victims of Hurricane Katrina lost everything they owned, but didn't get a dime from the insurance company, because a wall of water swept it away. Not fun. Insurance companies don't offer flood insurance because they can't make money at it. Why? The only people that buy it are the people who absolutely need it - i.e., the people who get flooded a lot. Not only that, but floods tend to swamp lots of houses at one time, and that is death to an insurance company. Insurance companies like to spread their risk around, so the people who don't have a claim provide enough money for people who do. So, an insurance company which writes $100,000 checks every Spring for the same 10,000 people who live next to the river isn't going to be around very long.

Enter Uncle Sam

Of course, lots of people live near rivers and oceans, and those same people vote. So, the federal government stepped in. All you have to do to buy flood insurance is find an agent who deals with a company that writes it. An insurance company actually issues and services the policy, but the government reimburses it for any claims. (You can find an agent on the very good NFIP website here.) Here's the best part - on average, the government pays more in claims than it receives in premiums. Not every year, of course. The program might operate in the black for several years in a row, then boom, the Mississippi floods or we get a big hurricane. Of course, all of this adds up over time, and now the NFIP owes about $18 billion to the federal government. (For an excellent financial breakdown of the NFIP, go here.) Congress is voting in March to keep funding for the program, so keep your fingers crossed.

What does this mean for you?

If you even have the slightest suspicion that you reside near a floodzone, then run, do not walk down to the nearest participating agency and buy a policy. It will be like putting money in your pocket. If you're not sure, than you can enter your address at the NFIP website (www.floodsmart.gov) and see what risk you might have (and also see what your premium might be.) It may be the best financial decision you ever make.

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Lots of Florida insurance companies lining up to take State Farm's policies

It looks like State Farm's recent decision to pull out of the Florida homeowners market was received warmly by a number of "entrepreneurial" Florida insurance companies - some of which have been in business since...2004. Here is a short list of companies, along with the number of policies that they are willing to take on:

Northern Capital Insurance Company - 50,000 policies
Florida Peninsula Insurance Company - 100,000
American Tradition Insurance Company - 30,000
Modern USA Insurance Company - 30,000

Insurance commissioner Kevin McCarty claims that there are 15 insurance companies that are willing to take between 50,000 and 500,000 policies each. Sounds fantastic! Look at all this competition! Prices may even fall!

Well, policyholders may get better pricing, but are they better off? What do the four companies listed above have in common? No A.M. Best rating. In fact, Modern USA doesn't even have a "not rated" rating. It's just a blank space. Most of these "takeout" companies were started with as little as $50 million of capital through a special state program. While State Farm Florida's B+ rating isn't anything to write home about, but its worlds better than "NR-5" or "NR-1." Northern Capital brags how it currently insures $20 billion worth of homes (not including any new State Farm policies.) $50 to $100 million of capital to cover $20 billion worth of homes in a hurricane-prone state...

These companies protect themselves by buying "reinsurance," which reimburses them for losses in excess of a certain amount. Right now, the state-owned Florida Hurricane Catastrophe Fund (FHCF) provides coverage at a reasonable price, but only for one "event" per year. The private market covers the rest (at much higher prices.) What do you think will happen to reinsurance prices if a big storm hits a populated area? First of all, the FHCF may run out of money to pay claims, and them the private reinsurers will surely jack up rates the next year. So, if you get your claim paid, your rates will go up the next year (probably to the point where State Farm was trying to raise them in the first place.) Also, the state will assess the insurance companies to fill the giant hole in its budget, and those will be passed on as well.

Just keep this in mind when you are sitting in your agent's office, complaining about State Farm.

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Every Day is Earthquake Season

I adapted the title from the official slogan of the California Earthquake Authority, the state-sponsored insurance company that provides a valuable (but seldom-used) service to California homeowners - earthquake insurance. In case you don't already know this, homeowners insurance does NOT cover damage from earthquakes. Not at all. (Just like flood damage isn't covered, either, which is the subject of a different post.)

While major earthquakes are rare, but the damage can be horrific, and most people who live in California have experienced several small to medium-sized quakes in their lifetimes. Based on this, you would expect almost everybody in that state to own earthquake insurance. Right?

Wrong.

Only 14% of Californians have separate earthquake coverage, and this is literally a disaster waiting to happen. The real estate market in California is not in the best of health right now, but a magnitude 7.0 earthquake ripping through San Francisco or Los Angeles would make the current situation seem like the peak of the bubble. Think of all of those mortgages that would no longer have houses backing them. Not a pretty thought. I assume that people will assume that FEMA will come to their rescue (just like after Katrina...) or that the (nearly bankrupt) state will somehow bail them out. Just keep on dreaming.

Fortunately, the California Earthquake Authority (which is an "A-" rated insurance company in its own right) is trying very hard to make it easy to buy earthquake coverage. It even has a nifty tool on its website where you can get a rough estimate of the required premium, based on ZIP code, age of house, etc. To get earthquake insurance, simply buy your homeowners policy from a "participating carrier," and ask for an earthquake quote. The carrier will service your policy and adjust your claim, but will not take on any risk. The CEA does that. Of course, there is a chance that a "big one" will wipe out the CEA's capital (plus the reinsurance that it buys), but at least policyholders would get something.

Here is the list of participating carriers (taken right from the CEA's website):

Participating Insurance Company	For service on your CEA earthquake insurance	To report your CEA claim*
ACA Insurance	(800) 207-3618 x2711 www.csaa.com	(888) 900-6526
Allstate Insurance Company	(800) 255-7828 www.allstate.com	(800) 386-6126
Armed Forces Insurance Exchange	1-866-496-1783 www.afi.org	1-800-255-0187
Automobile Club of Southern California (AAA)	(800) 924-6141 www.aaa-calif.com	(800) 672-5246
California FAIR Plan	(800) 339-4099 www.cfpnet.com	(800) 339-4099
California State Automobile Association (CSAA) Northern California	(888) 646-1006 www.aaa.com/insurance	(800) 922-8228
Commerce West	(800) 244-1545 www.commercewest.net	(800) 244-1545
Encompass	(800) 262-9262 www.encompassinsurance.com	(800) 588-7400
Farmers Insurance Group	(888) 327-6377 www.farmers.com	(800) 435-7764
Foremost	(877) 309-8394 www.foremost.com	(800) 527-3907
Golden Eagle	(800) 672-8130 www.goldeneagle-ins.com	(800) 238-3085
Homesite	866-922-4055 www.homesite.com	(800) 466-3748
Liberty Mutual	(800) 262-8238 www.libertymutual.com	(800) 565-5505
Merastar	(800) 637-2782 www.merastar.com	(800) 637-2782
Mercury	(800) 924-9225 www.mercuryinsurance.com	(888) 913-6372
Safeco	(800) 332-3226 www.safeco.com	(800) 332-3226
State Farm Insurance	(661) 663-1000 www.statefarm.com	(800) 732-5246
USAA	(800) 531-8111 www.usaa.com	(800) 531-8222

So, if you live in California, you might want to think of joining the "14% club."

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State Farm can Exit Florida Homeowners Market - With "Conditions"

On Friday, Florida Insurance Commissioner Kevin McCarty announced that State Farm Florida would be allowed to exit the state's homeowners insurance market - as long as they meet just a few little conditions. The major ones are listed below:

1. State Farm must place cancelled customers with a private insurance company - not Citizens (the state-owned "insurer of last resort").
2. State Farm agents must be allowed to sell non-State Farm homeowners policies
3. State Farm must "consider all offers to buy or assume all or part of its business.

The first condition is the tough one, as the private market (which consists mostly of small, undercapitalized companies) may not have the capacity to take all 1.2 million policies, despite the happy talk from Mr. McCarty. On the other hand, this condition may be a political game - State Farm looks like the "bad guy," because they would appear to want to dump their policyholders into Citizens, when actually, that is the only feasible solution. There aren't enough Universal P&C's, Tower Hill Groups and Homeowners Choices out there to absorb the volume.

Of course, the state is fooling itself if it thinks that it is avoiding exposure by forcing State Farm's policies to remain in the "private market." One major hurricane could put a lot of these policyholders on the state's balance sheet, after their tiny "private" insurance companies go belly-up.

The provision for agents to sell other companies homeowners policies may also be difficult for State Farm to swallow, as the company has built a strong brand around its own products. However, its 900 agents may revolt if they can't replace what was a significant income stream.

My guess is that this story has not quite reached an end, and that there may be more horsetrading to come. Let's hope it gets worked out before June 1st - when hurricane season starts.

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Zurich May Buy 21st Century (formerly AIG Direct)

The rumor mill is stirred up again regarding AIG's restructuring, as Zurich is reportedly in talks to buy 21st Century Insurance, which was also known as AIG Direct. The value could be as high as $2 billion, which isn't exactly chump change, but will barely make a dent in AIG's $80 billion debt to the government. Every little bit helps, I guess.

If Zurich proceeds with the acquisition, it would become the largest auto insurer in California, because it already owns Los Angeles-based Farmers (the management company, not the actual insurance company), and 21st Century has a large presence in California. There would be little overlap as well, as Farmers sells insurance through captive agents, while 21st Century sells directly via phone or the internet.

I think that this move would be a positive for 21st Century policyholders and employees, as the acquisition would bring some needed stability to the company. Not only is Zurich an "A" rated company (the same as 21st Century), it would allow 21st Century's management to have a planning horizon greater than two weeks. I believe that customers will notice the change as well, as claims reps would be less distracted.

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Michigan Blue Cross Blue Shield Problems Mean Higher Health Insurance Rates

Do you need health insurance? You better start looking now.

Check out the recent announcement by Blue Cross Blue Shield (BCBS) of Michigan. The company is losing a lot of money on individual health plans right now - as much as $1 billion (that's billion with a "b") over the next two years. What do insurance companies do when they lose money? They raise rates of course! (Except in Florida, where they leave after being denied their rate increase.)

Up to 55% rate increases

According to the article, BCBS of Michigan filed for approval to raise rates by up to 55%, depending on the plan. Specifically:

Blue Cross wants rate hikes of 55% for non-group plans; 32% for Medicare Supplemental, or Medigap, products; and 42% for those with group conversion plans that carry over prior workplace coverage, according to the article.

That's a pretty big price increase. Note that Blue Cross Blue Shield of Michigan is doing fine with group policies. Why are they losing their collective shirts on individual policies? The non-profit company is Michigan's "insurer of last resort," often taking people who have been rejected by other companies. Dan Leopp, CEO of BCBS of Michigan claims that "...our competitors have figured it out, physicians have figured it out, that high-cost cases you can dump on the Blues.” Of course, there is a certain amount of gamesmanship involved, especially when you are dealing with a nearly bankrupt government of a down on its luck state. The poverty/"charity case" angle usually works best.

Healthcare insurance rates rising elsewhere

"Well," you might be thinking, "I don't live in Michigan, so I'll be alright." Wrong. Almost every health insurer - profit or non-profit is either making less money, or losing money. Either their investments are tanking or they simply didn't charge enough for their policies. United Health, Coventry, Wellpoint, Humana...they are all feeling some pain right now, and most of them are thinking a nice rate increase will cure their headache.

You need to look even harder for the best deal

Now, this blog isn't the place to discuss the health care system in the country, so I'm not going to pretend to be able to solve that problem. (I'll do that once I turn lead into gold and make pigs fly.) What I can do is show you how to put the odds in your favor to save yourself some money when buying your individual or medigap health plan. I found a great website that takes some basic information from you and brings up many, many different plans, with prices as well, giving you the opportunity to pick and choose from the one that gets you the most coverage for the least money.

It's called Health Plan One. I actually tried it myself, and got back 114 different plans from several high-rated health insurers, including Anthem, Aetna, Humana and United Health, among others. Best of all, its free and quick. If you get stuck, you can call a phone number on the site to get help - with real people!

So give it a try, you might be surprised at how much you can save.

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Michigan Auto Insurers: Governor Granholm wants a "Rate Freeze"

It's no secret that Michigan's economy is in very bad shape right now, with skyrocketing unemployment from the collapse of the Big Three. Of course, the obvious solution to all of this is... (drum roll please) blame the insurance companies! As part of her "State of the State" speech, Governor Jennifer Granholm - who has never been on the best of terms with insurance companies - called for a statewide auto insurance "rate freeze" over the next twelve months while lawmakers work on "insurance reforms." (Milk prices have risen as well - should we also declare a price freeze on milk?)

What exactly are these "reforms," anyway? There is a 10-part list that was drawn up by the state's "insurance consumer advocate," Melvin Hollowell. Mr. Hollowell's three most prominent recommendations are as follows:

1. Banning the use of education level, credit scoring and occupation by insurance companies to set rates.
2. Requiring the insurance commissioner's approval before companies raise rates. Now, the commissioner has the ability to contest a rate only after it is raised.
3. Giving consumers with collision insurance the right to recover actual repair costs from the at-fault party.

Recommendation #1 is a fairly common one. Why do people with bad credit or little education need to pay more for insurance? The insurance companies have never proven an exact "why," but they can show to the penny that these factors are highly predictable for insurance claims, even when taking into account the traditional factors of driving record, age, etc.

#2 is another "consumer friendly" recommendation, as it places control of insurance rates in the governor's (who wants votes) hands. Too bad insurance companies get fed up with this system and leave if the insurance commissioner declines every rate increase (see Florida for a sad example.)

Recommendation #3 actually makes some sense, because it gets to the root of why Michigan's auto insurance rates are so high. Michigan is a "no fault" state. If you get in an accident, each insurance company pays the claim of its own no customer, no matter who is at fault - hence "no fault." Of course, the person who really wasn't at fault gets dinged for filing a claim, and usually sees a rate increase.

Abuse of no-fault medical payments is rampant, as insurance companies are required to pay medical bills (up to a reasonable amount) within a short time period. It becomes very easy to game the system, especially with a compliant doctor who doesn't mind the extra fees. Fraud rings have refined this system into a science, with networks of medical clinics throwing all their fees into the same bank account. The American Insurance Association helpfully supplied some eye-opening statistics to highight this problem, saying

In 2007, the average PIP claim in Michigan had increased more than 290 percent
since the mid-1990's to $29,392 compared to $8,458 in all other no-fault states.

Claims costs quaruple in 10 years, and people wonder why rates are so high? Of course, beating insurance companies over the head isn't going to solve many problems. In fact some of the reforms, like banning credit scoring, may actually raise average costs, since insurance companies will have one less indicator to base rates on, and will have to build in more of a "safety margin" to ensure that prices are adequate.

So, Governor Granholm, if I were you I would scrap the no-fault system immediately. That would do more to improve the insurance market than the other nine recommendations put together.

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Allstate Wants a 15% Rate Increase for New Jersey Auto Policies

Allstate New Jersey Insurance Company filed a request for a whopping 15.4% average rate increase for auto insurance policies that were written before September 2006. Note that customers of a sister company, Allstate New Jersey Property and Casualty Company will not be affected. A spokeswoman for the company estimates that up to 300,000 policyholders could be affected. Although P.R. people aren't known for their "straight talk," the company representative said the reason for the increase was that the insurer is currently "paying out more in claims than it is collecting in premiums." Some of the specific reasons cited were a) higher costs for repair parts and labor and higher medical costs.

This request is interesting for a number of reasons:

1. New Jersey has historically been one of the most expensive states for auto insurance. However, a recent relaxation of regulations has attracted new, aggressive competitors such as Geico (which is now the #2 auto insurer in the state, according to A.M. Best), Progressive and Mercury, which has put downward pressure on rates.
2. Steel prices have actually gone down over the last year or two, mainly due to the horrible economy (anyone notice GM and Ford's car sales this month? Down 40%-50%! So what are cars made of again...?)
3. People are driving fewer miles for a variety of reasons, and are getting into correspondingly fewer accidents.

Here's my take

I think that Allstate (which is a "C list" company by my World Famous Rating System) is raising rates for a variety of reasons - some good, some bad:

• Allstate probably cut prices a little too deeply in response to the new competition, and is now paying the price (they should talk to Charlie Crist down in Florida about what happens when you don't charge enough for insurance - or better yet, they should talk to me.)
• New Jersey is what's known as a "no-fault" state. No-fault means just that - if you are injured in an accident, a portion of your policy called Personal Injury Protection (PIP) pays your claim up to a certain limit. In fact, you can usually get a check in 30 days or less. Not only is that convenient for you, it's also convenient for the many fraud rings who own chiropractor and physical therapy clinics that treat their staged "accidents." "PIP fraud" is a major problem in New Jersey and the 20 or so other states with these rules, and this is probably what Allstate is referring to when they say "higher medical costs."

There's also that billion dollars that went missing last quarter...

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New Look for the Site

I've ported Insurance News and Views into a new template, which (in my humble opinion) looks nicer.

If you don't like it, then wait 5 minutes, because I'll probably get the itch to try something new by then.

Let me know what you think!

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The Best Home Insurance Companies - USAA, Amica, Erie

I have adapted my "world famous" (in my mind at least) insurance company rating system to now help you find the best deal for homeowners insurance! (Insert applause here...)



In my Insurance Buyer’s Guide, I strongly recommend shopping around for insurance and getting quotes from several companies. However, price is not the only measure of a “good deal,” as the buyer of low-cost insurance may get poor customer service or (more importantly) not get a claim paid quickly or in full. So, the better way to approach buying insurance is to first narrow down your choices to a “short list” of 3 to 6 companies, based on intangible factors such as ability to pay claims, willingness to pay claims, billing, customer service, etc., and then start comparing prices.

Who actually "shops" for homeowners insurance? - maybe YOU should

Most people don't "shop" for homeowners insurance nearly as much as they would for car insurance. Why is that? Well, there are a number of reasons, but the main reason is inertia. You buy a house, get a recommendation from a friend or family member, set up the escrow account, and forget about it until you move out of the house. Since your premium is usually tucked away into the mortgage payment, you don't get that tangible reminder that you have a real live insurance policy sitting behind your biggest single purchase that you ever made. Believe me, insurance companies want you to forget that you have insurance. The renewal comes up, and you don't think twice about what company you have...until something bad happens. Maybe you have a bad experience with a claim. Maybe your rate goes way up. Maybe you get canceled for being too close to the beach. (Ask anyone in Florida about that one!)

Maybe you should think a little more about who insures your home (and the price you pay) so you can minimize the "bad things" before they happen.


You've come to the right place

Of course, this takes a little research and legwork, and who has time for that? Well, search no more, because I’ve already done a lot of the searching and consolidating for you, by finding a select few websites that give reasonably objective reviews of customer service and claims service. I took the ratings from each of these places for the some of the most-popular insurance companies, translated them into a common scale, added them up, and presto! A nice, objective way of separating the sheep from the goats in homeowners insurance land.

The top (and bottom) companies.

The “A” List – Amica, USAA, Erie, American National, Chubb

One thing that all these companies have in common is the high A.M. Best ratings (A++ or A+). They also have consistently high ratings - i.e., no weak spots. Two companies (Amica and Chubb) have national coverage, USAA requires a military connection and American National and Erie do not sell insurance in all states.

Amica and USAA sell insurance directly (either over the phone or through the internet) while Erie and Chubb policies are only available though their independent agent networks. American National (also known as ANPAC) relies on its captive agent base.

The “B” List – Auto Club of California, Auto-Owners, Cincinnati Insurance, Nationwide, State Farm

The next list also has some high-quality companies. The difference in total points between the bottom of the A list and the top of the B list is very small, so a competitive quote from any of these companies could mean a good deal for the buyer. Auto-Owners and Cincinnati Insurance primarily sell their policies in the Midwest, while Auto Club is strong in California (hence the catchy name). Nationwide and State Farm are well-known to anyone with a working television set!

The "C" List - Hartford, CA State Auto Association, Country Mutual, Shelter Mutual

The California State Auto Association is a fixture in the...California market, while Country Mutual and Shelter operate in the midwest. Hartford is available in almost every state, either through an independent agent, or through a number of affinity programs, such as AARP. These companies are all high quality - they just don't have any a lot of really strong characteristics. The only negative score was Hartford's negative epinions rating.

The "D" List - American Family, Liberty Mutual, Travelers, Allstate, Metlife

The companies on the "D" list are very similar to companies on the "C" list - only with slightly lower ratings in one area or another. American Family is very popular in the upper midwest, while Metlife has a strong presence in the northeast. People who think that companies this far down the list automatically have bad service should read this post about Travelers.

The bottom five – Farmers, Firemans Fund, Safeco, AIG, Hanover

These companies aren't exactly "fly-by-night" operations. None of them has less than an A- rating, and almost all of them are very well-known. What they all have in common is poor J.D. Power ratings for customer and/or claims service. Note that a low rating doesn't mean "ignore," it means "get a very good price."


How to use these results

First of all, do not just pick the first company at the top of the list and sign up. Just because the top companies have great scores across the board does not mean that the next tier is not worth looking at. What you should do is get quotes from the “A” list companies (if you are even eligible – USAA only sells to military members, and other companies do not sell nationwide), then choose a few off of the “B” and “C” lists, keeping in mind that you would probably want them to have a more competitive price.

You also have to consider how you want to buy your insurance. If you want to sit in an agent’s office and have him or her walk you through the process, then USAA or Amica would not be the best choice. If you just want to shop through the internet, then Erie, Chubb or Cincinnati would not be good choices. Some companies (such as Chubb for instance) cater to different types of customers. If you are too far outside their "target market," they may not be able to give you a good deal.

The Complete Results




















Sources and Methodology

For claims-paying ability, I chose the company’s A.M. Best rating. A.M. Best is the leading rating agency for insurance companies. The grading scale is listed below:

A++ or A+: 2 points
A: 1 point
A-: 0 points
B++: -1 point
B+ or lower: -2 points

To an average consumer, the difference between an A++ rating and A+ rating is negligible, and implies that the company has considerable financial resources. Anything lower than an A- rating is a cause for concern.

Of course, the company actually has to want to pay you the money, so I looked at the claims portion of the J.D. Power and Associates 2008 homeowners insurance claims survey. The scale for these results are as follows (note that J.D. Power’s term “balls” made me giggle, so I am using “stars,” instead):

5 stars: 2 points
4 stars: 1 point
3 stars: 0 points
2 stars: -1 point (There were no ratings below 2 stars)

Since few people actually get into an accident during the term of their policy (industry figures point to 2%-5% of all “standard” policy holders file a claim in any given year) the company’s overall customer experience is important. I looked at three sources, in decreasing order of importance: The J.D. Power and Associates 2008 Homeowners Insurance Survey (minus claims and pricing) and epinions.com ratings. The respective grading scales are shown below:

J.D. Power's Insurance Ratings
5 stars: 2 points
4 stars: 1 point
3 stars: 0 points
2 stars: -1 point (There were no ratings below 2 stars)

Epinions.com
4.5-5 stars: 1 point
3.5-4 stars: 0.5 points
2.5-3 stars: 0 points (also used if less than 5 reviews)
1.5-2 stars: -0.5 points
0-1 stars: -1 point

Note that I weighted epinions.com half as much as J.D. Power or A.M. Best ratings, since epinions can sometimes have sketchy or misinformed reviews.

How not to use these ratings

First of all, you need to keep in mind that these scores are not the be-all and end-all of insurance reviews. I can guarantee you that Safeco has many happy, loyal customers, while Erie or Amica have people that “WILL NEVER DO BUSINESS WITH THIS ^@#$$% COMPANY AGAIN!!!” If you don’t believe me, read some of the reviews on epinions.com or similar sites. Also, if you just want cheap, minimum-limits insurance, then you should probably just go for an “A-“ or better rated company with the lowest price (and get a lot of quotes!) The details are all there, so feel free to modify the scores as you see fit, or even add your own sources. Happy hunting!

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