Advice to “ask around” is included in many articles and blog posts on how to shop for the best car and home insurance. However, asking around is pretty close to a waste of time. Therefore, at ValChoice we offer a better solution.
To “ask around,” how many people would you have to ask?
Let’s go straight to the bottomline. We don’t want to waste your time. Analytics are the best way to find out about an insurance company. Click the buttons below to get free analytics reports on any car or home insurance company.
To learn more about why analytics are the best way to get info, read on. Let’s say you have a particular insurance company in mind. Let’s also assume it’s a large company. Large companies would often be in the range of five to ten percent market share. To make the math easy, let’s use ten percent.
- At 10% market share, on average you would have to ask ten people to get an opinion from one customer of the company you’re considering.
- Issues with insurance companies typically arise after a claim is filed. Therefore, you need to ask people that have filed claims recently. However, only 7 out of 100 people file a claim in a given year.
- Statistically speaking, opinions from 15 people insured by the company you have in mind would be necessary to find one that filed a claim. Therefore, you would need to ask 150 people to get input from one person that filed a claim last year with the company you’re considering.
- However, one customer with a complaint is not enough to to have a well-informed opinion. Let’s say you want to talk to ten people who filed claims. That means you would need to ask around to 1,500 people.
Ask Your 15,000 Closest Friends
ValChoice has been grading insurance companies for years. One of the points that we find fascinating is that most, not all, of the companies that provide really good protection are small. It’s a common occurrence across the country that the very best companies have roughly one percent marketshare. Many times their marketshare is even less than 1%.
Do the math on this. If the company that has the best protection and claims handling is only 1% marketshare, you have to multiply the numbers used in the example above by ten. That means to find a good insurance company, you need to talk to 15,000 people.
Clearly talking to 15,000 people isn’t practical. What are the alternatives?
User Surveys vs. Actual Analysis
Many types of reviews are based on user surveys. However, let’s be honest. Best case, they’re unreliable. Worst case, the data is manufactured to support the marketing and sales plans of the company.
Starting with the best case of being unreliable, the Wall Street Journal ran a story about the average five-star rating is 4.3 stars. Here’s a link to the story, When 4.3 Stars is Average: The Internet’s Grade-Inflation Problem. One problem with 4.3 being average is shoppers don’t know if there’s a material difference between 4.3 and 4.5. Giving all companies a high grade certainly helps the company doing the user surveys monetize their data. That leads us to the second issue of manufacturing data.
User-surveys that pay people to respond are manufacturing data. User-survey questions can be worded to solicit specific responses. this is another method for manufacturing data. Manufactured data makes already low-quality data from user-surveys even more inaccurate. That’s a serious problem on its own. However, the problem is exacerbated by companies whose aim it is to monetize the data. Proprietary data is not transparent. Owners of proprietary data can manipulate the data in any fashion they wish. How many companies do you know that actually care more about properly guiding the consumer than they care about making more money for themselves?
This is the norm in the insurance industry. Unfortunately, the services consumers can trust are few and far between.
Consumers Deserve a Better Approach
When buying car or home insurance, advice to ask around is not a viable approach. We even contend that user-surveys aren’t much better. Consumers need real data when making important decisions about insurance. When protecting what people have worked their entire life to build, real data and information is necessary.
Click the buttons below to find reports on the best auto and home insurance companies for your state. ValChoice uses data collected from state insurance departments. This is high-quality, transparent data that will help guide you to the best insurance.
Note: ValChoice does not receive any form of compensation from insurance companies for presenting them as a good option in our car and home insurance reports. Our analysis is completely independent of the industry.