An insurance policy is a promise to pay in the future. Whether that promise is worth anything depends on the company behind it, and the number on the quote tells you nothing about that.
The useful part is that this information is public, free, and takes about ten minutes to check.
Start with licensing
The first check, and the one that matters most.
It is illegal for unlicensed companies or agents to sell insurance. If you buy from an unlicensed seller, you may find there is no policy at all: no claim payment, and no refund of what you paid.
Verify both the company and the individual through your state's Department of Insurance, which maintains licensing records and can confirm whether each is authorized to transact business in your state.
This is also the defense against the fake-agent and phantom-policy schemes described in insurance fraud awareness. A legitimate policy produces a declarations page from a named, licensed insurer.
The NAIC Consumer Insurance Search
The NAIC operates a free consumer tool that pulls together several of these checks in one place.
It lets you look up an insurer by state, by company and by type of insurance, and shows:
- Licensing status, including where the company is authorized
- Financial condition information
- Complaint data over roughly the past three years
- How long the company has been in business
The NAIC also publishes aggregated reports combining data from state insurance departments, showing common closed complaints by reason and by type of insurance, along with how those complaints were resolved. Those aggregate views are useful for context on what people complain about in a given line.
Many state insurance departments publish their own complaint data as well, sometimes in more detail for their own market.
Reading a complaint index
This is the part that requires a little care, because the number is easy to misinterpret.
A complaint index measures complaints relative to the insurer's business volume, not the raw number of complaints. That normalization is the whole point: a large company will naturally receive more complaints than a small one, and the raw count would tell you almost nothing.
The index is generally constructed so that an average performance sits at a reference value, with higher indicating more complaints than the company's market share would predict and lower indicating fewer.
The NAIC's own caveats deserve repeating, because they are easy to skip:
- Do not use a single factor to choose an insurer. Compare complaints, financials and premium volume across several companies.
- An index can move for reasons unrelated to the company. It can fluctuate because of changes in the company's own complaints or premiums, and also because of fluctuations in complaints or premiums across the broader market for that type of insurance.
Two further practical points. Small companies produce volatile indexes, because a handful of complaints against a small book moves the number substantially. And look at the reasons, not just the total. A cluster of complaints about claim handling tells you something different from a cluster about billing.
Financial strength ratings
Complaint data tells you about service. Financial strength tells you whether the company can pay a large claim, or many claims at once.
The NAIC directs consumers to independent rating agencies for this, naming firms such as A.M. Best and Standard and Poor's. Ratings are available free in summary form from most agencies.
The honest limitation, which the NAIC itself notes: ratings are designed to be long-term and relatively stable across an economic cycle, which means revisions tend to lag market and economic developments, and ratings have at times failed to react quickly enough.
So a rating is a meaningful input rather than a guarantee. Read it alongside the complaint data and the financial information rather than as a substitute for them.
Financial strength matters most in two situations: when you are placing coverage with a surplus lines carrier, where the guaranty association will not be there, and when you are insuring a large exposure. See admitted vs surplus lines carriers.
Receiverships
The NAIC tracks receivership information provided by insurance departments from all states and territories. Receivership means a regulator has taken control of an insurer in financial distress, and the register is a useful check for spotting a company in trouble.
If an insurer does fail, the state guaranty association responds for covered claims, subject to caps that vary by state. That protection applies to admitted carriers only.
Putting it together
No single source answers the question. A reasonable sequence:
- Confirm the company and the agent are licensed in your state
- Check whether the carrier is admitted or surplus lines
- Look up the complaint index for that company in your state, in that line
- Read the complaint reasons, not only the count
- Check a financial strength rating from an independent agency
- Check the receivership register if anything looks unusual
- Compare against several other companies, since these figures are only meaningful relatively
Then weigh that alongside coverage terms and what you are being charged. A company with a poor claim-handling record is offering a different product from one with a good record, even at identical coverage.
Filing a complaint
If you have a problem with an insurer or an agent and cannot resolve it directly, the state complaint process is real and it works.
Where to go: your state's Department of Insurance. The NAIC consumer pages link through to each state's complaint process.
What you will need: your name and address, the type of insurance, the company and policy number, and a clear statement of the problem.
What to gather first: supporting documents, photographs, email correspondence, and a log of phone calls with dates, names and what was said. That log is worth keeping from the beginning of any difficult claim, not assembled afterward.
What happens: regulators generally require the insurer to respond, and the complaint is recorded, which is what feeds the complaint data other consumers rely on. Filing helps the next person as well as you.
A complaint is appropriate for claim handling disputes, delays, denials you believe are improper, cancellation and non-renewal issues, and agent conduct. See filing a home insurance claim and cancellation, non-renewal and lapses for where this fits in each process.
Questions worth asking
- Is this company admitted in my state, and is my agent licensed?
- What is its complaint index here, and what are the complaints about?
- What is its financial strength rating, and when was it last reviewed?
- How long has it been writing this line in my state?
- How are claims handled, and by whom?
Related reading: how to shop for insurance, captive agents, independent agents and buying direct, and will filing a claim raise my rate.
Complaint data, licensing records, guaranty association coverage and complaint procedures vary by state, and rating agency methodologies differ. Nothing here is a recommendation of or against any company. For your own situation, consult a licensed agent or your state's Department of Insurance. You can request quotes for auto insurance or home insurance and get connected with licensed providers who cover your area.