Mutual Insurance Companies Offer the Best ValuePersonal Finance

Mutual Insurance Companies Offer the Best Value

Kristin Wong , Gizmodo Media

Car insurance is tricky. Your policy price can fluctuate for seemingly random reasons, and the details of the policy itself can be confusing, too. To make matters more complicated, there are two types of insurance companies: publicly traded ones and mutual companies. According to ValChoice, mutual companies offer the best value for customers.

Publicly traded companies make up 48.3% of the market and these are companies like Progressive and Allstate, according to the New York Times. They serve shareholders as well as their policyholders. Mutual companies, on the other hand, are only owned by policyholders. USAA, the Automobile Company of Southern California, and Liberty Mutual are all examples of mutual insurance companies. Some mutual companies pay dividends to policyholders; others don't.

As the Times reports, data analytics company ValChoice recently released their Market Report, a study that analyzed claims over the past five years for over 300 auto insurance companies, comparing premiums with the amounts paid for claims. They found that mutual companies offer the best value-specifically, mutual companies that pay dividends.

It found that the car insurers providing the best value to consumers were mutual insurance companies owned by their policyholders and paying them dividends. Over a five-year period from 2011 through 2015, these companies paid out an average 72.6 percent of their premiums in claims; publicly held insurers with shareholders to satisfy paid 62.8 percent of their premiums in claims.

Dan Karr, a former technology executive who founded ValChoice, said it was hard to know exactly why such disparities exist....

"There's a conflict here between shareholders and policyholders," Mr. Karr said. "We're showing how companies have run their businesses, and that's not always in the interest of the policyholder."

A few mutual companies that pay dividends include USAA, the Automobile Club of Southern California, and Amica Mutual. For the full report, head to the links below.

Market Report | ValChoice via The New York Times

Photo by Negative Space

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