Many Americans are being ripped off by their auto insurer.
According to recent research from insurance analytics company ValChoice, Americans overpaid for auto insurance coverage by $101 billion dollars over the past five years.
Mutual companies that pay dividends kept the smallest percentage of their customers’ premium payments, according to ValChoice, thereby providing the best value to the consumer, while publicly traded companies provided the worst value by keeping a larger percentage of their customers’ premiums. Privately held insurers fell somewhere in the middle.
ValChoice’s analysis suggests that publicly traded insurers were focusing on delivering profit for their shareholders at the expense of policyholders. Publicly traded insurers kept an additional $58 billion compared to mutual companies, while privately held companies kept an additional $43 billion in premium payments.
Most U.S. households (90 percent) could have found better deals on auto coverage if they had sought a policyholder-owned insurer that pays dividends, according to ValChoice.
For a household, the difference between using a publicly traded insurer versus a mutual company equaled nearly four months worth of car insurance payments. On average, a household who bought their insurance from a publicly traded company received $262 less in value per year compared to a household who bought their insurance from a mutual company.
Over time, consumers are receiving less value from owning policies from publicly traded and private insurers, according to ValChoice.
ValChoice’s analysis was based on a study of the 312 suppliers of U.S. private passenger auto insurance that actively sold insurance to consumers between 2011 and 2015. These companies represented 98.4 percent of the market.