Car insurance is a competitive business; in recent years, many new entrants have entered the field, trying to compete with the established, high-quality providers. One of these new entrants, Geico, has recently had some difficulties as a result of the financial crisis experienced by the US economy. Many consumers, while pleased with their coverage options at Geico, lost their preferred insurance policies. So what’s going on?
According to an article at the Geico Redbook website (the link has now been disabled), the recent problems at GEICO began almost two months ago, when the company suddenly changed its underwriting guidelines. The reason given was “a fluctuating market.” This may be true, but there are many other possible explanations for this dramatic change, and none of them seem to be related to either quality or cost. The changes that occurred at Geico resulted in many policyholders losing their policies, and some even filed bankruptcy. So what went wrong?
According to the article at Geico Redbook, the first changes that took place came about when Geico started basing its underwriting on certain risk factors. This meant that some people were being rejected for cheap car insurance coverage because their driving histories were too risky. So they began analyzing drivers more intensely. These changes apparently affected about fifty percent of all drivers who applied for a policy at one of their Geico branches.
Why are so many people losing their policies? According to the article at Geico Redbook, it appears that the “unusual” changes in underwriting resulted in “lower than acceptable” premiums for many drivers. Specifically, the changes were made to limit the number of speeding tickets that a driver could accumulate. Even if the ticket didn’t result in a conviction, the increase in the premium may force the driver to cancel their insurance coverage or at least cut back to a minimum the amount of coverage they wanted. Another driver who was previously accepted for the same coverage but now finds the new premium unaffordable could simply choose a different company and start shopping around for cheaper rates.
If this sounds familiar, you’re not alone. Many people have complained about similar changes at their local Geico or Nationwide car insurance company. Although the moves aren’t necessarily random, it seems that they are made according to some sort of national or regional trends. It is well known that some states have stricter requirements for insurance coverage than others, and this has also affected the way these companies determine their premiums. Nationwide and Geico seem to have followed suit with some of their changes, and this can mean that some drivers are getting cheated out of money by these insurers.
According to an article from The Insurance Information Institute, these same trends have also affected auto insurance reviews. Many people are reviewing their policies online in order to find the best deals possible. However, the process of finding the lowest rates is often much more complex when relying on an internet search engine. Some of these websites don’t give you access to the entire field, while others only list the national companies by state. Even if a website allows you to search for discounts based on your location, you may be missing discounts that are offered nationwide.
One website that does give a national perspective is J.D. Powers and Associates. This company ranks every major auto insurance provider based on several factors such as customer satisfaction. For example, those with the best customer satisfaction ratings receive a high mark from J.D. Powers and Associates.
An even more important deciding factor in determining insurance rates is a person’s credit score. Shopping around for cheap car insurance rates is still best done by utilizing a company’s quotes, but if a person’s credit score is too low they should definitely get a copy of their credit report and look to fix any errors. A credit score as low as 500 can affect a person’s ability to qualify for lower interest rates, so it is important to work on this area of credit repair as soon as possible.