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For These Insurers, the “Feeling’s Mutual”

There’s a lot of discussion lately around the role of healthcare insurance industry profits and how it impacts our nation’s medical costs.  Yet there are other segments of the insurance industry that can raise your costs—solely for their benefits.

I’m talking about all of the for-profit home and auto insurers. Take Allstate Corp. as an example. Last year, this insurer had $3.9 billion in operating profits on $35.7 billion in insurance premiums. Simply put, such firms serve two audiences: shareholders and policyholders. The other kind of operation — known as a mutual company — is owned by its policyholders and so does not have to serve two masters.

Mutual insurers return all of their excess profits back to policyholders, usually in the form of a year-end dividend check. Over a five-year period from 2011 through 2015, these companies paid out an average 72.6 percent of their premiums in claims. Some more money went to overhead and the rest went right back to policyholders. Publicly held insurers with shareholders are far less generous. They paid 62.8 percent of their premiums in claims. After covering overhead, the rest was pure profit. Their profit. 

Who are these mutual insurers used in that analysis? They include USAA, the Automobile Club of Southern California, Amica Mutual and NJM Insurance. (Government insurance entities and nonprofit organizations make up the rest of the market, and were excluded from the study.)

When shopping for insurance, consumers often focus solely on price. You also want to take note of a firm’s track record in terms of timeliness and thoroughness in paying claims. This study from Nerdwallet found that Amica and other mutual auto insurers score among the highest in terms of customer service. The same goes for homeowners’ insurers

To be sure, mutual insurers may not always offer the best prices. In an analysis I did for a recent client, I found that a New York state-based for-profit insurer offered the most competitive rates. 

Lastly, don’t over look the most important aspect when selecting an insurer” financial strength. Ratings agencies such as A.M. Best provide clear data on whether an insurer is well-positioned to handle adverse underwriting conditions.  This link helps explain how they zero in on the strongest insurers.

If you’re tired of enriching others when it comes to your insurance, give the mutually-owned firms a closer look.