Insurance - do you get what you pay for?

So with many goods and services, price, while not perfectly correlating, is often an indicator of quality. The higher the price, the better the good or service, usually.

But is that the case with insurance? Does How do I know I’m getting good quality insurance or that the actuary working at my insurer just sucks at pricing?

From a consumer standpoint perceived quality will largely be based on the experience with claims handling. (This is for P&C personal lines btw)

1 Like

How do I figure that out though? Cause it’s like, if I want an amazing cheeseburger I can pick the more expensive ones and for the most part, they’ll be better. But if I pick an insurer that charges me a really high premium, is it because they suck at cost control which is reflected in higher rates or is it to pay for skilled adjusters who will be like my personal butler when I have a claim?

Two options that I can think of would be 1) on your own, get multiple quotes, and then try to read up on customer reviews and make a decision from there, or 2) use an independent agent that has lots of knowledge about various providers and who will have essentially done all of the research for you


In terms of dollars in, dollars out, in aggregate personal lines P&C insurers haven’t had great combined ratios over the last decade so in that sense on average everyone is getting what they paid for. 2020 was a notable exception with the improvement in personal lines auto due to COVID.

I agree with other comments that a good claims handling experience is ideal from your insurer and probably the biggest item in getting what you paid for. You can google which carriers are good vs stingy.


I would also consider asking around. Maybe your friends have a great agent who helps them out. Maybe they’ve had a good or bad claims experience.

Okay can somebody explain this agent thing to me. Is that like an underwriter or broker or something? I know this sounds dumb with me being a ceritifed expert and all but I’ve never worked on personal.

Your rate is NOT based on what you might cost.

I am not going to go any further than this. Assuming you’re an actuary, you already know the answer.

At least on life, there’s no correlation.
Actuaries price the product. Then it goes to marketing where they run tables comparing those rates to their 5 predetermined competitors to see where their rates match where they want to be, I e. Within our 5 competitors, or cheaper than our top 5 competitors, or we want out of the game so more expensive than our 5 competitors.
Then it goes back to actuarial with a list of ages and bands to move pricing up or down. Actuaries change assumptions to make the pricing fit, and then you have your rates. Companies with good and bad service do this, so pricing isn’t an indicator of quality service.

Years ago I had a US pricing actuary call me and demand answers over how a competitor was a penny cheaper than their insurance - not possible because you can’t target to the penny on a 500k face amount. I told them that their competitor had given me to three decimals for their rates, which allowed them to go to pennies in the prices. The actuary told me they were immediately going to move to three decimals rates in order to be a penny cheaper than this competitor.


When my son was three, I told him to give me a letter from the alphabet. He said ‘L’.

So I opened the yellow pages and picked the third ‘L’ business under the insurance category.

1 Like

isn’t there’s some consumer satisfaction report ranking?

use that to gauge customer service

I haven’t working in insurance in over 20 years, but I’ll take a swing at explaining consumer insurance to you. First, we’re talking about home/auto/life as the primary insurance consumers are sold. I thought about making this a narrative but didn’t want to work that hard at it, so bullet points it is. In no particular order…

  • The basic rate of an insurance is based on risk experience and expenses. Companies’ rates differ not on the quality of the actuary as they are all brilliant, rather on the experience and expenses for that company.

  • Using your cheeseburger analogy look at the surroundings and service around the two cheeseburgers. Doesn’t the more expensive cheeseburger come from a restaurant that is nicer with better amenities? Or if from the same restaurant aren’t there better or additional ingredients on the more expensive cheeseburger? Insurance is the same there are different condiments and services that come with different insurance cheeseburger choices. Term life insurance is probably the closest thing to a commodity and even that has flexibility with how it and you are underwritten and how they measure the amount you need. Which leads us to.

  • Agents help the consumers make the decisions regarding measuring and balancing the consumer’s complex insurance needs. Agents also provide a first line of service with regards to many insurance issues, that is, personalized customer service.

  • Agents help the customers make decisions. To some extent they need to be an expert on the decisions to be made. Since an agent works for/with a limited number of companies the agent’s expertise tends to be in how to navigate the insurance choices from those companies. The agent, like a waiter at a World of Cheeseburger restaurant, is incentivized to guide you to make a choice that may not be the best choice for you but you feel is the best choice for you.

  • Brokers are like agents except they can guide you to pick from a wider selection of insurers. Their expertise is similar with their incentives coming from different insurers rather than different items from one insurer.

umm it’s called competition. If your company is pricing you too high either they will lose business or you are more risky than you think you are

this is acuatin’ 101 yo

1 Like

Yeah but lower price can also mean cheapo insurance and bad pricing and bad service, but it can also mean efficiency. How do I differentiate the two?

For example just because you see a car priced at $100 doesn’t mean you should buy it…

for insurance co, look at their rating
for a car, kick the tires

u don’t. eventually the market will figure it out. but you can’t guarantee to be protected at the individual level. same goes with all else in life

I’m not familiar with this qualification. Is it similar to a petrified expert?

I was going to type a full explanation but this is good enough.

TLDR; Brokers work for you, agents work for a company. Find a broker. If they have a State Farm sign for example they probably work for State Farm. I think in some states everybody is legally called an agent which makes it confusing. Ask your broker/agent if they’re going to shop you for multiple companies or just one.

Find an industry satisfaction report. Reject a company that looks like shit, however IME all of the big companies are in a similar range, you’re not going to find GEICO with 1 star on any serious report for example.

1 Like

The best way to pick an insurance company is by their TV commercials. I recommend Allstate because I enjoy the “tens of tens views” comment in one of their Mayhem ads. You should also pick who you vote for in the same manner. I see no flaws with this plan.

1 Like