Choosing between small and large insurance companies

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When choosing the right car insurance company, does bigger always equal better? Both small carriers and large carriers have pros and cons. On one hand, a smaller carrier could quote a lower rate, since not as much money is being used for advertising budgets. But a large carrier could have an ultra-convenient smartphone app, so you can manage your policy with a few simple clicks.

Another approach is to widen the scope even further when searching for the right insurance carrier. Consider how important premium rates, available discounts, customer satisfaction ratings and the financial strength of a company are to you in influencing your decision. Depending on your personal needs and how each carrier performs in these categories, could lead you to choose one over the other, whether the carrier is large or small.

Small vs large insurance companies

Smaller companies tend to be the local options found in communities across the U.S. You will most likely find them staffed with local agents who live in the same community as the policyholders. The larger companies are the big names you often see advertising on television or the radio and rely on more digital options for accessibility, such as a 24/7 customer service online or via the phone, or through a smartphone app.

Top 10 largest insurance companies by market share

When comparing multiple quotes from different insurance companies, many drivers find it easier to start with the largest companies. The Top 10 largest car insurance companies based on market share represent the majority of drivers in the U.S.

Company J.D. Power score Average annual minimum coverage premium Average annual full coverage premium Market share
State Farm 881/1,000 $539 $1,457 16%
Geico 871/1,000 $433 $1,405 14%
Progressive 856/1,000 $582 $1,509 13%
Allstate 876/1,000 $696 $1,921 9%
USAA 890/1,000 $384 $1,225 6%
Liberty Mutual 867/1,000 Rates not available Rates not available 5%
Farmers 872/1,000 $808 $2,000 4%
Nationwide 876/1,000 $501 $1,485 2%
American Family 862/1,000 $918 $1,911 2%
Travelers 861/1,000 $469 $1,325 2%

Pros and cons of a small insurance company

Pros Cons
Possibility of more personalized attention Potentially financially unstable
Potentially lower or more competitive rates Customer service may be slow or less available
If the business is locally owned your money may stay in the community Potential lack of discounts

Pros

Possibility of more personalized attention

There is a greater likelihood of getting the “personal touch” with a smaller company. Since they are usually staffed by local agents, this means you have a name of someone to call when you have questions or need help with a policy who may remember you without prompting.

Potentially lower or more competitive rates

Depending on your coverage needs, a smaller company may be able to offer more competitive rates. Because a local company does not have the larger expenses for operating, such as a large number of employees, benefits and advertising budgets, they may be able to pass on the savings with lower premiums.

If the business is locally owned your money may stay in the community

To some people, where their money goes is an important factor in the companies they choose to do business with. With a smaller, locally owned insurance agency or company it’s possible that the money you spend will be put back into the community you live in.

Cons

Potentially financially unstable

Many smaller companies may not have the financial stability of a larger company. This is due to the smaller amount of money coming in.

Customer service may be slow or less available

Smaller companies may not have the resources of a larger company, meaning that they may not have 24/7 customer service available or that it may take longer to answer calls and inquiries due to less available staff.

Potential lack of discounts

Smaller companies may not be able to offer as many discounts as a larger company could offer. This is due to the fact that a smaller company may not make as much money, meaning they have to take their wins where they can get them.

Pros and cons of a large insurance company

Pros Cons
More likely to be financially stable Less personal attention
More likely to offer discounts and savings
24/7 customer service

Pros

More likely to be financially stable

Larger companies have more capital to pull from, deeper pockets and a longer history, usually. This makes them more likely to be financially stable, making it more likely your claim will be paid out after a covered accident or event.

More likely to offer discounts and savings

Because they have more capital and available funds, larger insurance companies are more likely to be able to offer discounts and savings programs. They have a large enough customer base that it makes up for the money they would “lose” offering discounts.

24/7 customer service

Larger companies are more likely to have a number of tools available for customer service options. They’re more likely to have digital tools, agents, email, phone lines, etc. Companies with digital tools make it easier to manage your insurance portfolio on your time.

Cons

Less personal attention

Since you never know who you will get on the phone or if you are dealing strictly with an online portal, a larger company may provide less personal attention for your liking.

Which one should I choose?

Instead of focusing on the size of a company, the best approach is to evaluate what is most important to you when making your decision. Once you know what works best for your lifestyle and driving needs, then you can narrow down your options. For example, if strong customer service is your top priority, then choosing a carrier with high customer service ratings with J.D. Power might be the way to go.

Other aspects to consider include financial strength ratings, such as those through AM Best and S&P, which rate a carrier’s ability to payout claims. If digital tools are a higher priority than talking on a phone with a local agent, then keep this in mind when choosing. Overall, selecting the right carrier comes down to which one provides the coverage you need, while balancing customer service, digital assets, financial strength and budget.

Frequently asked questions

What is the best car insurance company?

Each provider offers its own unique rates, coverage options and discounts. The best car insurance company ultimately comes down to what you prefer. The largest car insurance companies are a good place to start, but comparing smaller, local options alongside the larger ones may give you a better picture of which one is the best for you.

How do I know how much car insurance I need?

Almost all states require drivers to carry a minimum amount of insurance. However, most financial experts recommend purchasing higher coverage limits to offer a greater amount of financial protection. If you lease or finance your vehicle, the lender will likely have additional requirements, such as comprehensive, collision coverage and gap insurance.

How much will I pay for car insurance?

The average cost of car insurance in the U.S. is $1,674 per year for a full coverage policy, based on data from Quadrant Information Services. However, individual rates are based on numerous personal factors, including zip code, vehicle and miles driven per year. Your rates may be more or less expensive.

Written by
Sara Coleman
Insurance Contributor
Sara Coleman has three years of experience in writing for insurance domains such as Bankrate, The Simple Dollar, Reviews.com, Coverage.com and numerous other personal finance sites. She writes about insurance products such as auto, homeowners, renters and disability.
Edited by
Insurance Editor