Don’t Get Burned: Your Essential Guide to Researching Insurance Company Claims Settlement History Before You Buy
Choosing the right insurance company isn’t just about finding the lowest premium—it’s about ensuring your insurer will be there when you need them most. Claims-handling delays (19.1%), denial of claims (17.9%) and unsatisfactory settlement offers (15.0%) represent the top complaints consumers file against insurance companies. Before you sign on the dotted line, here’s how to thoroughly research an insurer’s claims settlement history to make an informed decision.
Start with CLUE Reports: Your Claims History Foundation
A CLUE report is a Comprehensive Loss Underwriting Exchange report — a record maintained by LexisNexis that tracks all insurance claims filed on a property or by a person over the previous seven years. While CLUE reports primarily show your own claims history, understanding this system helps you grasp how insurers evaluate risk and settlement patterns.
Most major insurance companies submit claims data to CLUE, and most pull from it when underwriting new policies. Insurers use CLUE reports to decide whether to offer coverage and how much to charge. This database gives you insight into how thoroughly companies track and share claims information across the industry.
Leverage State Insurance Department Resources
Your state insurance department is a goldmine of information about insurer performance. The primary study is the Justified Complaint Study (Composite Ratio) which ranks the insurance companies according to their justified complaint ratio. CDI ranks insurers according to their justified complaint ratio. The justified complaint ratio is based on the number of justified complaints per 100,000 policies or exposures.
Complaint ratios are created by dividing the dollar amount (in millions) of written premium into the number of filed complaints. The resulting ratios provide complaint information that can be meaningfully compared across insurance companies, regardless of size. This standardization allows you to compare a small regional carrier with a national giant on equal footing.
The Complaint Ratio shows that some companies generate more complaints per $1 million of premium than other companies. An index higher than 1.0 indicates that a company’s complaint counts are higher than average, and an index lower than 1.0 indicates that a company’s complaint counts are lower (better) than average.
Examine Financial Strength Ratings
A company’s ability to pay claims depends on its financial stability. These ratings, issued by agencies like AM Best, Moody’s, and Standard & Poor’s (S&P), help assess an insurer’s ability to meet its ongoing policy and contract obligations. An AM Best rating is an independent assessment of an insurer’s financial strength and its ability to meet ongoing obligations to policyholders. It is a forward-looking opinion issued by a credit rating agency that specializes exclusively in the insurance industry.
An AM Best rating of A- or better is generally considered the minimum acceptable standard for annuity and life insurance placement. A Comdex above 85 is generally considered strong. Below 70 warrants extra scrutiny. When evaluating potential insurers, prioritize those with strong financial ratings from multiple agencies.
Research Through NAIC Resources
The NAIC compiles closed, confirmed complaint information about insurance carriers from state insurance departments. That information is available to state insurance regulators and consumers. To access the information, visit the Consumer Insurance Search page. You can look up information by state, company, and insurance type for the past three years.
You should not use just one factor to decide which insurance company to use. You should compare the complaints, financials, and direct premiums written of several companies. You can view the insurance carrier’s financial condition, how long it has been in business, and its complaints over the past three years.
What to Look for in Claims Settlement Patterns
When researching claims settlement history, focus on these key indicators:
- Claims Processing Speed: Look for patterns of delayed claim processing, which represents the top consumer complaint category
- Settlement Fairness: Research whether the company has a history of lowball settlement offers
- Denial Rates: Compare how often the company denies legitimate claims versus industry averages
- Customer Service Quality: Examine complaint ratios for communication and responsiveness issues
Working with Independent Agents
Independent insurance agencies can provide valuable insights into insurer performance. Companies like american summit insurance company work with multiple carriers and can share real-world experience about claims handling. Premier Choice Insurance understands businesses in our community. As an independent insurance agency in Mesa, we take pride in reviewing your options with multiple insurance companies and comparing protection and prices to find the best value for your business.
Work with an independent agent who represents multiple carriers — they know which companies are more forgiving of specific claim types. These professionals have firsthand experience with how different insurers handle claims and can steer you toward companies with better settlement histories.
Red Flags to Avoid
If the insurer’s complaint ratio is high, check its record at your state insurance department and find out whether any enforcement actions have been taken against the insurer. You should be concerned if a company you’re considering has a lot of complaints in these areas.
Be wary of insurers with:
- Complaint ratios significantly above industry averages
- Recent regulatory actions or fines
- Declining financial strength ratings
- High percentages of denied or disputed claims
- Poor customer service ratings across multiple review platforms
Making Your Final Decision
Premium costs, benefits offered, financial condition, and level of service should all be considered when evaluating a company. Consumers are cautioned against relying only on the Complaint Ratio or the Complaint Index.
The time invested in researching claims settlement history pays dividends when you need to file a claim. It’s important to report any problems you have with an insurer to your state insurance department. You go on record as having complained, and the regulators can investigate the complaint. Then it can be included in the figures to help warn other people about potential problems with the insurer. Plus, the regulator may be able to put extra pressure on the insurer to resolve your complaint.
Remember that the cheapest premium isn’t always the best value if the insurer has a poor claims settlement record. By thoroughly researching complaint ratios, financial strength ratings, and settlement patterns, you can choose an insurance company that will stand by you when you need them most. Your diligence today protects your financial security tomorrow.