General Insurance FAQs

The U.S. insurance industry includes several types of insurers:

• Stock Insurers: Corporations owned by shareholders, with products sold to customers who may or may not be shareholders.
• Mutual Insurers: Owned by policyholders, who also own a stake in the company.
• Reciprocal Insurers: Where policyholders agree to insure one another, similar to mutual companies.
• Lloyd’s Associations: Companies where managers have personal financial stakes in decisions.
• Blue Cross/Blue Shield: Nonprofit, community-based health insurers offering traditional indemnity coverage.
• HMOs (Health Maintenance Organizations): Provide prepaid, comprehensive health coverage

For customers, the ideal insurer is one that offers the right product and service at the best price, regardless of the company structure. While studies on cost differences between insurer types are inconclusive, it’s important to also consider the insurer’s financial strength when making your decision.

There are two main types of agents:

• Independent Agents: Commission-based business owners who offer coverage from multiple companies, providing objective advice and personalized service.
• Exclusive Agents: Company employees who represent one insurer, often offering less personalized service and requiring customers to call 800 numbers for claims.

Independent agents often provide more customized service and can be more flexible in finding the best coverage for you.

Buying insurance directly from companies—via mail, internet, or 800 numbers—may seem cheaper but often leads to impersonal service and high advertising costs. Independent agents offer personal, customized service and better advice, helping you make informed decisions.

Insurance companies are rated by agencies like A.M. Best, Standard & Poor’s, Weiss Research, Duff and Phelps, and Moody’s. These ratings assess a company’s financial stability, ensuring they can meet future claims. Checking ratings from multiple agencies provides a well-rounded view of an insurer’s financial health.

Publications like Best’s Review (Life and Health Edition) and Best’s Review (Property and Casualty Edition) list information about the largest insurers, including assets, premiums, and products sold. These resources are available at public libraries in many cities and are published by A.M. Best.

Insurance applications typically ask for demographic details (name, age, address) and risk-related information (driving record, type of car). These questions help insurers assess your risk profile, determining your eligibility and the premium you’ll be charged. This process, called underwriting, ensures that higher-risk individuals pay higher premiums.