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UPDATED: Mar 13, 2020
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Unlike health insurance, where no single company has an overwhelming percentage of policies, car insurance is definitely skewed toward the largest insurers. Although there are hundreds of insurance providers, nearly 70% of all car insurance policies are held by the top 10 insurers. Of these, the top two companies hold over a quarters of all policies sold.
There are many reasons why large insurance companies can exert so much influence over the general insurance landscape. Larger companies generally have more money to spend on advertising, which enables them to reach a wider audience of interested buyers. Bigger insurance companies can also often offer more discounts than their smaller competitors. Finally, since a consumer can only have one insurance company at a time, there is a fixed demand for policies; this makes competition very fierce and prevents small companies from being competitive in the market.
You don’t need to buy insurance from the biggest companies, but there are many benefits to doing so. In addition to the discounts they offer, large insurers generally tend to have faster claims support and larger customer service staffs. On the other hand, it’s easy to feel lost in the crowd when you’re insured with a larger company, so you may prefer the more intimate approach of a smaller insurer. Either way, it’s a good idea to research the offerings available from the largest companies.
Top Five Largest Car Insurance Companies by Market Share
Far and away the largest car insurance company, State Farm has twice as many policies as its closest competitor. Because it’s a mutual firm, State Farm is financially owned by its policyholders rather than stockholders. This enables it to operate with a low overhead, which allows it to employ a huge staff of dedicated agents. It also provides a lot of discounts, and many people find Sate Farm policies to be cheaper than the competition thanks to these factors.
The second-largest insurance company, Allstate constantly struggles to catch up with State Farm but has about half as many policies as the larger insurer. Allstate is publicly traded, which means it must operate with a much higher profit margin than State Farm. Allstate is well-known for providing innovative protection to safe drivers, and it advertises a “you get what you pay for” approach to pricing.
Trailing behind Allstate but catching up fast, Geico is the third largest provider of auto insurance and one of the most well-known companies thanks to its aggressive marketing. It is publicly traded but focuses predominately on direct sales, which enables it to keep a lower overhead than companies that use dedicated agents. Although Geico was originally created to service government employees, its focus has been on affordable direct-sales policies since the 1990s.
Like Geico, Progressive focuses predominately on direct sales. It sells its policies through the Internet and over the phone, but policies are also sold through independent agents. Progressive is best-known for its innovative ideas, and it’s often the first insurance company to break new ground in technology or policy offerings. For example, it was the first insurer to offer pay-as-you-go auto insurance, and it also offered pet injury protection before any other company.
Holding about 6% of the total market share, Farmers is the fifth largest insurance company in the country. A subsidiary of Zurich Financial, this California-based firm is one of the largest homeowner’s insurance providers as well, and it’s the third largest overall insurance company in the country. Its well-known subsidiary companies include 21st Century and Bristol West.
Other top insurers include Liberty Mutual, USAA, Nationwide, Travelers and American Family. Not all insurers offer policies in all states, and some companies may be extremely popular in certain states but relatively unknown in other areas. For example, Mercury is a major insurer in California but unavailable in most other places. Massachusetts also has several small insurance companies that are unknown elsewhere, and many large companies don’t sell policies in that state due to tight insurance regulations in the area.
When you obtain a quote online for auto insurance, certain large companies are bound to show up prominently in your results. While their offerings may be excellent, it’s worthwhile to investigate your other options to see if a smaller company may be able to provide a competitive rate. Just because a major insurer has the best advertising budget doesn’t mean that they’ll provide you with optimal coverage. If you do choose to obtain a policy from one of these top insurers, though, you can rest assured that you’ll be protected by a financially sound and very popular company.