Yes and the problem is getting worse in
What's the evidence? Publicly-traded insurers like Geico and Allstate paid an average of about
Mutual companies owned by their policyholders, such as
And it was
Karr says the disparity is an especially big deal for
An industry association whose members include both stock and mutual companies neither confirmed or disputed the data, but did push back against the notion that there's some kind of secret plan to short-change customers in order to please investors.
After all, drivers have choices in a very competitive marketplace if they feel mistreated, said
"There is no difference between how stock and mutual companies handle claims," Passmore said. "The home, auto, and business insurance industry is extremely competitive and companies compete aggressively in this marketplace to attract and retain customers."
He continued, "The claims experience is one of the most important aspects of customer satisfaction and in fact, stock companies are likely to be even more sensitive to negative perceptions about service. Perceptions about a company may impact the investment value of the company in the eyes of investors as well as in purchasing decisions for current or potential customers."
Individual investor-owned companies including Geico and Progressive did not respond to requests for comment for this story.
An Allstate spokeswoman referred to a 2016 statement that the company offers "a fair and caring claims experience for customers, and we work diligently to ensure the timely and accurate processing of claims."
Karr says he has a background in technology, business and mathematics, and has been working full-time at his start-up firm for about four years.
"Like most people, I was fully insured with what I thought was good health and auto insurance," Karr says on his website. "Then I was hit by a car. Everything seemed fine, until I got a letter in the mail saying I was being taken to collections for nearly
He continued, "After a lengthy process of recovering the money, I vowed to fix this problem. I vowed to apply my technology background to make sure no other family ever experience the same thing my family went through."
Karr acknowledges in individual cases, companies can excel or treat customers poorly regardless of ownership type. But the big-picture data suggests when it comes to paying claims -- as reflected in what is known as the "paid loss ratio" -- the gap between stockholder-owned firms and mutuals is growing wider, he says. That gap has quadrupled in
The split also shows up in complaints to regulators, the firm says. Nationwide, stockholder-owned companies generated 15 percent more complaints per premium dollar than mutuals about delayed, denied or inadequate claims payments over five years ending in 2016, Valchoice found.
The corporate structure of your insurance company might not be the first topic you'd choose to liven up a dinner party, but it boils down to a real-world concern: Whether stockholder-owned firms are less likely to come through when you need them.
After Hurricane Irma in September,
Geico offered assurances
"We continue to deliver prompt and fair settlement of all claims for our customers affected by the recent storms," Geico spokeswoman
Perhaps not surprisingly, mutual companies, which include firms like Amica and Auto-Owners, were generally happier to chat about the research.
"Mutual insurers exist for policyholders, that's their sole constituency," said
Of course, there's a case to be made that investor-owned companies bring plenty of benefits to consumers too. Money from investors can give companies a powerful war chest to expand their business and fight for market share, and consumers can reap the benefits when companies compete hard for business on price and service.
Still, stockholder-owned insurers come with a built-in conflict between shareholders and policyholders, and consumers tend to lose that struggle when it comes to paying claims, as analysts like Karr see it.
The trouble is, drivers generally know next to nothing about a company's history of paying claims, let alone how its ownership is structured, when they shop for insurance.
What they do see is advertising. Shareholder capital has helped fuel an advertising arms race in which investor-owned companies are generally wrestling market share away from mutuals.
That's why consumers need all the information they can get to help the marketplace work most effectively, Karr said. Greater transparency is needed, he said.
"There's a clear conflict between shareholders and policyholders, no doubt about it," he said. "You step back and look and say, wow, this is really bad for consumers."
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