Should I Purchase Insurance from Nationwide or Allstate?

The insurance industry exerts a tremendous amount of control over the national economy. There are thousands of different insurance providers in existence. Nearly 1,000 of these are small or medium-sized life insurance companies that earn predictable returns on the relatively small numbers of policies that they issue. These businesses typically employ a few hundred employees and deal with loyal bases of repeat customers. The business model to which they adhere is significantly less aggressive and competitive than the models that other types of insurers follow. This is because the life insurance industry produces more predictable rates of return for established firms that employ talented actuaries.

By contrast, the auto insurance industry is highly competitive and may be subject to volatile pricing and selection swings. There are several major "full-service" auto insurance providers that underwrite a wide range of policies for virtually every type of consumer. Most of these "full-service" insurers have been in business for many decades and have solid connections within the industry. Some of the most prominent outfits within this class of insurers include Allstate, Nationwide and State Farm.

Not every insurance company is a "full-service" provider. Over the past two decades, dozens of discount providers have cropped up to take advantage of increasing demand for so-called "proof-of-insurance" requirements. These providers aren't known for responding to claims in a timely fashion or underwriting competitive policies. Rather, "discount" providers specialize in providing low-cost policies that meet the minimum coverage requirements to which the vast majority of state motor vehicle bureaus require their drivers to adhere. Discount insurance providers include Esurance and The General.

Although Nationwide is recognized as a "full-service" insurance provider, its policies are generally cheaper than those issued by Allstate. However, Nationwide is not known for providing excellent customer service. After a round of recent layoffs, the ranks of the company's claims and customer-service departments are quite thin. While other insurers like Progressive and Geico have been on a hiring tear since the recession's end, Nationwide has struggled with an unprofitable customer base and high rates of customer "churn." As such, it may be forced to raise its premiums across the board during the coming years.

By contrast, Allstate is known for its excellent customer service and prompt response to claims. In addition, its policyholders enjoy certain perks that aren't available to discount insurers' customers. The annual cost of an Allstate policy may be between $300 and $500 greater than the cost of a Nationwide policy.

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