Question: Why would there be so much different between auto insurance premiums? After all, they are regulated by state insurance commissioner. Where the differences in rates come from? I cannot figure out how a company charging a lot more would survive.
Answer: This statement cannot be any wrong. Every company will come back with a totally different quote for exactly the same driver for the same coverage. According to surveys the difference can be as much as thousand dollars in some areas. And the difference does not appear because one insurer is inferior to the other. This is another misconception. Sales agents kept telling to motorists that only cheap auto insurance companies can give you low quotes because they are not as reliable. This is utter nonsense as large premium difference can happen between two highly reputable insurers.
Your second question is not as straightforward. If you assume everyone acts like a well informed consumer, your are right to say that companies with high rates, bad customer service and below average claim handling should not be able to survive. However, most people don’t even bother to check alternative quotes for years. A company with good advertising strategy and sweet talking sales force can do a lot better in this age of media and television than a company who strives on delivering the best for their customers but lacks in adverting and publicity.
We are not living in a communist society where state dictates everything. Each company is free to determine their prices and choose to do business or not. State insurance commissioners are there to make sure nobody is discriminated. But they cannot dictate over companies unless they break the law.
Some companies try to differentiate themselves from the rest by offering great vehicle insurance policy packages while others concentrate on prices. And you are supposed to act like a well informed consumer.