What’s the Difference Between an Insurance Company’s Subsidiaries?

Corporations have gotten larger and more powerful than ever before, and these corporate conglomerates are becoming pervasive in every industry. From the food you buy to the television you watch, most brands are actually subsidiaries of a few massive companies. Car insurance is no different.

Many well-known insurance companies are actually subsidiaries of larger insurers. If your insurance company has recently been acquired by another insurer, you may be wondering whether your policy will change. You might also wonder if it’s worth getting quotes from a company’s subsidiary if you’ve already gotten a quote from the parent company. By understanding how subsidiaries work and why companies create them, you can make an informed decision about which insurance company to choose.

There are many reasons why a company may choose to acquire a smaller company or create a new subsidiary. For example, a company could create or acquire a subsidiary to service a small niche community without affecting its overall offerings. This allows a company to increase its profits without sacrificing the accounts it already has.

How a Subsidiary Works

When a company is a subsidiary of a larger corporation, that primarily means that the larger company is the main shareholder of the smaller company and controls most, if not all, of its stock. It also means that the main company will have a say in how the subsidiary is managed, and it may follow similar rules and corporate policies to the main branch.

What’s important to note is that subsidiary companies are independent and function as their own company in regards to finances and behaviors. The parent company is also not usually financially liable to the subsidiary in any way. In other words, if the subsidiary goes bankrupt, the parent company is not responsible for paying its debts. The only loss the parent company feels will be the loss of stock profits.

All of this is important to understand when looking at an insurance company because it affects the way a subsidiary will be run. The money behind the company will be provided by its parent company, and management decisions will usually be made by the parent, but everything else will be handled independently by the subsidiary itself.

This means that discounts, base rates, coverages and features are all handled by the company rather than its parent. The claims department, sales, agencies and everything else will also probably be handled separately.

For example, Allstate acquired Esurance in 2011, but Allstate claims centers do not handle Esurance claims or policies. Similarly, Esurance has its own unique discounts and does not have Allstate’s more unique features like a vanishing deductible. Although they are both funded by the same basic pool of money, the two companies are very different and should be treated as essentially two separate insurers altogether.

This also means that your customer experience with a given corporation may change dramatically from one subsidiary to the next. Although management is generally similar between all of a parent company’s different subsidiaries, the service could be very different due to differences in training or claims facilities.

On the other hand, if you have a personal reason not to support any particular corporation, you might want to research all of that company’s subsidiaries and affiliates to be sure you’re not supporting someone that you don’t want to give your money to. Parent companies profit from their subsidiaries, so you can assume that any money you pay to one will benefit the other; this usually isn’t a problem, but it’s something to be aware of if you have a major grievance with the way a certain company is run.

Should I Get a Quote From a Subsidiary Company?

If you already have insurance with one company, there’s no reason why you can’t check its subsidiaries for lower cost premiums or better service. Indeed, some insurance companies offer very different products through different subsidiaries. For example, Nationwide insurance is the parent company of both Farmers and Titan. Farmers policies are offered predominately through agencies and appeal to the same group of customers as might shop with State Farm or any other large agent-based insurance. Titan, on the other hand, is a provider of low-cost insurance for high-risk drivers and is a competitor to The General and other similar companies.

Depending on your situation, it might make more sense for you to hold a policy with Titan than Nationwide itself. This is true of all other insurance companies with subsidiaries, and it’s a good reason for you to get quotes from as many companies as possible. This gives you more access to a greater quantity of companies and their various discounts.

Case Studies: Understanding Insurance Company Subsidiaries

Case Study 1: Allstate and Esurance

Allstate, a well-known insurance company, acquired Esurance in 2011. Despite being owned by the same parent company, Allstate and Esurance operate as separate entities. The subsidiaries have their own unique discounts, coverage options, and claims processes.

While Allstate caters to a broader customer base and offers features like a vanishing deductible, Esurance focuses on providing low-cost insurance for high-risk drivers. It’s important to treat them as distinct insurers, as their policies and customer experiences can differ significantly.

Case Study 2: Nationwide, Farmers, and Titan

Nationwide is the parent company of both Farmers and Titan. Farmers primarily operates through agencies and targets customers similar to State Farm. On the other hand, Titan specializes in offering affordable insurance for high-risk drivers, competing with companies like The General.

Each subsidiary has its own product offerings, underwriting criteria, and discounts. Depending on your specific situation, it might be more beneficial to hold a policy with Titan rather than Nationwide. Exploring quotes from subsidiaries can provide access to a broader range of options and discounts.

Case Study 3: Company Acquisitions and Niche Markets

Insurance companies often acquire smaller companies or create subsidiaries to enter new markets or cater to niche communities. These acquisitions allow the parent company to increase profits without compromising its existing accounts.

The subsidiaries operate independently, handling their own finances, discounts, coverages, and customer interactions. By creating subsidiaries, companies can expand their offerings and provide specialized products while maintaining control over their overall operations.