What Is the NAIC Complaint Index for Insurance?

David is a financial content writer in New York City. He specializes in covering insurance, investing, and retirement planning. Before writing full-time, he worked as a financial advisor and passed both the CFP and Series 6 exams.

Bobby L. Hickman is a longtime business and financial journalist who brings decades of experience in insurance and financial services to his editor role at Investopedia. He has worked with insurance and financial services companies, such as AFLAC, Allstate, Confederation Life, Farm Bureau, SunLife, and others. His editorial clients include the Atlanta Business Chronicle and Advisors magazine.

The NAIC complaint index is a tool that allows you to make apples-to-apples comparisons of insurance companies of different sizes regarding the number of customer complaints they receive. An insurance company will have an overall complaint index as well as separate index numbers for each of its product lines.

The National Association of Insurance Commissioners (NAIC) gathers complaints about insurance companies from state insurance regulators. It calculates a complaint index by comparing the number of complaints received to the insurer’s market share. That index number and other NAIC complaint information can be an important factor as you evaluate your choices for buying insurance. Here’s how the NAIC complaint index works for insurance and how to access it.

What Is the NAIC Complaint Index?

The NAIC complaint index distills an insurance company’s track record of complaints for a particular year in a single number. The NAIC uses 1.00 as a benchmark. An index of 1.00 means the insurer received the number of complaints that’s exactly proportional to the company’s market share. An index above 1.00 shows that the company has more complaints than expected, given its market share; a figure below 1.00 indicates fewer complaints than are proportional to the company’s size. (Market share is determined by the value of premiums a company underwrites.)

Here’s why market share is important. A bigger insurance company has more customers, which means more opportunities for complaints. The NAIC takes this into account in its calculation.

The NAIC creates a separate index for each type of insurance sold by a company and each state where the company operates. You can explore this information further to see where these complaints come from.

Why Is the NAIC Complaint Index Important?

The NAIC complaint index can be a gauge of customer satisfaction. If a company receives many more complaints than the typical insurer of its size, that’s cause for concern. On the other hand, a company with a low index would seem to have mostly satisfied customers who aren’t filing complaints.

You can also use the complaint index categories to see whether a company handles some types of insurance better than others. Perhaps a company has a low complaint index for life insurance but a high complaint index for disability insurance. That’s a sign it does better with life than with disability insurance.

In addition, the state data might show where a company prioritizes resources and support. For example, an insurer might have few complaints in the Southeast because it has more staff in that area but a worse complaint index in other parts of the country.

How Do You Find a Company’s NAIC Complaint Index?

You can find a company’s complaint index through the NAIC’s website, although the process isn’t user-friendly. Here are the steps to pull up a company’s NAIC complaint index and get the information you need.

1. Retrieve the Insurer’s NAIC Record

You can search for companies by name on the NAIC consumer insurance search tab. One issue is that large insurance companies have multiple business entities with similar names. Searching by name could bring up numerous results.

Alternatively, you can search by a company’s NAIC number. An insurance company may list its main NAIC number on its website. You could also request the number from a company customer service hotline or an insurance agent. Finally, you can search the web to identify a company’s main NAIC number.

2. Open the Complaint Report

After identifying the correct insurance company record, press the “Click for Report Options” button. It will give you several options. Select “Go to Complaint Trend Report.” This will pull up a graphic illustrating the complaint index.

3. Check the Complaint Index

The NAIC graphic will show the company’s latest complaint index, with a line representing 1.00 for the number of complaints expected for a company of that size. If the insurer has more complaints than proportional to its size, a red circle will be shown above the line; if the insurer has fewer complaints than proportional, there will be a green circle below. The NAIC provides three years of data so you can see whether an insurer’s complaint index is different for previous years.

4. Compare Insurance Types

The first NAIC complaint index represents how many complaints a company receives overall. On the right side of the screen, you can also see the complaint index broken down for different types of insurance. Check the complaint index for the type of insurance you want. This example shows the complaint index for State Farm’s commercial auto insurance. The complaint index of 1.59 is higher than State Farm’s overall index of 1.48.

5. Filter by Location

At the top of the screen, you can filter the data. If you click the “results by state” button, the NAIC will show you how many complaints an insurance company receives in each state over a nationwide map. Then you can see whether a company does better in some locations than others.

6. Review the Types of Complaints

If you click “results by complaint code,” it will show you how many complaints a company has received for each type of insurance. On the right side, if you click the “Reason for Complaint” button, it will show you what kinds of complaints an insurance company receives, such as payment delays, refusals to pay benefits, canceled policies, frustration with premiums, or abusive service. This provides you with a better idea of what issues you might encounter as a policyholder.

What Should You Do With This Information?

The NAIC complaint index can be valuable in evaluating an insurance company. You can gauge how well these companies manage customer service. Still, that should be just one part of your overall decision. If a company quotes you expensive premiums, you might decide not to work with it even if it has a low complaint index.

On the other hand, you might decide it still makes sense to work with a company with a high complaint index. Perhaps you have a relationship with a good insurance agent at the company who you trust will give you better service than the company’s rating indicates. Ultimately, the complaint index should be part of your decision but not the only factor.

Frequently Asked Questions (FAQs)

What Is the NAIC Definition of a Complaint?

The NAIC defines a complaint as a written communication expressing dissatisfaction with a company or an agent. These communications include letters, faxes, and emails. It could also include verbal complaints that are later converted into a written form. Insurers are supposed to report these complaints to state insurance agencies so they can be added to the NAIC complaint index.

Do All Insurance Companies Have an NAIC Number?

Yes, any insurance company that registers to do business in the United States receives an NAIC number. Each company uses this number when it registers to get the necessary licenses to sell from each state’s insurance commissioner. With this number, you can pull up-to-date information on any insurance company through the NAIC.

Can a Company Have Multiple NAIC Codes?

Yes, an insurance company can have multiple NAIC codes. It might do so if it sells different products and services. The company could register each separate product line under a different NAIC code. An insurance company might also use different NAIC codes for operating in different regions.

What Is the NAIC and What Is Its Purpose?

The NAIC provides support and guidance for the insurance commissioners of every state. Each state has its own regulations for insurance companies. The NAIC provides the commissioners with data, analysis, and other tools to set these regulations. State regulators work with the NAIC to improve insurance markets for consumers.

The Bottom Line

The NAIC collects complaint data for every insurance company and summarizes this information in one number that shows whether a company receives more or fewer complaints than is proportional to its market share. This information is free and readily available online. By checking the NAIC complaint index, you can see how an insurance company handles its customer service and where it has issues. It’s valuable information when you are looking for the best insurance company for your needs.