Car Insurance Is A Scam: Why Drivers Have Switched To LOOP

Published on
February 9, 2023

Confused about why you’re paying for car insurance? You’re not alone—many drivers question what they’re actually getting for their money.

You can’t legally drive without car insurance, but the high premiums and unfair pricing models may have you wishing you could. Here are some of the (very valid) reasons drivers think car insurance is a scam, and how we're trying to do things differently.

Why do drivers hate car insurance companies?

Imagine having to pay hundreds of dollars each month for legally-required insurance, which puts a squeeze on your budget.

You get into a fender-bender and your insurance company finds you at fault, refusing to pay for your car repairs and raising your premiums the next year. Now you can’t fix your car because of how much you pay for a service that didn’t even cover you to begin with.

This is just one story from countless other drivers about how they have felt ripped off or scammed by their insurer. It's no secret that drivers generally don't get along with car insurance companies. After all, your car insurer is the one that decides how much you have to pay for your coverage—and if they’ll pay out your claim after an accident.


Drivers’ common complaints about their car insurance companies include:

  • Expensive premiums: Car insurance costs thousands of dollars annually, and your premiums may increase at renewal time.  
  • Difficult to file a claim: Filing a claim can be painfully difficult and time-consuming, requiring detailed and extensive documentation. It takes anywhere from a few weeks to several months to settle your claim.
  • Delaying the claims process: Some insurers may purposely delay a claim to get you to settle faster. Not only are you stuck in limbo and forced to keep tabs on your claim status, some drivers face financial strain while waiting for a claims payout.  
  • Low or no payouts: Even when the claim is settled, your insurer may pay you a lower amount than you expected, or deny your claim altogether.
  • Poor customer service: No one likes sitting on hold, especially if you’re trying to get a simple question answered without the runaround, or to even get someone on the phone who can help you.

The number #1 reason why people think car insurance is a scam

The biggest reason why drivers are sick of car insurers? They have no idea what they’re paying for.

Car insurance companies use a variety of factors to determine how much you pay for your policy—and many of them are unfair and inequitable. These can include facts like where you live, your age and gender, and the type of vehicle you drive—but also things that have nothing to do with how you drive, like your job title and credit score.

Studies show that insurance companies charge people with low credit scores 50-70% more for car insurance.

Not only do these pricing models make no sense, they’re discriminatory. The ability to access lines of credit when and where you need it is a luxury many Americans don’t have. Using credit scores to determine car insurance prices disproportionally affects lower-income individuals and communities of color.

How to Protect yourself and Pick The Right Car Insurance

It may be tempting to buy the cheapest car insurance out there but, if you’re not careful, you may wind up getting scammed.

  • Some fraudsters create fake car insurance sites with the promise of cheap car insurance, tricking drivers into purchasing fake care insurance. In some cases, you won’t even realize you have fake insurance until you get into an accident and go to file a claim.
  • Other scammers will pose as insurance agents that will claim you’re eligible for lower premiums—all you have to do is provide your personal account information. Your insurer will typically never call you directly and ask you for personal information. If you receive a call like this, hang up and contact your insurer yourself.


To avoid buying a fake policy or losing money to scammers, do your research when shopping for auto insurance.

  • Compare rates across different companies, and avoid clicking directly on insurance ads.
  • If you haven’t heard of the insurer before, do extra research to confirm they’re licensed and can operate in your state. Most legitimate insurers should have that information clearly listed.
  • If an insurers’ rates seem too good to be true—they probably are. Make sure you read customer reviews (both good and bad) before making a commitment.

Once you decide on a policy, review all of your paperwork and be wary of any overly aggressive sales tactics from insurance agents. You can verify an agent’s license via your state’s license database or the National Association of Insurance Commissioners’ Consumer Information Source.

We created LOOP to fix the broken car insurance industry

At LOOP, we believe all drivers are worthy of access to fair rates. Our values are simple: We think insurance shouldn’t discriminate, customer service should be a delight, and companies have a responsibility to give back to their community.

When it comes to pricing, we don’t care what your credit score is. Really—we’ll never ask for it.

We look at the roads you drive on, the streets you park on, and how you drive—not your ZIP Code or your job title. We use a dynamic measure of risk that focuses on how and where you drive, which allows us to create more inclusive pricing for our customers. Something that traditional car insurance companies can’t and don’t want to do.

See how much you save when we take systemic bias out of the equation.

You don’t need a good credit score to have great car insurance!

Check out how much you could save today.

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