Driving’s down – and that’s driving down insurance claims, premiums

Social distancing and stay-home orders have reduced the number of cars on the road and that has resulted in a sharp drop in auto insurance claims. That, in turn, has led a number of insurers, including companies holding about 80% of the policies in Arizona, to offer discounts or premium rebates to their customers. (Photo by Dennis Sylvester Hurd/Creative Commons)

TEMPE – While social distancing and staying at home may be driving you up the wall, it could also be driving down your auto insurance premiums.

With fewer cars on the roads, auto insurance claims have dropped 80-90% in major cities and 60% in rural areas within the last month, according to the Consumer Federation of America. As a result, it said, companies holding more than 80% of car insurance policies in the county have pledged rebates, credits or direct payments to their customers.

But not all the relief is equal, advocates say, and some consumers may have to fight for the benefit.

“Arizonans should be aware that insurance companies are beginning to recognize that a decrease in driving relates to a decrease in risk exposure, and are assessing what that means for the premiums of their customers,” said Diane Brown, executive director of Arizona Public Interest Research Group.

Brown encouraged drivers to check with their insurance agents to see if any refunds are being offered. If not, she said, customers should urge the insurance company to offer a pandemic-related refund or should think about taking their business elsewhere.

But many insurers have already stepped up.

Customers “are driving less and experiencing fewer claims. Because of these results, they deserve premium relief,” Telisa Yancy, chief operating officer of American Family Insurance, said in a statement Tuesday.

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CFA Director of Insurance Robert Hunter said in a conference call Monday that with claims dropping, continuing to charge policy holders the same premiums when they are no longer driving to work and school every day would be overcharging them.

The CFA urged auto insurance companies in March to provide immediate relief to customers and this week released a report card grading companies on their responses to the pandemic. Companies were graded on the amount of relief they are providing, the timeframe in which the relief applies and the method in which it is being delivered.

American Family, which said Tuesday that it will provide $10 million in relief to Arizona drivers, got an A on the CFA report card. One-time checks for $50 per vehicle insured will be sent within the next few weeks, which averages to be $100 per household, the American Family statement said.

State Farm, which insures about 17% of drivers in Arizona, received an A for giving customers a 25% credit for premiums owed between March 20 and May 31, or about $20 per month per vehicle insured, said a State Farm spokesperson.

No other insurance company graded by the CFA received an A. Grades for other firms ranged from a B for Allstate, to a C+ for both Progressive and Nationwide, and D- for Geico. Requests for comment from those and other companies were not immediately returned.

Birny Birnbaum, executive director of the Center for Economic Justice, said on the CFA call Monday that the relief being provided by companies is a good thing, but that it ultimately will not be enough to reflect the drop in claims the companies will see. Birnbaum encouraged state legislatures to get involved and force more realistic rebates for consumers.

Brown said that while many Arizona residents are looking for ways to save money during the economic tumult of the COVID-19 pandemic, “reviewing insurance policies should be a factor” in their budget decisions.

“Arizonans who have auto insurance policies should check out the website of their insurer to note any changes in their policy or call the local agent to note any potential impacts on what they owe now or in the future,” she said.

Next Gen Reporter, Washington, D.C.