COVID-19 Windfall for Auto Insurers
Auto insurers are sitting on millions of dollars because of reduced driving during the pandemic. Now, several consumer watchdog groups are asking the auto insurers to give that money back to drivers.
With people driving far less during the pandemic and fewer miles traveled on our roads, carriers face far less risk. Under the principle of risk-based pricing, less risk should translate into lower rates.
Some insurance carriers have stepped forward to offer refunds, and the consumer groups applauded them for taking that action. But one estimate by leading actuaries and economists shows that the reductions should be twice as much as that promised to date.
Because mileage and accidents have fallen by well over 50% during the pandemic, the 15% refunds most auto insurance companies have promised are not nearly enough. Studies find that an average of 30% relief payment is warranted for all premiums paid from the second half of March through April and May.
One auto insurer that seems to be adjusting their auto insurance rates based on risk-based pricing during the pandemic is San Antonio-based USAA.
On August 4th, USAA announced that it will return an extra $270 million in dividends to auto insurance policyholders due to continued fewer drivers on the road.
See the Automobiles page for more information.