How is COVID-19 affecting the car insurance market?

A woman driving a car with a mask on because of the coronavirus pandemic (COVID-19).
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The COVID-19 pandemic is reshaping American life. From changing the ways in which we shop and go to school and work, it seems as though every aspect of our day-to-day living has been impacted by the coronavirus. The auto insurance industry is no different and the impact is manifesting in a variety of ways.

One thing that many people are trying to do as we are living through the coronavirus pandemic is save money in any way they can. In Q3, LexisNexis reports in its Insurance Demand Meter report that the U.S. auto insurance shopping rate was up slightly to 41 percent in Q3. This is the highest rate that we have ever seen.

Shopping around and switching car insurance companies has been trending upward since 2016, according to the LexisNexis data. It’s no surprise that this has continued to trend upward through Q3 of 2020 as drivers are trying to shop around to save money on their car insurance as a result of COVID-19.

Less driving and fewer accidents during the coronavirus pandemic

The most immediate impact of the pandemic on the auto insurance industry was a steep decline in the number of Americans on the road. Workers were advised to stay home to “flatten the curve,” which resulted in a sudden and massive drop in the number of cars on the road.

Fewer cars on the road means fewer accidents. The auto insurance industry almost immediately saw that lockdowns and growth in remote workers meant a reduction in accidents, from serious wrecks to minor fender benders. “Shelter in place” orders meant that people were working from home, trips for entertainment purposes were eliminated, and even necessary grocery trips were on an only-as-needed basis.

A special report conducted by the Road Ecology Center at the University of California-Davis (UC Davis) found that after California’s “shelter in place” order was issued, the number of crashes on state highways and rural roads was reduced — sometimes dramatically. Crashes causing injuries or fatalities were reduced by half, dropping from approximately 1,000 total crashes per day to 500, and from around 400 crashes with an injury or fatality a day to 200.

Auto insurers offer premium credits, discounts

By April, it was clear that the reduction in miles per person driven and the subsequent drop in traffic accidents was not a short-lived phenomenon.

With fewer people on the road, auto insurance companies began to issue refunds on premiums paid. COVID-19 credits from auto insurers ranged from around 15 percent up to 25 percent, while American Family Insurance chose to refund a flat $50 refund per vehicle on a policy.

Some insurers offered more than one round of car insurance refunds for coronavirus. USAA, an auto insurer that covers members of the military and their families, has issued three rounds of insurance refunds during 2020.

Related content: see if you are eligible for USAA.

Why the wide range in COVID-19 relief refunds?

There are a couple of reasons why refunds offered can vary so much from one company to the next.

  • Risk pool: The risk pool from one insurer to the next can be quite different.
  • Telematics (driving apps): With telematics, auto insurers can see the impact of changing conditions in near-real-time, and this can affect business decisions.

For example, several insurers that examined telematics data noticed that while fewer people were driving, those who were on the road were more likely to speed. With less traffic, some drivers were inclined to put a more leaden foot down on the pedal. This is risky driving behavior. Companies that observed this tendency may have been less likely to extend discounts.

Another consideration mentioned by insurance companies is simply the factor of the unknown. A Forbes article covering how insurance companies decided on the rates of refunds included a quote from a spokesperson for Allstate who noted that COVID-19 could disrupt the availability of automotive replacement parts, which could then lead to more expensive repairs. While this is speculation, insurance companies need to consider any and all factors that could impact the price of repairs.

What do customers have to say about car insurance during COVID-19?

The devastating employment impacts of the initial nationwide closures and lockdowns is evident in many of the customer comments on Clearsurance.

Comments and feedback related to car insurance during coronavirus seems to generally fall into two big categories:

  • Those who are pleased with the premium rebates issued by auto insurance companies, and
  • Those who are unhappy that they couldn’t get more relief from insurers, due to extreme financial hardship.

Here are some examples of comments from customers, provided as feedback on Clearsurance.com:

"This is my first auto insurance. And I must say, I've had a pleasant experience with Progressive up [until] now. They are very keen in taking care of their customers. Amid COVID-19 situation, Progressive has given 20% insurance payments back to their customers for 2 months, providing ease in this difficult situation."Progressive customer review on Clearsurance.com (Read all Progressive reviews.)

"Amazing customer service and excellent rates. Automatically lowered my payments during COVID-19. I have been with them for 10 years and have only had positive experiences."Wawanesa Insurance customer review on Clearsurance.com (Read all Wawanesa reviews.)

"Great company, thinks of their clients first. I really appreciate their willingness to give money back to their clients during COVID-19."State Farm Insurance customer review on Clearsurance.com (Read all State Farm reviews.)

When customers provided negative feedback about car insurance discounts due to coronavirus, it was largely due to the fact that the discounts offered were not large enough to make a difference for those experiencing job loss or considerable financial hardships. Here is an example:

"Not as great as it sounds. Rates go way up after introductory [period]. They increased my bill each month by $20 a month until I called and complained. They are hard to get a hold of. The customer reps are barely professional. I called about Covid19 relief and they only offered to postpone April and have me make a double payment in May. How is that helpful?"Root Insurance customer review on Clearsurance.com (Read all Root reviews.)

Economic downturns can present hardships for customers and insurance companies are aware of this. If you’re having trouble making payments, reach out to your insurer and see what can be done to either reduce your bill or assist with payments. If you’re looking for a car insurance refund, coronavirus adjustments have likely been made for the calendar year. If you are looking to compare your insurance with top customer-rated carriers, visit here to get the top-rated car insurance in your state and zip code.


Image source: Aleksandra Suzi/shutterstock.com

The content on this site is offered only as a public service to the web community and does not constitute solicitation or provision of legal advice. This site should not be used as a substitute for obtaining legal advice from an insurance company or an attorney licensed or authorized to practice in your jurisdiction. You should always consult a suitably qualified attorney regarding any specific legal problem or matter. The comments and opinions expressed on this site are of the individual author and may not reflect the opinions of the insurance company or any individual attorney.

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