Should Auto Insurance Premiums Be Refunded Due to COVID-19?

Although some auto insurance premiums have been refunded during the pandemic, consumers may be owed more compensation for underutilization of their car insurance from their insurer.

What Do Insurance Premiums Pay For?

Insurance premiums are monthly payments made to insurance companies in exchange for insurance coverage. The amount someone pays in automotive insurance premiums will vary depending on their risk level. Risk levels consider several factors such as age, geographic locations, type of coverage, history of traffic incidents, and more.

For example, a teenager driving in a suburban area may be associated with less risk than a middle-aged man in a big city who has a history of traffic violations.  This risk determination is based on the amount in claims an insurance provider may end up paying for a certain demographic.

Have Some Auto Insurance Premiums Been Refunded Due to COVID-19?

After the COVID-19 pandemic gripped America in the beginning of the year, many people stopped using their cars as they opted to stay inside and were able to work from home instead of commuting. As a result of the pandemic, driving activity across America dropped significantly between March and April.

According to a study by the U.S. Public Interest Research Group (PIRG), daily vehicle-miles driven declined by 68-72% immediately following pandemic closures and public health measures. Exact reduction in driving varied by state, with the District of Columbia seeing the most dramatic drop with an 89% decline.

Due to the dramatic drop in the number of drivers on the road, some auto insurance companies agreed to refund premiums for their customers. Some notable auto insurance premium refunds include:

• Allstate: The insurance company says that its customers would receive refunds averaging around 15% for April, May, and June.
• Farmers: Farmers provided several different refunds for April and May. For all policyholders except those in New York, refunds of 25% for April premiums and 15% for May premiums were issued. New Yorkers received a 40% credit on their bill.
• GEICO: Instead of providing premium refunds, GEICO provided a 15% discount on six or 12 month auto or motorcycle policyholders when they renewed between April 8 and Oct. 7. This discount was also available to new customers.
• Liberty Mutual: Liberty Mutual and Safeco, a LM subsidiary, each provided 15% refunds on two months of policies. These refunds were available to individuals with active policies as of April 7.
• Progressive: Progressive policyholders were refunded for about 20% of their April and May payments. New York customers received refunds for May and June instead of April and May.
• State Farm: State Farm gave back around 25% of auto payments made by policyholders between March 20 and May 31.

Although these refunds can help put money back in the pockets of struggling Americans, it may not be enough.

Should Auto Insurance Premiums Be Refunded?

Americans have faced significant financial hardship during the coronavirus pandemic. Many people have lost their jobs, making it difficult to pay for living expenses, bills, and even COVID-19 related expenses. Auto insurance premium refunds can help struggling Americans by providing some sort of compensation in these trying times. But is it enough?

Although some auto insurance companies have decided to refund their customers for their premiums during COVID-19 closures, these refunds may be insufficient considering the massive reduction in driving seen during the pandemic. Consumers may not have been refunded for the full premium reimbursement they are owed.

Attorneys are investigating several companies which may have refunded only a fraction of their insurance premiums. Consumers may be owed a larger refund if they are insured through one of the following companies:

• State Farm.
• Berkshire Hathaway (GEICO).
• Progressive.
• Allstate.
• USAA.
• Liberty Mutual.
• Farmers Insurance.
• Nationwide.
• American Family Insurance.
• The Travelers Companies, Inc.
• Auto Club Exchange (AAA Insurance).
• Erie Insurance.
• Kemper.
• CSAA Insurance.
• Auto-Owners Insurance.
• Mercury Insurance.
• MetLife.